PREVIOUS ISSUES

Interview

 Sameer Mathur, Head, Solutions Partner Organization, HP India

• How do you react to the recent controversy in Tamil Nadu over a student scheme floated by Elcot?
  I wouldn’t like to comment on any specific vendor here, but on the broader aspects of the event.
  Special rate contracts are nothing new for the IT industry. All vendors have a volume-based pricing strategy.
  However, these products are meant for a specific use and aren’t expected to be floated in the open market.
  I believe the reported volume of the Elcot deal probably merited the pricing that it got. The problem occurred when the government agency decided to float the products in the open market, which it shouldn’t have.
  
    
  
• Do vendors have huge mark-ups on products sold through retail? How else do you explain such a huge price differential between products sold through retail and special rate contracts or tenders?
  In a competitive market, no vendor can think of having such a huge mark-up. Vendors at times give at-cost pricing for large deals. This is done either due to topline pressure or to gain entry in a particular segment or account. There are also certain instances where vendors sell below cost to upstage a competitor from an account.
  
   
  
• Was HP invited to participate in the Elcot offer? If so, would you have been part of the project?
  I don’t know if we were invited for this specific offer. But we supply products to Elcot through tendering for various state-funded projects.
  A few months back we had won a tender to supply HP servers for a TN government project to computerize 1,800 schools.
  As for this particular offer, we wouldn’t have been a part of the offer if we felt that it would have adversely impacted our channel ecosystem. Our internal policies would stop us from doing so.
  Hypothetically, if we had participated in the offer we would have supplied a custom configuration and not a product sold through channels.
  
  
  
• Lenovo and Samsung have alleged that Elcot diverted products sold for a certain government funded project to the student offer. Can a government agency do that?
  I don’t know if Elcot has the mandate to do so. However, strictly speaking from HP’s view, if products sourced under a special rate contract were diverted to the mass market or for that matter to other projects not mentioned in the tender, we would have raised the matter with the company. For special rate contracts we expect that the agreement is followed in toto.
  
  
  
• Some of your retail partners like Infocity and Gigahertz in Mumbai, which have a multi-store presence, get special pricing which is equivalent to the distributor’s landing cost. Doesn’t that create pricing disparity and hurt smaller players?
  Pricing is a tricky issue. As a vendor you have to have the right balance while deciding a pricing strategy. As for the example of the partners you have given, we do provide them better pricing. But that’s because these companies have invested substantial amounts in retail. Their recurring costs are also high.
  As a vendor we cannot afford to alienate smaller players, so we cannot have a pricing model where large players have a substantial advantage. We ensure that the price differential between small retailers and large retailers is not more than 2-3 percent. If it’s more than that, small retailers will not see the benefit of doing business with HP, and this will eventually show in our market penetration and share. We constantly monitor the pricing of our products in the market and ensure that parity is maintained.
  
  
  
• What about large format specialty retailers like Reliance Digital and Croma? They will have unmatched economies of scale and could undercut the channels in a big way.
  I don’t think that’s possible. These large chains have a very high cost structure. Also, these companies are focused on healthy bottomlines. So even if they have economies of scale and get the best bargains from vendors, it may not reflect  in the end-user price.