Offering value addition to any product is what every vendor looks for in this cut throat competitive business. Here comes the role of the Value Added Distributors (VADs). Realization has dawned on the distributors that it is incumbent on them to align their business models more closely with their tech vendors. As a matter of fact, it is expected of the VADs that they should go all out to create a more compelling demand generation foundation which can be leveraged by vendors and SP/VARs. At the end of the day, VADs need to help VARs to generate demand around multi-vendor offerings.
Today apart from distributing their products, manufacturers are devising ways to manage the channel. Traditionally the wholesale distributor’s role is limited to "boxes in/boxes out", the manufacturer owned the relationship with the channel.
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| Rajesh Kumar Business Head - Inflow |
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| Dalip Arora COO, RAH Infotech Pvt Ltd. |
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| Naresh Desai Country GM, Avnet Technology Solutions India Pvt Ltd |
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| Rajesh Goenka VP Sales & Marketing, Rashi Peripherals |
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| Krishan K Girdhar Director, Presto Infosolutions Pvt. Ltd |
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| Sunil Pillai Co-Founder and MD, iValue InfoSolutions |
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| Ramesh Natarajan Head - National Sales, Redington |
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| Ashwin Kulasekhar Sales Director-India and SAARC, Transition Systems Pvt Ltd |
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| Bhavin Bhatt Country Manager M. Tech Solutions (India) Pvt. Ltd |
As things stand today, Value-added distributors (VADs) have a far greater role to play. Instead of just focusing their attention on ‘boxes in/boxes out’ effort, it is also expected of them to customize their offerings with solution. VADs need to offer value-added services as an extension of the manufacturers’ sales channel. It helps in the alignment of their products with the goals of the manufacturer.
These days there has been a penchant for the value added distribution model. While there are players who are established, some emergent players have jumped the bandwagon. A VAD can come to the aid of resellers in increasing its top-line and bottom-line results. VARINDIA looks at the current dynamics in the distribution space where the emergence of VADs is an obvious corollary.
Managing the Distribution Network
Almost all the vendors are faced with the challenge of managing the distribution network. Distributors and VARs with wide presence in various places in the country help the vendors achieve this goal.
Rajesh Kumar, Business Head – Inflow says, "We do business with 600+ channel partners across the country. Out of this close to 75% partners are active wherein they do a minimum of one transaction per quarter. We understand the partner’s business model in terms of focus areas (Networking, Security etc), technical skill set and customer bases and we use this when we add new products/ technologies to our portfolio."
Sunil Pillai, Co-Founder and Managing Director – iValue InfoSolutions Pvt Ltd says," Empowering partners for niche & relevant offerings and engaging them tangibly to grow profitable revenue is the best way to motivate human resources of partner eco system."
Ashwin Kulasekhar, Sales Director-India and SAARC, Transition Systems Pvt Ltd says, "We understand our partner’s challenges, and we work with them to deliver the services that their customers will be satisfied with."
Rajesh Goenka, VP Sales & Marketing, Rashi Peripherals says, "VAD distribution comprises of not only up-selling a product but also offering a complete eco system to the channel partners. This includes product avail technical know-how, training installation, marketing, services & demand generation."
Naresh Desai, Country GM, Avnet Technology Solutions India Pvt Ltd, says, "We always endeavor to developnew market opportunities for both, our vendors and partners. It is essentially about mapping the offerings of our vendors with the growth plans of our partners. It is the constant dialogue that we have with both through Quarterly Business reviews as well as during other informal meetings with partners that we understand vendors and partners priorities. Most partners are always receptive to new ideas for growth and they also respect our insight into new and emerging technologies. Essentially what this means is that it makes it easier for Avnet not only to recruit new partners for our vendors but to also to help partners upsell and cross sell a variety of products that eventually make up a solution for their end customers.
Ramesh Natarajan, Head – National Sales, Redington says, "Developmental Distribution or Value Added Distribution, as it is widely called, has a vendor specific approach. It can relate to Product specific approach or Market Segment specific approach. We would carry the responsibility of having skilled resources who can act as the Vendor’s extended arms in the market to help partners propose solutions to their customers, help freeze the BOM, work out the pricing for the BOM and help the partner close the order with his customer."
Managing Human Resource for Better Customer Services
It is not that value addition ends with sales. By offering its manufacturer partners the right kind of support, a distributor should add value and give the channel proper direction about business strategies.
