Crn 15 november 2013 all pages by UBM India

contents

November 15, 2013 l Volume 3 Issue 02

Cover Story Nearly 90 percent of Indians have no access to a PC, and yet sales continue to decline while local manufacturers struggle. Whatâ&#x20AC;&#x2122;s wrong? How do we set things right?

22 Cover Design : Deepjyoti Bhowmik

NEWS Analyses

Channel Chief Richard Lee Global VP and GM, Global Commercial Channels, Dell, APJ, speaks about the reasons behind the companyâ&#x20AC;&#x2122;s privatization and its outlook for commercial channels

LG targets `1,000 crore from B2B business

Canon bets on cloud printing

Special Focus

Avaya plans ambitious SMB push

Capitalizing on the new opportunity Business intelligence with big data analytics is a prime opportunity awaiting solutions providers

Lenovo increases thrust on accessories 8

Role Model

READ More Editorial 10 Opinion

Feedback

Channel Buzz

New Products

Shadow Ram

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Transparent and trustworthy Sachin Rao and Ramanujam S, Directors, Archon Consulting Systems, recall their journey together from the early days of the enterprise to its present happy position

Tech Focus 5 ways to defend against ransomware threats CryptoLocker, a new form of malware, is threatening businesses and individuals of encrypting their files and demanding payment to regain access

starting line MUST

LG targets `1,000 crore from B2B business

Canon bets on cloud printing

n AMIT SINGH

Read

With a flat PC market for the last multiple quarters, Canon is planning to leverage the growing popularity of tablets and smartphones to increase its inkjet printer market share. The company recently launched a series of Pixma cloud printers that allow printing on the go. Inkjet printers contribute 9 percent to Canon’s overall revenue of `1,868 crore. In 2014 the company wants to grow 25 percent and increase its market share in the `4,500 crore inkjet printer market. Said Alok Bharadwaj, Executive VP, Canon India, “We have seen an increasing trend among consumers to use smartphones and tablets to print stuff like social media images and photographs for project work. With the new launches we expect to cater to this new target audience of techsavvy youth. We also aim to increase our present market share of 30 percent in inkjet printers to 45 percent in the next two years.” Canon has launched three SKUs—the Pixma MG2570, MG3570 and MG6470—of its cloud-based Wi-Fi Alok Bharadwaj inkjet printers, and priced them at `6,495, `13,495 and `20,495 respectively. According to Canon, at `1 for a monochrome and `4 for a color printout, the printers will save on the cost of printing per page. To save on paper and power the printers also have an auto duplex printing feature and auto power-off mode that switch on once a print command is given. The company will create special demo zones with Wi-Fi capabilities at its 109 Canon Image Squares (CISs) for giving customers a touch-andfeel experience. CISs are its exclusive stores; the company plans to increase their number to 200 by 2014. To showcase the new printers to consumers Canon will also conduct 10 road-shows. The company has around 400 primary channel partners and over 6,000 retailer partners whom it wants to train for the cloud-based printers. n — Abhijeet Mukherjee 6

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he B2B division of LG Electronics has aggressive growth plans for its commercial displays, projectors and surveillance solutions businesses. The division, which contributes 5 percent of LG India’s revenue, is targeting `1,000 crore in 2014. Said Hemendu Sinha, Head, B2B Sales, LG India, “We will grow 100 percent from `350 crore in 2012 to `700 crore in the current fiscal.” On the solutions front the company is expecting major contribution of 60 percent from commercial displays (digital signage, video walls, interactive TVs) and the rest from projectors, and surveillance and video conferencing (VC) solutions. According to Sinha, in surveillance the focus will increase on IP-based products and cameras with built-in analytics. In projectors the company will focus on LED and ultra-short-throw projectors. In the next fiscal he expects projectors and surveillance to each bring in 15 percent of the revenue, and VC 5 percent. Informed Sinha, “We are leading the LED projector market and will continue to do so with plans to launch 1,000-lumen LED projectors. We will also launch ultrashort-throw projectors early next year. We recently strengthened our display solutions with a 100-inch laser display and an 84-inch panel with 4K resolution.” The division is counting heavily on the government and education verticals, and expects 40-45 percent of its revenue from them. Said Sinha, “The government is now focusing on infrastructure projects that were pending; this will create huge demand for displays, projectors, and VC and surveillance solutions. BFSI will add 20-25 percent to our business with its increasing demand for display and

“We will close 2013 with 100 percent growth with our revenues increasing from `350 crore to `700 crore. In 2014 we will cross `1,000 crore” Hemendu Sinha Head, B2B Sales LG India

surveillance.” Further, the B2B division is looking for aggressive expansion of its current channel base of 250 partners. It intends to double this base and is looking for major tieups with IT partners. “IT partners will be the natural choice because they can value-add to the solutions around commercial displays, projectors, VC and surveillance,” Sinha said. “With their existing IT skills they can easily gain skills in these solutions and enlarge their wallet-share. We will also leverage the robust IT network for distribution.” The company has Neoteric as its ND for its projectors, surveillance and commercial displays businesses. It plans to add five RDs to its existing 10 RDs for projectors and three RDs to its existing four for surveillance. “Besides, we will add 100 more SIs across all of our solutions businesses,” Sinha informed. The company will conduct roadshows in 25 cities including Chandigarh, Bhopal and Kochi. According to Sinha, “These roadshows will serve as platforms to connect with customers and partners with demo and training sessions.” LG will introduce a partner portal in January 2014 to channelize all its schemes and programs. n

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starting line MUST

LG targets `1,000 crore from B2B business

Canon bets on cloud printing

n AMIT SINGH

Read

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“We will close 2013 with 100 percent growth with our revenues increasing from `350 crore to `700 crore. In 2014 we will cross `1,000 crore” Hemendu Sinha Head, B2B Sales LG India

edit opinion Volume 3, Issue 02

Boosting PC penetration dhaval valia

he MAIT-sponsored KPMG report on ways to increase PC penetration in India is a welcome initiative though a few years late. According to the report, PC sales are expected to grow at a CAGR of 6 percent from 11 million units in FY2012-13 to 15 million units by FY2017-18. During the same period tablets are expected to grow at a CAGR of 73 percent from 1.9 million units to 51 million. Today India ranks the lowest among emerging countries in PC penetration. With just 10 percent PC penetration among households, it is way behind Malaysia’s 64 percent, Russia’s 57 percent and China’s 35 percent. The report highlights issues impacting PC penetration in households, MSMEs, large enterprises and the government. A key challenge to PC penetration in Indian households is their limited perceived utility, high ownership cost and lack of localization to appeal to rural India. KPMG has recommended a reduction in indirect taxes on IT hardware; this includes lowering excise rates on hardware from 12 to 6 percent and increasing the abatement on MRP from 20 to 35 percent to align the duty structure with mobile phones. The report calls for aligning the CVD rate on components with other inputs such as microprocessors and HDDs where the CVD rate is 6 percent. KPMG believes that the government should provide tax exemption to individuals against PC purchases, and that the industry and the government should devise purchase schemes for segments such as students and households with annual incomes of less than `5 lakh. On the MSME front, the challenges include low perceived utility of IT in the core business and the high cost of software. KPMG notes that despite good government schemes there is low awareness in this segment. For instance, many MSMEs are not aware of the IT spend component in the existing Credit Linked Capital Subsidy Scheme. Among large enterprises the key challenge is mostly about lack of incentives to refresh technology. KPMG has recommended a depreciation policy that allows 175 percent deduction of expenditure on IT hardware from business income. To increase IT penetration and use in the government segment, KPMG contends that limited flexibility in the ERV clause impacts procurement during adverse currency movements and recommends that the government should consider revising the clause and add more flexibility. It also recommends making IT education and training compulsory for existing government employees and job aspirants. While many of these recommendations are not new, and various industry bodies including MAIT have been lobbying for them, a few of the recommendations, if implemented, can help boost IT penetration in India. n E-mail CRN Executive Editor Dhaval Valia at dhaval.valia@ubm.com 10