Bhavin Bhatt, Country Manager, M.Tech Solutions (India) Pvt. Ltd. explains, "Since all our products are enterprise class and most of them are niche, we invest heavily on human resource development. We are involved with our partners right through, from identifying an opportunity, doing technical presentation, POC, designing and implementing to providing remote and on-site after sale support."
With expertise in different areas, distributors can hone this expertise which will sand in good stead for both manufacturer and the channel partner.
Rajesh Goenka from Rashi Peripherals says, "We have a dedicated team which works only for various industry verticals and applications which helps to drive the demand. To keep them updated about the latest technology, we conduct training program every Saturday and also send them for training once a quarter within India and internationally."
Educating / Updating the Partners
Thorough knowledge of a product is a prerequisite in effective distribution. Distributors who are value-added in true sense of the term have the potential of empowering the channel by educating them about new products. Apart from investing in marketing campaigns, they should ensure the availability of the product across the country.
Bhavin says, "We enable, train and motivate resellers to go to OEM portals and get themselves trained and certified on various technologies with the help of our sales and pre-sales team."
Sunil elaborates, "iValue does both technical and sales training regularly for our partners. Our vendors also do regular webinars which is also attended by relevant partners along with our team. Unless an individual is good understanding of the offering, it is unlikely that he will propose to customers and hence empowerment is critical 1st step."
Apart from educating the channel, VAD should also train its internal staff about the product. This is essential in view of the fact that only a well-informed internal staff will be able pass on its knowhow to the channel.
Rajesh Kumar says, "It is extremely important for us to skill our channel team adequately for any of the product lines that we handle. So, we conduct various kinds / levels of training programs to enable our partners. We conduct regular webinars which is normally for shorter duration (60 to 90 minutes) and these focus on specific updates."
In addition, it is also incumbent on the distributors to ensure that the product available wherever there is demand.
Krishan K Girdhar, Director, Presto says, "We believe in not just attaining new skills and knowledge for ourselves, but we also help our partners and customers to attain more skills and knowledge so that they can use our solutions more efficiently and effectively to run their business."
Ashwin elaborates, "Transition is committed to helping the channel develop and grow their potential by offering Transition’s training programs. Most of our training suites are fully wired and interconnected to the labs which house a large range of low to high end equipment allowing our students to have true hands-on experience."
Vetting the right resellers for the manufacturers
Right Mechanism should be taken resort to by the distributors to choose the right partner for the manufacturers. Owing to geographical or financial constraints, a partner may not be able to access business opportunities. Here the distributor comes to its rescue. The crux is that a distributor should ensure the availability of the right product at the right time in the most efficient and cost effective manner.
"We take a top down approach. We understand that each solution/product caters to certain sections of industry. For each solution/offering we carefully choose the market where we want to sell. We then identify the resellers who can cater to that market. Once identification is done, we take them through a number of trainings and orientations to get them geared up. Post this, we sign off on a business plan and take off" Bhavin says.
Krishan says, "As a value-added distributor, if we can’t show how a manufacturer can help one of our resellers grow its top-line and bottom-line results we’re not doing our job, we’re not adding enough value. Our role is to articulate the value of the manufacturer’s products to the reseller channel, and provide the reseller with the knowledge and the tools to successfully market and sell the products to their customers."
According to Sunil iValue team works both at customer and partner end for niche technology. They sell the concept, create traction for our partners to leverage and replicate. Empowering partners for niche & relevant offerings and engaging them tangibly to grow profitable revenue is the best way to motivate human resources of partner eco system.
Developing new market opportunities for both manufacturers and resellers.
These days pressures from different quarters are mounting in the distributors. Tough times in economy and cut-throat competition are compelling the industry to carefully consider their next steps. Added to this, the industry operates on thin margins.
Dalip Arora, COO, RAH Infotech Pvt Ltd. says, "RAH Infotech has a strong channel base of more than 450 VARs and SIs with an ever increasing count PAN India. Many of these resellers are working closely with us for years together which gave us the opportunity to have good insight on their particular strengths and areas of expertise. Thus we get fair visibility on our choice of reseller who can be the best fit for our particular vendor and we can ensure value add from both the sides."
Bhavin says, “This is another way of adding solutions, top line and bottom line for reseller while creating new market opportunities for manufactures. We carry many products which complement the solutions that certain resellers have been doing.”