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edit opinion Building the perfect channel Robert Faletra

am just back from our Best of Breed conference, where Meg Whitman, Michael Dell and the industryâ&#x20AC;&#x2122;s most elite solution providers met to talk about what is important and necessary to drive the market forward over the next 12 months. For three days, the agenda focused on the channel and pushing forward toward a new business model designed to drive customer engagement, partner profitability and a new way of delivering computing power to business. Michael Dell sat onstage and talked about how he has set a company goal to be the best partner in the business. Meg Whitman told partners that HP is returning to its roots as a product-driven company with a focus on customers and partners. Margins are being squeezed in every category of IT and the resulting pressure on the cost of direct-sales channels, let alone the need to have a deeper understanding of customer needs, is pushing CEOs across the industry to focus on the indirect sales channel. While Whitman and Dell may be the most visible champions of the need to grow via their channel, they certainly are not alone. But how do these titans build the perfect channel for the future? Building the perfect channel of the future is going to be much different than in the past. Suppliers, be they vendors or distributors, are making decisions as to what their own goto-market strategy is. Will they be cloud suppliers, enablers, brokers, or all three? Depending on the strategy, how will they manage the channel conflict if they choose to be both a supplier and an enabler? The era of backend rebates and other traditional methods of compensation for partners is changing. As we move from a world of traditional on-premise sales to hybrid cloud engagements and full public cloud sales, compensation methods need to change too. Of course, building the perfect channel is subjective. One personâ&#x20AC;&#x2122;s perfection is anotherâ&#x20AC;&#x2122;s abomination. It is always dependent on where you sit that changes your point of view. But one thing that is certain is that partners and suppliers need to talk more and be willing to bend past business practices. This is probably the most challenging issue for the CEOs in this industry that are responsible for shifting their businesses. Knowing what to change inside of an organization, be it people, processes, compensation or organizational structure, and when to do so, is critical and tricky. In the end, there is no perfect channel for very long because this market is continually changing. But there is a way to get very close to one, and it requires CEO leadership, a surrounding team of loyal executives that believe in the goal, and a commitment to take feedback from the field and build a business that is easier to do business with. n Email Robert Faletra at rfaletra@thechannelcompany.com 12

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Opportunities in enterprise mobility

CI adoption

Your story on opportunities in enterprise mobility was an interesting read. With the proliferation of mobile devices being accessed by corporate employees, IT organizations in small and large enterprises are increasingly looking for solutions to improve employee productivity without compromising enterprise security. While the concept is still at a nascent stage, examples of how tier-2 partners worked diligently to develop an enterprise mobility solutions practice were inspiring. I believe that the convergence between the IT and the telecom channel will happen sooner than later, and it is therefore, imperative that IT partners develop a home-grown delivery framework, and develop niche applications or solutions to offer their customers.

The story on converged infrastructure (CI) painted a rosy picture around sales opportunities for IT channel partners. We do agree that the IT infrastructure is now headed toward CI and it may become a standard infrastructure of tomorrow. However, we must not forget the fact that CI is yet another attempt from the vendors to commoditize the SI space. With availability of server, storage and networking in a preconfigured box, there is little requirement for system integration and hence reduced services share; maintenance of course will be taken by the vendor. Currently, only enterprises are opting for CI systems as the prices are high, but as the prices go down, mid-market and SMB customers will also start adopting CI due to operational benefits.

Vaishnavi C Bengaluru

Satyavir Singh Noida

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channel chief “Cloud will strengthen distributors’ role” Byju Pillai, President & CEO, Inflow Technologies, spoke to Ramdas S about the company’s plans after it bought back the equity stake of the Westcon Group. He also discussed the future of value-added distribution You recently bought back the equity investment of the Westcon Group. While other distributors are known to be trying to sell their stakes, you are investing back in your business. In 2008 Westcon invested 50 percent in Inflow with a plan to buy us out completely over a period of seven years. Over the last few years they increased their share to 54 percent. This investment made us stronger and paved the way for bringing Westcon and Comstor into the country. However, in the past few quarters, Datatec, which owns the Westcon Group, has seen some loss in market share in Europe and North America where they generate major revenue. This has forced them to rethink their plans for many emerging markets, including India. We, the main stakeholders, directors and senior employees of Inflow who owned the remaining 46 percent felt that it was a great idea to buy back the shares, and we feel we got a fair deal. We are totally committed to the Indian and South Asian market, and have larger plans. Westcon India is today a division called Inflow Solutions, and the Comstor business has moved in with Cisco signing Inflow as a distributor.

Many other distributors are known to be negotiating for buy-outs. What do you think is a fair valuation for an Indian distributor? It will depend on many parameters such as the assets owned, the vendor relationships, and the growth potential of the businesses they are in. I believe a ball-park figure would be 25-30 percent of the annual turnover for a valueadded distributor (VAD) and maybe 15-20 percent for a traditional distributor. Other parameters such as the real numbers in the balance sheet, bad debts and the quality of the team would also impact the valuation.

With so many disruptive technologies the role of a distributor is often questioned. I think distributors are an integral part of the supply chain and are irreplaceable for almost all IT vendors. While some of the business models such as e-commerce and

“We are adding new practices, and are open to inorganic growth ideas, strategic investments, and may launch a separate initiative to sell services through channels” 14

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cloud computing are redefining the way things operate in the IT industry, we don’t see them reducing our value or impacting us in any way. Cloud computing is not really changing anything for either the systems integrator (SI) or distributor. Public cloud computing is still a few years away from mass adoption in India because the cost and benefit of public clouds does not fit in with our cost equations since we have abundant manpower resources at reasonable cost. If at all I believe cloud will strengthen the role of a distributor.

Many say that the model followed by VADs of being project-focused is not scalable. Today, 95 percent of our business is driven through projects where almost 70 percent comes through vendor and partner references. We can scale these numbers because we have built strong practices and processes. The biggest challenge is choosing the right projects. Many projects, especially in the government sector, have landed in payment delays for various reasons. We are learning on a daily basis and are improving our processes, due diligence criteria and services capabilities to address more prospects with less risks.