Sunil says, “Since we focus on Data, Network and Application management space, when we sign new vendors, we ensure that the new offering is complimenting to some of the current offerings. This helps in taking multiple/relevant offerings to customer through same set of partners who are already engaged with us."
According to Krishan, One of the reasons manufacturers choose Presto is-loyalty is the key. They find niches in their portfolio to fill. They find best-of-breed products, build up their internal expertise and create long-lasting relationships with their resellers by challenging themselves to continuously add value to their businesses.
Ashwin says, "Transition focuses on a variety of marketing activities with our VAR to address opportunities and promote/cross -Up Sell among products that we represent. Apart from this we have various product teams and regional resources focusing on multiple products and Solutions."
Rajesh Goenka says, "At Rashi we reach to the corporates and SOHO customer's daily creating demands for upstream product lines. Also we conduct training programs for various verticals which enables us to create opportunities for our re-sellers.”
Corporates consideration in appointing VAD's
Since mapping of the technology varies from organization to organization, different organization has their own Key result area (KRA) in terms of reaching out to their customers in terms of services, availability and technology compatibility etc. Last but not least the most important thing is choosing or selecting the right product to fit into the technology particulars targeted project.
Rajesh Kumar says, “The product offering of the vendors can be classified into matured ones and development ones. This situation is true for most of the vendors. Considering this, vendors would need a VAD who could help them handle both kinds of need at any point in time. In the product lines wherein technology changes happen quite fast the role of the VAD becomes very important.”
Bhavin opines, “Many of the corporates either have very limited or no direct presence in the country. Hence they depend heavily on VADs to set up a market and channel base for them. VADs work as the extended arms in true sense for these OEMs. VADs not only provide sales, pre-sales and post-sale support to OEMs but also act as authorised service centres and authorised trainings centres for these OEMs.”
Sunil says, “With the advent of cloud, we see plethora of niche/new/relevant and compelling offerings coming out. Current day challenges are no longer in coming out with products. Hence moving forward, VAD role will become even more critical since we see fast expansion on both supply and consumptions sides.”
Rajesh Goenka says, “The best advantage of VAD is total solution form single source. Even though direct cost may be higher but the indirect costs are much lower and hence corporates are now looking for VAD partners.”
Bottle neck in the operation
In every business there is some or the other kind of hurdles one face. Unfortunately, there are some broken pieces in these evolving trends that Vendors and Distributors need to attend to insure collective success.
According to Bhavin With cut throat competition from various solutions that are available, the margins on product sales have been going down by the day. Hence more and more VADs are moving towards selling services around their solution offering to ensure overheads are recovered. Whereas Sunil explains that India offers great potential. Vendors need to invest and be patient for the market to accept and deliver results. Vendors need to show commitment to geography, invest in people, offer commercial in line with local market needs and support partners to achieve greater heights.
Dalip says, "RAH enjoys a strong bond with all its vendors and resellers, working in sync to achieve the common objectives and contributing in each other's positive growth. Yet we do face challenges in the form of market development support, logistics support due to time zone change, product pricing or discounting due to stringent pricing norms at vendors' HO etc.
At times vendors not having knowledge about India's geographical/cultural issues and lack of appreciation to the same leads to unreasonable expectations."
Present Market Size
Rajesh Kumar admits that it could be difficult to put in a specific number to VAD business in the country. As you would be aware there is no specific categorization as VAD biz that is available. VAD business will be a subset of total IT distribution business in the country. He says “We would classify the business which involves some technical, business development or marketing activity to be done by the distributor as the VAD biz. The VAD biz could probably be 25% of this IT distribution business.”
Rajesh Goenka says, “Currently, 15% of the business is VAD business.” Whereas Sunil says, “The addressable market size for iValue is around 1.7Bn USD.”
Growth Potential
Rajesh Goenka says, “This is growing with 30-35% and will double up within 3 yrs. The important point besides the opportunity is the gross margins which are relatively better.”
Sunil says, “This market is one of the fastest growing segments of IT and is expected to grow at 20% CAGR over the next 3 years. iValue is targeting to grow at 2 to 3 times of market growth rate.”
Rajesh Kumar says, “Growth would happen in organic way which is the normal growth of the existing biz and in-organic way which is increase in the overall distribution pie."
The important role of a VAD is there for everyone to see. As the dynamics of market changes, it can be said with a great deal of certainty that VAD gains in importance and role with the passage of time.
for more contact :
mohini@varindia.com