Is channel hygiene a big worry this year? It’s definitely the biggest worry for all distributors. Over past few years some SIs have hit rough patches and some have even exited the market creating bad debts. Over the past few months we have created an alliance among distributors called Distributor Forum which shares information, and distributors are working collectively to ensure we are all protected from such risks. Many SIs who have burned their fingers by choosing the wrong deals have become smarter. We feel that in the next couple of years things will improve.

What are your future plans? We are adding new practices and refocusing on growth areas within our existing businesses. For example, Web application firewalls is a niche market within security which will grow exponentially; there exists similar opportunities across storage management, networking, cloud, software and other areas. We are launching a physical security and surveillance practice and are adding vendors. We are open to inorganic growth ideas, including acquiring smaller VADs. We are also open to strategic investments. We may launch a separate initiative to sell services through channels. n

channel chief “We are the world’s largest start-up” Richard Lee, Global Vice President and General Manager, Global Commercial Channels, Dell, APJ, spoke to Ramdas S about the reasons behind the company’s privatization and its outlook for commercial channels Why did Dell go private? Dell has spent millions acquiring vendors over the past three years, and it has been on the path of transformation. On one side we are moving from being a PC vendor to a solutions provider; on the other side we are moving from being a direct company to becoming a channelfriendly company. Our management led by Michael Dell, our CEO, felt that being a public limited company restricted the speed at which we could transform. By taking the company private we are not governed by perceptions which drives shareholder sentiments though we are still answerable to investors. Inside Dell we are calling ourselves the world’s largest start-up. To quote our CEO, our future is indirect channels. These will be more profitable for Dell, so partners will have a bigger role with us.

You launched GCC in 2010. But you are still being compared with HP and IBM in engagement policies. We have been told that some of our policies and programs are better than those of the competition. While we have come a long way, we still need to go a long way. Very soon Dell will be the benchmark for commercial channels in all aspects of channel engagement. Globally, from zero to one-third of our commercial and enterprise business is indirect. In emerging markets such as India our dependence on GCC partners is even more. We see our indirect marketshare growing.

What are the improvements you have made in the Dell PartnerDirect program? As a result of our acquisition of several software companies we have enhanced PartnerDirect. There are four new software competencies: security, data protection, systems management and information management. These competencies will allow Dell to better serve the needs of its partner community, including software and hardware-focused and solutions partners. From November the new competencies are available for channels for specialization and training. Partners now have a tool, the Online Solutions

“We are moving from being a PC vendor to becoming a solutions provider. We are also moving from being a direct company to becoming a channel-friendly company”

Configurator, which allows them to collaboratively create multi-part, customized enterprise solutions for their customers. For Indian channels we are customizing the configurator to support the local currency.

It has been observed that Dell’s acquisitions are companies which aren’t leaders in marketshare or mindshare in their verticals. How does Dell plan to gain a leadership position in the solutions business? We have made investments which have given significant marketshare in security, storage, enterprise mobility, IT management and cloud computing. We agree that we are not market leaders, but we have successfully integrated the companies and their technologies to build next-generation solutions in each segment. We have also inherited several legacy channel partners, and they have been brought under the PartnerDirect program. Partners should understand that we have built a rich portfolio that’s appealing to the mid-market and SMB on which the majority of channels are focused. For example, we are launching a Big Data Starter Kit which will help to lower entry barriers for partners, customers and developers who want to gain from big data without incurring high infrastructure costs.

In this rush to transform into a solutions provider you seem to have lost aggression in the PC business. Not at all. The PC client business remains a very important focus area for us. However, the PC market itself has been declining QoQ, and margins have been slipping further. Customers have broader choices beyond the Wintel platform, Dell recognizes this, so we will continue evolving the PC business as the market transforms.

What can commercial channels look for in 2014? We will support channels with campaign strategies, open communication and sales tools, enable them to deliver improved profitability, enhanced services and support. After successfully establishing Partner Advisory Councils in India and China, we will establish the APJ Partner Advisory Council in H12014. We have about 23,000 partners in APAC, and the numbers are growing. Through our first pan-APJ partner summit we want our partners to network better and figure out how they can collaborate to grow. Channels can expect more training and certification , especially around software, security and the data center. n

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special focus Capitalizing

on the new

opportunity Business intelligence with big data analytics is a prime opportunity awaiting solutions providers n amit singh

onsider this: according to Crisil, every minute over $300,000 is spent globally on online shopping, over 7,000 photos are uploaded on Flickr, and over 600 videos are uploaded on YouTube. These rapidly growing data sets present one of the most promising opportunities for IT partners in the next couple of years. Says Amit Chatterjee, Country Director, HP Software, India, “Customer activities outside the purview of organizations are generating huge amounts of complex data which are being eagerly lapped up by corporates and helping them to make evidence-based and consumer-oriented decisions. That’s giving a boost to business intelligence (BI) and big data.” As per Gartner, the Indian BI software market will grow from $98.1 million in 2012 to $113 million in 2013 and $149 million by 2015, while a joint report by Nasscom and Crisil says that the Indian big data industry is expected to grow from $200 million in 2012 to $1 billion in 2015. “Pressure from consumers, competition and the demand for internal operational efficiencies are forcing organizations to improve their processes to become both agile and efficient in a volatile marketplace,” comments Bhavish Sood, Research Director, Gartner. While BI in India has come of age, big data is catching up fast. According to the State of the Indian CIO survey, 40 percent of Indian IT leaders plan to implement big data analytics during this year; 16 percent say they are in the process of implementing it. As per research commissioned by HP, 47 percent of the companies surveyed in India said they would spend at least 10 percent of their IT innovation budget on big data this fiscal.

High on the agenda BI’s present-day definition has widened to include analytics, predictive intelligence and intelligence in

Services opportunity Partners already in the BI and big data space call it a big services opportunity. Explains Sunny Sharma, Technology Evangelist & Co-founder, Foetron, Gurgaon, “The opportunity exists in terms of hardware, software

“Pressure from consumers and demand for operational efficiencies are forcing customers to improve their processes and be efficient in a volatile market”

“The compelling reason for partners to go in for BI and big data is the lucrative services pie; moreover, it offers stickiness of the customers”

Bhavish Sood

Sunny Sharma

Research Director, Gartner

real-time. While BI deals with structured data, big data analytics deals with structured and unstructured data that runs into petabytes. “BI and big data are two of the first things our clients ask for,” says Jatin Sawhney, Business Head, Information Services, Team Computers, Delhi. Team is banking big on BI and analytics. The company has set up a separate BI practice and has 125 consultants on board. While the retail industry had emerged as an early user of BI and big data, now companies from sectors such as life sciences, financial services, manufacturing, energy and utilities are investing in them. “Five years back Indian businesses were more concerned about implementing ERP,” Sawhney observes. “Now, with ERPs in place, they want to analyze customer sentiment and behavior not only in the organizational setup but also in the social ambience.” According to Niraj Kaushik, VP, Alliance & Channels, Oracle India, the demand for BI and big data analytics has grown from departmental level to the enterprise level. While large enterprises were the early adopters, midmarket organizations are now readily adopting BI and big data analytics. Discloses Sawhney, “30 percent of our BI and big data business comes from mid-market customers.” Neel Shah, Director, Insight Business Machines, Mumbai, has deployed storage and servers for large media, entertainment, BFSI, IT-ITeS and retail customers who have deployed big data. He says, “We have aligned with ISVs who provide the applications for big data projects, both physical and cloud-based.”

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Technology Evangelist & Co-founder, Foetron

special focus Projected BI software market in India 149

In $ million

Projected big data market in India In $ million Includes software and hardware

1,000

113

98.1

200

2012

2013

2015

2012

2015

Source: Gartner

Source: A KPIT and Nasscom report

licensing and services. The compelling reason for partners to go in for BI and big data is the lucrative services pie. Moreover, it also offers stickiness of the customers.” Adds Sawhney, “Services take a major share of 6070 percent in a big data project over the span of three years. This includes implementation, data management, data analysis and maintenance. Usually a team of 3-50 members is required to manage and analyze the data.” Foetron is totally focused on services for big data. “We are a sister concern of MM9 Information Technology which takes care of the hardware part. For services we have a team of 25 engineers who take care of presales, implementation, and data management and analysis. Having a team of skilled data engineers is essential in this space,” says Sharma.

pharma, manufacturing, retail and IT-ITeS are demanding big data analytics on the public cloud. “20-25 percent of our Windows Azure usage comes from BI and big data. We expect at least 100 percent YoY growth of big data analytics on the public cloud over the next couple of years.” Insight is also exploring opportunities for service revenue in the cloud. “The ISV can port all the data either to his own data center or to a third-party data center provider like Amazon or NetMagic. We can earn service revenue in the form of ORC for consultancy,” Shah says.

Convergence with cloud The general trend is that organizations are adopting a mix of cloud and non-cloud BI and big data deployments. According to Sharma, “While enterprise customers can still afford to go for a private or hybrid cloud, mid-market and smaller organizations are readily opting for public clouds from Amazon and Windows Azure.” Moreover, going in for a public cloud implementation brings additional benefits. “Any big data setup needs huge IT infrastructure and large capital expenditure for the on-premise facility; this is where the public cloud helps organizations to rationalize their spending. While an on-premise set-up may take 2-3 days to be implemented, a Hadoop implementation on a public cloud takes just 15-20 minutes. That’s where you begin with the implementation of analytics tools and data management,” details Srikanth Karnakota, Director, Server & Cloud Business, Microsoft. He says that many customers from verticals like

Analytics on the go Companies are now looking for fast, interactive and insightful analytics to remain ahead. Mobile BI equips them to do this, hence there is growing interest among Indian organizations to deploy mobile BI, says Kaushik. Sawhney agrees. “Mobility is bringing big momentum to BI. Customers are demanding mobile BI to analyze customer behavior on the go. About 10 percent of the current BI deployments are happening on mobility. In the next three years this figure could go up to 50-60 percent.”

End-note While industry experts predict rapid growth in the BI and big data markets, they also add a word of caution. “Many Hadoop projects struggle to move beyond the PoC stage due to poorly-defined use cases, lack of management support, data integration challenges and lack of data scientists and operational IT professionals. Of these, lack of technology and business skills hamper the success of Hadoop projects the most,” says Sood of Gartner. “While there are ongoing efforts to train channel partners, the skills among most of the partners are quite elementary. The need is to upgrade skills specifically on the application services side.” n

“Any big data setup needs huge IT infra and large capex for onpremise facility; this is where public cloud helps organizations rationalize their spending”

“Organizations are asking for mobile BI to analyze customer behavior on the go. About 10 percent of our current BI deployments are on mobility”

Srikanth Karnakota

Jatin Sawhney, Business Head, Information Services, Team Computers

Director, Server & Cloud Business, Microsoft

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market focus Multi-brand outlets

Exclusive stores VS

Both have their advantages and negatives, and it is not clear which format is superior, but every retailer is forced to choose between the two n Abhijeet Mukherjee

artners have long debated about which retail model brings more profits: multi-brand outlets (MBOs) or exclusive stores. There has been no definitive answer so far, and a definitive answer may not even be possible. Yet for channel partners investing in retail making a choice between these two models is important. There are approximately 1,700 Lenovo Exclusive Stores (LES) and LESlites, 300 HP Worlds, 100 Dell exclusive stores, 500 Acer Malls, 250 Sony Centers, 70 Asus exclusive stores, and around 50 Toshiba stores in the country today. This along with some of the stores promoted by other brands puts the number of exclusive partner-driven stores at around 3,000. There are only guesstimates about the number of multi-brand partner-driven stores. The figures range from 12,000 to 25,000 depending on the parameters you choose to categorize these stores.

Exclusive positioning Partners say that the biggest advantage of owning an exclusive store is that there is shared responsibility with the vendor who must ensure that the store is visible and that there’s a minimum flow of business. In a slackened economy, partners say that most vendors are working harder to keep their specialty store business growing. Says Paramjit Singh Juneja, CEO, Secant Technologies, a Ludhiana-based exclusive retailer, “We get from the vendor a trained in-shop salesperson who has sound knowledge about the products we shelf. This provides a great customer experience and helps us to sell better. We also get operational costs of 1-1.5 percent and up to 3 percent for highend products.” Vendors admit that since the specialty stores act as an extended brand wagon their first preference will be to promote these stores over MBOs. “For an exclusive store our company provides more frontend and backend margins,” informs S Rajendran, CMO, Acer India. “In terms of indirect profits we provide demo products at discounted rates, market development funds, in-shop and shop-front branding materials, and leads which not only add to their profit margins but also help to draw footfalls.” However, many feel that the fortunes of an exclusive store are often dependent on the vendor. “No vendor can keep promotions going throughout the year. Nor do all campaigns work throughout the year,” points out Arvind Modi, CEO, Bits & Bytes, a Jaipur-based retailer who owns both exclusive stores and MBOs. While vendors say that they foot most of the in-house

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branding, most partners say that it’s more expensive to run an exclusive store. Explains Manoj Bajaj, CEO, CAS Computers, a Tinsukia-based multi-brand retailer, “Even for a small city like Tinsukia the operational costs are high and an exclusive store would not be able to provide the ROI. The monthly expenses for even a 400 sq ft store would be nothing less than `50,000 including real-estate, electricity and telephone expenses, 2-3 salespersons and a store manager, a peon, and freight and courier charges. If I add five more brands to the same store and my expenses remain the same, I will have better profitability.” “One problem with vendors is that they expect retailers to stock and display each and every model of theirs. Although the run-rate models vanish from the shelves fast the highend models are hard to liquidate and thus our money gets stuck. We eventually sell them at zero profit,” rues Modi.

Where MBO works Most specialty retailers feel that since vendors often fail to maintain a uniform MOP it is the MBO owners who reap the benefits. Adds Modi, “A uniform MOP can reduce competition between the two retail formats as well as among peer partners but since the MOP is not uniform MBOs sell at a reduced rate while we have to follow the company guidelines and bear losses.” Most partners say that conversion rates are higher at MBOs. Points out Hemant Shah, MD, Care Office Equipment, a Mumbai-based multi-brand retailer,

market focus PARAMETERS Conversion rate

Exclusive Stores

Multi-brand Outlets

Comparatively less. Retailers say it ranges from 10 to 30 percent of footfalls

Better. Between 20 and 45 percent

Most vendors offer between 30 and 60 days on unsold inventory through rebates

None

Price protection

More discounts and rebates Discounts & rebates

Transfer price 1-2 percent higher than exclusive stores

Vendor-dependent. Most vendors pass on Promotions & lead generation leads to retailers

No lead generation. Being multi-brand means more chance to participate in more programs

Ideal real-estate space

500 sq ft to 1,000+ sq ft

350-1,000 sq ft

“A multi-brand retail outlet provides a lot of options both for the seller as well as the buyer. For a `40,000 notebook requirement of a customer I can offer 10 SKUs of different brands which may not have been possible if I had an exclusive store because a single brand might not necessarily have a wide range of SKUs.” Many sub-distributors who have set up MBOs are taking advantage of the situation. “We have seen some of our peers taking advantage of price clearances offered by different vendors and promoting the products through their stores,” says Dinesh Nair, Director, Big C Technologies, a Bengaluru-based multi-brand retailer. However, he adds that for partners to really take advantage of a multi-brand store deep pockets have become necessary. “Across the country we have seen businesses paying extra for smaller real-estate footprints. To do justice to 5-6 brands a retailer needs to have a minimum display space of 750 sq ft in a city like Bengaluru. We have seen smaller retailers shutting shop because smaller spaces cost more per square foot while the basic costs in terms of manpower, promotions and office expenses remain the same.”

*Market sources

Comparing the two formats

Computers, a Mumbai-based exclusive retailer. Retailers suggest that the best option will be to bring online retailers under regular market development programs, or to promote different models through different formats. High targets set by vendors is another disturbing factor. “At times we find it extremely difficult to meet targets,” complains Reeta Budhay, Director, Business Algorithm, a Nagpur-based exclusive retailer. “What adds to our woes is that a vendor starts promoting another partner if our targets are not met. No one can perform consistently month-on-month, so vendors must not stop helping a partner because the partner had a bad month.” More creative financing options are also in demand. Many retailers report growing numbers because of financing options. “Vendors such as HP have tied up with banks and finance companies for EMI schemes. A 5 percent cash-back on certain products helps us to sell them better,” says Juneja.

End-note

Large format retailers and e-commerce portals are a threat to all partner-driven businesses, and the biggest demand from retailers cutting across both formats is better control from vendors to ensure stable MOP. “Every year we are seeing more competition from websites. Many of these portals have deep pockets, and can offer better deals because month-on-month profitability is not a concern for them. That’s not the case with a partnerdriven store,” says Vinod Mulchandani, Director, Aarvee

Most successful IT retailers are adding more stores. Most exclusive store owners are launching either MBOs or stores of other vendors. “No one wants to keep all their eggs in a single basket. You don’t want to be tied to the fortunes of a single vendor or a single format,” remarks Bajaj. Rajendran sums up things rather nicely. “There’s no single formula for success. We have seen some entrepreneurs succeeding with MBOs and others with specialty stores. What you need to pay attention to is the basics of business such as place, product, promotion and people.” n

“For an exclusive store we provide frontend and backend margins, demo products at discounted rates, MDF, shop-front branding material and leads”

“Even for a small city like Tinsukia the operational costs are high. The monthly expenses for even a 400 sq ft store would be nothing less than `50,000”

S Rajendran

Manoj Bajaj

Expectations from vendors

CMO, Acer India

CEO, CAS Computers

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cover story

Nearly 90 percent of Indians have no access to a PC, and yet sales continue to decline while local manufacturers struggle. What’s wrong? How do we set things right? n RAMDAS S

hile the PC market is declining globally, and several mature economies are seeing a decline in their IT markets, India is still to realize the true potential of IT. Since less than 10 percent of its population has access to a PC, India ranks the lowest among even countries with similar socio-economic characteristics—lower than even countries such as Sri Lanka and Vietnam. The other BRIC countries too are much ahead of India with Brazil at 45 percent, Russia at 57 percent and China at 35 percent. An estimated 80 percent of Indian IT channels are directly dependent on the fortunes of the PC market. “Many retailers and resellers have been hit hard over

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the past few quarters because of the slowdown in the PC market. While we have been recommending that they switch to selling tablets and smartphones, many have not been able to make the transition successfully,” says Suresh Pansari, MD, Rashi Peripherals. According to estimates by the All Kerala IT Dealers Association (AKITDA), the channels provide employment to nearly 4,00,000 people, many belonging to the lower economic strata of society. “A growing IT industry and a healthy PC market are essential for the survival of many in the partner ecosystem. Unfortunately, we are so fragmented that our collective voice does not reach the decision-makers,” says Toshy Mathew, Vice President, AKITDA.

cover story “An increase in the CAGR of sales of PCs from 6 percent to 18 percent over the next five years will provide GDP contribution of `66,300 crore”

“Once it becomes clear that it’s cheaper to assemble PCs in India, almost all manufacturers will invest and expand manufacturing facilities in the country”

Amar Babu

S Rajendran

President, MAIT, and MD, Lenovo India

CMO, Acer India

The Manufacturers Association of Information Technology (MAIT) has intensified its lobbying efforts to influence the government. The recent report by KPMG and commissioned by MAIT makes several recommendations to the government and the industry to keep the momentum growing and create demand for PCs and IT. “One of our key recommendations to the government is to bring down the TCO of PCs by providing tax incentives,” says Amar Babu, President, MAIT, and MD, Lenovo India. “Any loss in revenue due to the reduction of taxes will be offset by a gain in revenue due to direct, indirect or induced efforts resulting in the sales of PCs. Our studies say that an increase in the CAGR of sales of PCs from 6 percent to 18 percent over the next five years will provide GDP contribution of `66,300 crore and additional taxes of `25,000 crore besides creating employment for 1,11,000 people.”

Start manufacturing One of the challenges for domestic IT manufacturing has been the small size of the market in India. This has prompted the government to protect its revenue collection and allow importers the benefit of importing fully integrated units rather than facilitate local manufacturers. It was achieved by creating an inverted duty structure where things cost 3-5 percent more for a manufacturer. Explains Ashis Sanyal, former Director, Department of Electronics & Information Technology, Government of India, “The policy makers in every government look at broad parameters for revenue growth so that the revenue raised can be invested in government programs and initiatives.” Many industry leaders feel that the decision of the government to not protect the local industry may not have created major damage. However, going forward, it would be almost criminal if India does not explore the potential for domestic IT hardware manufacturing. With the PC market expected to clock 11 million units during FY2013-14 and a tablet market which according to IMRB International can touch 51 million by 2018 it’s time India looked at reversing the duty structures to start PC manufacturing. MNCs are also eager to tap the manufacturing potential in India. “Our only request would be to provide us with a long-term vision and plan so that investments can be protected,” says S Rajendran, CMO, Acer India. MAIT recommends an immediate reduction in excise duty on hardware from 12 to 6 percent. It also recommends having a uniform Countervailing Duty (CVD) of 6 percent on all components

including motherboards and chassis. At present only microprocessors and hard drives attract 6 percent CVD. Besides, MAIT recommends that the Special Additional Duty be removed from all components used for manufacturing. Over the years the government had kept a lower duty structure for ICs and hard drives which are not manufactured in India while keeping higher duties on motherboards, memory modules and other PCB-based products as well as products such as chassis. This was done because there existed, at least on paper, a potential for manufacturing motherboards, memory modules and chassis in the country. However, with nearly 50 percent of the cost of a computer accounted for by the processor and hard drive, the benefit of sourcing motherboards and memory locally does not exist for the manufacturer. “Some of the theories that we could have been a great base for manufacturing computer chassis have proved to be wrong,” argues Rajendran. “While India is rich in mining and produces iron ore, we have not been successful in creating the right quality sheet-metal for manufacturing chassis at reasonable prices.” Hence he feels the first step which the country needs to take is to reverse the duty structure. “Once it becomes clear that it’s cheaper to assemble laptops, desktops or tablets in the country then almost all manufacturers will invest and expand manufacturing facilities here.” After the local assembling starts most manufacturers will look for sourcing some of the products locally. “Remember, logistics is a huge factor,” says Anwar Shirpurwala, Executive Director, MAIT. “We have seen in the automotive industry how hundreds of local suppliers mushroom whenever a car manufacturer sets up shop. In the first phase of manufacturing we may see manufacturers importing components, but once the volumes are consistent, local entrepreneurs would start sensing the opportunities.”

Incentivizing purchases The biggest challenge is the affordability of PCs especially for those belonging to SECC (Social Economic Caste Census) C and below households. “If you consider the cost of an entry-level PC to be about `22,000 a month, and consider the average income of a household to be around `12,000, you will see that it will be difficult for such a household to cough up two months’ earnings to buy a PC,” explains P Krishna Kumar, Executive Director, CSMB, Dell India. According to the Census of India 2011, among 78 million urban households only 15 million own PCs,

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cover story PC penetration in emerging markets Malaysia

64% Russia

57%

Brazil

45%

“Indian households are now giving importance to children’s education. Helping schools to start an ICT-powered curriculum helps us to reach PCs to students” P Krishna Kumar

China

Executive Director, CSMB, Dell India

35% South Africa

18% Vietnam

18%

Sri Lanka

12% India

10% Source: KPMG Report

Key barriers for IT adoption in the MSME Sector High cost of hardware

34% Customers not using IT

31% Electrical outage

26%

Manual methods working well

26%

Difficulties in learning technology

23% Lack of skilled staff

23% High cost of software

22% Lack of awareness on benefits of IT

21% Source: KPMG Report

Total addressable market for PCs Segments

Installed base

Potential market

Households

22-24 million

45-50 million

MSME

12-14 million

25-30 million

Large enterprise

5-6 million

6-8 million

Government

7-8 million

9-12 million

Total

45-50 million

Source: KPMG Report

85-100 million Note: Indicative range provided

Current market coverage of PC vendors Number of unique MSME clusters

392

PC vendor and SMB reseller presence

179

Percentage of coverage through SMB channels

Number of clusters with PC retail presence

337

while of the 168 million household in rural India hardly nine million own PCs. One of the industry’s recommendations to the government is to offer income-tax exemption on the purchase of one PC per household. “Income-tax exemption up to say `25,000 every three years would encourage a number of households to buy a personal computer,” believes Rajendran. The generally accepted rule is that the TCO of a home computer must be less than 3 percent of the annual household income. For this the industry is lobbying with TRAI to introduce low-cost broadband connections. When Sri Lanka introduced broadband connectivity at $2 a month in 2010, the country witnessed a sharp increase in PC sales by 60 percent. “Though our broadband costs are low compared to many countries, it’s still not affordable for the vast majority of Indians. We are working with government officials and telcos to bring down the cost,” says Kalyan Biswas, Associate VP, Internet & Mobile Association of India (IMAI). Lower broadband costs are possible in rural India once the National Optic Fibre Network, a project by the central government to connect 2,00,000 villages, takes final shape. Right now 29 percent of rural India needs to travel more than 10 kilometers to access the Internet. While telcos and smartphone enthusiasts believe that the next 100 million Internet users in the country are likely to connect to the net using a smartphone, many believe that it would actually help the IT industry to grow further. “Both smartphones and tablets have limitations for content creation. While a vast majority go online for content consumption, a significant number would actually upgrade to a computer for content creation,” says Shailendra Katyal, Director, Home Business, Lenovo India. Over the past few quarters many PC vendors have tied up with consumer finance companies to offer PCs on EMIs. While some of the retailers say that 20 percent of their business today is through finance, Katyal feels

“We have been studying the advantages of various MoMSME schemes. We would promote them since very few partners are aware of the schemes and benefits”

Percentage of coverage through retail 86

Kshitij Kotak

Source: KPMG Report

CEO, Fortune Grecells, & President, ASIRT

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cover story the market size is less than 1 percent. “We will need to build better models and stronger finance schemes to grow the market. Technology obsolescence increases the risk of unsecured loans on personal computers. At present we have sign-ups to provide loans for creditcard holders, but then a very tiny part of our population has credit cards.” Targeting the education sector is another strategy for IT vendors. “Modern Indian households are giving a lot of importance to children’s education. Helping schools to start an ICT-powered curriculum helps us to reach computers to students, and then from students to their parents,” says Kumar. Dell runs a program called Dell Champs, which

this year is expected to connect with 4,00,000 students across 20 cities. Kumar explains, “The program is based on the understanding that computers play a significant role in the all-round development of a child, and are an important part of a student’s life.”

SMB sector Perhaps the fastest-growing segment is the small business segment, specifically the micro, small and medium enterprise (MSME) sector for which the central government has a dedicated ministry, the Ministry of MSME (MoMSME). The ministry has announced several schemes to boost the uptake of IT, including the National Manufacturing Competitiveness Program.

India can be a hardware exporter Anwar Shirpurwala, Executive Director, Manufacturer’s Association of Information Technology (MAIT), evangelizes the potential of the country’s hardware sector What’s your outlook for IT manufacturing in the country? India has already developed into a huge consumer market for IT hardware even though less than 10 percent of the population owns computers. Let’s say that in the next decade PC penetration goes up to 30 or 40 percent; this means the size of the market would also multiply three or four times. It’s in the interest of the country to address this market locally, and we need to learn from the software industry which has built a very strong base. Thankfully, things are falling in place for us now, and the government is listening. We feel we are where the software services industry was Anwar Shirpurwala in 1991. What should be the immediate course of action? We must do away with the inversive duty structure. We have a 10 million plus PC market, and a tablet market which is expected to eclipse the PC market in a few years. By simply doing away with the inversive duty structure we could convert a large base into local manufacturing. Based on studies by our research partners, KPMG, this would result in, by 2018, an additional revenue of `1,33,000 crore per annum from direct, indirect and induced streams. But India has always been regarded as a low choice for manufacturing. A reason for this was that the domestic market was small. Today we are among the few countries where the domestic IT industry is growing. If we are able to build this as a captive market then the potential for the country is huge. Once local manufacturers are assured of volumes, their economies of scale will improve, and India can potentially be a hardware exporter. What do you think is the role for Indian channel partners? At present a majority of the local channels are primarily into

trading and providing services. Globally we have seen the trend that traders have become manufacturers and creators, and manufacturers have become traders. There’s no shortage of technical or management skill-sets among our local channel entrepreneurs; if presented with the right opportunities they can do it. For example, if it becomes more viable to manufacture PCs locally than import them, there would be opportunities for making components.

Which hardware products can be manufactured here? Anything for which you can build a captive base for local manufacturers and which does not need high investment. An example could be the set-top boxes. We will also need to look at what technology will sell in future, and need to invest on a longterm basis. In this we have to learn from some of the smaller Asian countries. The best example is Thailand, which is one of the biggest manufacturers of hard drives. The world realized its dependence on Thailand for disk drives when the floods hit and there was a shortage of drives. What we don’t need is a handful of large manufacturers, but a large number of smaller manufacturers. Thailand did just that in the late nineties through government support for the disk drive supply industry so that every manufacturer sought Thailand for components to make disk drives. What is MAIT doing to get India on that track? We have been educating the government. We have been advocating the advantages of setting up hardware manufacturing hubs. We have been advising government policy-makers on the challenges faced by the industry, and how through proactive policies we can really unleash the IT potential of the country. n

By doing away with the inversive duty structure we could convert a large base into local manufacturing. This would result in, by 2018, additional revenue of `1,33,000 crore per annum

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cover story Six ideas that worked globally Argentina: A country with socio-economic characteristics similar to India, rolled out three million PCs to schools as part of its Conectar Egualdad (Relevance) program. The government partnered with telecom companies to subsidize broadband costs. This resulted in 74 percent PC penetration. 85 percent of the teachers were trained to use computers. Brazil: With an initiative called PC Conectado, set up a budget of $9 billion to subsidize PCs for low-income groups and students. The government subsidized loan repayments and offered consumers the chance to own a PC paying as little as $20 a month for a period of 48 months. Brazil had 45 percent PC penetration as of 2012. China: Provided a 13 percent rebate on PC purchases by rural Chinese and enabled PC makers to offer attractively-priced notebooks and desktops by underwriting taxes for low-income groups. Today, China has a PC penetration of 35 percent and is expected to cross 50 percent by 2015. China has already overtaken the US as the largest PC market. Malaysia: Subsidized one million netbooks for students and low income group families, and also subsidized projects to set up broadband in rural areas. The country has also taken steps to promote manufacturing in the country. It has introduced full income-tax exemption for individuals buying personal computers up to RM 3,000 (approximately `40,000). Today, Malaysia has 64 percent PC penetration, and is one of the hottest destinations for global PC manufacturing. South Africa: Offered a support of SAR 130 to teachers for repayment of loans on PCs purchased from an accredited list of suppliers. In this way PC penetration grew from the low singledigits to 19 percent in three years. Vietnam: A country that was ravaged by war for most of the second half of the 20th century, and where 80 percent of the population depends on agriculture, today has 12 percent PC penetration which is more than that of India. This was the result of government-subsidized broadband connections and software which reduced the TCO of a PC by 50 percent. n

China provided a 13 percent rebate on PC purchases by rural Chinese and enabled OEMs to offer affordable PCs by underwriting taxes for low-income groups Another interesting scheme is the Credit Linked Capital Subsidy Scheme which has identified 48 microverticals for offering subsidies for the purchase of computer hardware and software. Unfortunately, few potential beneficiaries are aware of the scheme. Equally unaware are the vendors and channels. “We have been studying the advantages offered by various MoMSME schemes, and would like to promote them among our members. Few partners are really aware of the schemes and how partners can benefit from them,” says Kshitij Kotak, CEO, Fortune Grecells, and President, ASIRT. Most vendors have announced strategies to tap SMB clusters spread across various city suburbs. According

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“There’s no proof of adverse effect on the PC market with free distribution of notebooks. On the contrary we are seeing more enthusiasm from consumers” Shailendra Katyal

Director, Home Business, Lenovo India

to ClusterObservatory.in, there are 392 unique SMB clusters in India but only 179 of them have a channel partner present within the locality to address their requirements though a number of vendors have tried to address these requirements through both the retail and hub-and-spoke models. Lenovo has launched SMB retail outlets in cities such as Pune, and has explored the idea of addressing SMB requirements through retail. According to ClusterObservatory.in, 86 percent of clusters have a presence of either a specialty store or multi-brand store. “The SMB is not a monolithic entity,” cautions Neha Jalan Goenka, Senior Associate, AMI-Partners India. “We have divided SMBs into six categories according to their IT usage and number of users. The smaller sets behave like a consumer when it comes to IT buying decisions, while the larger SMBs behave like an enterprise.” Meanwhile, Dell, Lenovo and HP have embarked on focused channel initiatives to address the opportunities. “We believe we have some lead there,” says Kumar of Dell. “We have positioned ourselves across 15 cities which have very large MSME clusters, the approach is largely through channels, and to manage them we have a dedicated channel team.” However, many opine that vendors need to think beyond box-sales and try selling solutions to the SMB space. “Today most MSME companies are limiting computerization to accounting and email. There are several departments such as logistics, purchase and shop-floor where the PC is yet to penetrate,” says Pattabiraman Raghuraman, CEO, Salezart, New Delhi To address SMB opportunities for the software sector both Nasscom and the Indian Software Product Industry Roundtable have embarked on promoting the use of software products targeted at micro-verticals. “The SMB sector needs a large number of software products that can be easily sold through a channel partner. Our goal is to help create software product vendors who can address that requirement,” says Bharat Goenka, MD, Tally Solution.

Government support While policy changes can help start manufacturing and tax reforms can bring PC-buying enthusiasm, the government can play the role of a facilitator. The free PC distribution to students by state governments such as UP and TN faced a lot of criticism, but while many partners feared that the freebie schemes would kill consumer sales, most vendors report growth which is on par with the rest of the country.

cover story “We have divided SMBs into six categories. The smaller sets behave like a consumer making IT buying decisions, while the large SMBs behave like an enterprise”

Four ways channels can help Increase upcountry business: City-based partners should look at expanding their markets to pockets outside the immediate city suburbs, as well as villages and towns. Starting retail outlets in such regions could benefit their business and also increase computer awareness. All major PC vendors are encouraging their partners to go beyond their comfort zones.

Neha Jalan Goenka

Senior Associate, AMI-Partners India

“Based on the numbers we see in the consumer market there’s no proof that there’s any adverse effect on the PC market in states where there has been free distribution of notebooks,” remarks Katyal. “On the contrary we are seeing more enthusiasm from consumers who had earlier not even thought of owning a PC. We hope that over a period of time many of the beneficiaries will upgrade and buy one of their own.” Shirpurwala says that globally the free or subsidies on computers has resulted in progressiveness, and that such schemes should continue. Other recommendations include an increase in G2C services that are e-enabled. “We have observed many new buyers in cities where local or state governments are offering online government services including the payment of taxes and bills,” says Kumar. Another observation was the spurt in the demand for PCs in SMB clusters when the Karnataka commercial taxes department introduced schemes such as eSugam and e-payment of taxes. n

Tap SMB clusters: Every major city has an SMB cluster which is fast growing. Vendors cannot address their demands directly, and are on the look-out for channel partners to address these requirements. Give ICT training in schools: With computer sales dipping, one service which is not very costly is offering computer aided training to schools. Anirudhan Prabhu, an IT reseller based in Dharwad, says that his services billing rose to `14 lakh over the past six months by offering ICT training to six schools in the district. Build a software product: Associations such as Nasscom and iSpirit are running boot-camps and forums for entrepreneurs interested in building software products that could increase IT penetration in the SMB sector. This requires investments and skill-sets, but the returns are higher. n

City-based partners must expand their markets to pockets outside the immediate city suburbs, and nearby towns. Most PC vendors are encouraging them to do so

Clear Credible Competent Consistent Compassionate Communicative CRN Creative CRN – the 8th C of Channel Marketing www.crn.in

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role model Transparent and trustworthy Sachin Rao, Founder & CEO, and Ramanujam S, Co-founder & Director, Archon Consulting Systems, recall their journey together from the early days of the enterprise to its present happy position n ABHIJEET MUKHERJEE n IT company digressing from its core area of business and moving to a non-IT business became a turning point for Sachin Rao and Ramanujam S. The duo later founded Archon Consulting Systems which has become one of the most trusted companies specializing in server, storage, virtualization and client computing solutions. “Our strong belief in our core values, and transparency in our dealings with both employees as well as customers has helped us to build the trustworthiness we are known for. This has been the main reason for our success in the last couple of years,” says Rao, Founder & CEO, Archon.

The beginning Archon Consulting Systems was founded in August 2010, when Bengaluru-based Dreamquest (where Rao was the CEO) slowed down its business. “I spent 10 years with that company and was the CEO during the last four years. I moved away when I saw that the passion was missing, and Ramanujam joined me,” recalls Rao. The new company was named Archon, meaning ‘ancient rulers of Greek provinces.’ Rao and Ramanujam made investments to the tune of `10 lakh from their savings, hired four engineers for services delivery, and rented a small office in Bengaluru. They were later joined by Prakash R as Director, Client Computing Solutions, and Kiran Holla as Director, Finance, Operations & Logistics. Fund flow with their limited capital was a challenge. “Our small capital made fund flow a difficult task. This continued for almost 5-6 months. After lots of discussions we eventually got an investor to sail us through the tough times,” recalls Ramanujam S, Co-founder & Director, Archon. On the third day of starting the business the young company hired a market research start-up run by common friends to build business intelligence on opportunities to chase. “We knew we needed professional help in understanding precise trends before plunging in completely. This was the best decision we took because it added 25 customers in the first seven months,” Rao recalls. Their first big deal, worth `10 lakh-`12 lakh, was

“Our transparency in dealings has helped us to build the trustworthiness we are known for. This has been the main reason for our success in the last couple of years” 28

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Sachin Rao and Ramanujam S

with a semi-conductor manufacturing company for implementing backup in a Linux environment. “It was a difficult job and the completion of the project gave us a different high altogether,” explains Ramanujam. During the first year of operations orders worth $160,000, $450,000 and $600,000 which were executed in FY2011-12 from three semi-conductor companies for HPC clusters and data center migration, took the turnover to `5 crore. In April 2011 the company bagged an order worth `50 lakh from a UK-based logistics giant for setting up its IT infrastructure. Another large project was the implementation of proactive pre-failure alert software in a 300-server Linux hardware cluster for a large semi-conductor company in Bengaluru. Rao and his team acquired several new certifications in FY2011-12 from vendors such as HP and VMware. “Certifications helped us to win the confidence of customers. They reflected in our communications and helped to convince prospects faster, thus leading to more customers and more business,” explains Ramanujam. During the fiscal the company bagged five orders ranging between `3 crore and `7 crore for server and storage infrastructure; this helped them to register

Role model revenue of `35 crore by the year-end.

2010

Current business

MILESTONES Founded Archon Consulting

migration project, setting up a Hadoop cluster, and implementing a BYOD solution for a customer with 800 users.

2013

2012

2011

2010

The company grew 5 percent in Systems FY2011-12 with revenue rising Future plans from `35.4 crore to `37 crore in At present Archon has around Hired a research agency for FY2012-13. Corporate reselling at 80 mid-market and enterprise business intelligence on market 55 percent contributes the largest customers who provide yearopportunities chunk of its revenue, solutions round repeat business; it hopes contribute 35 percent and the rest to grow the number to more than Bagged an order worth comes from services. 100 during the current fiscal. `50 lakh from a UK-based Because the last fiscal was The company aims to grow its logistics giant for setting up its slow Archon designed a mixed topline by 15-20 percent and strategy to acquire new customers, garner revenue of `45 crore in IT infrastructure add new brands and deep-dive FY2013-14. It intends to add 15 Acquired new certifications into existing businesses. While more employees and aggressively the company added around 30 increase its customer count. “We from HP and VMware more customers in the last fiscal, will also increase our focus on it also added a few new brands storage, cloud and virtualization, Won an ERP migration project, like Cisco for the entire stack. and aim for large corporate set up a Hadoop cluster, and “Last fiscal we worked both houses,” says Rao. implemented a BYOD solution on breadth and depth. DeepArchon wants to get into IT for a customer with 800 users selling new technologies to our security in a more focused way existing customers contributed and sign up with vendors such Archon recorded a turnover significantly to our revenue,” as WatchGuard, CheckPoint and of `37 crore informs Rao. Fortinet. Rao informs, “We are During FY2012-13 Archon looking at strengthening our grew its business on the security portfolio in 2014 and strength of stronger relationships with vendors such adding substantial customers.” as NetApp and Hitachi Data Systems. “While we are The company will also look at VDI with a renewed predominantly aligned with HP, we have averaged approach. “Back in 2011 we had tried to get into this almost a million dollars of business with both NetApp segment but due to the high price of $1,100 for VDI per and Hitachi,” informs Rao. He concedes, “If it were not node versus $800 for a notebook it was difficult for us for the trust shown in us by HP in the initial days we to convince customers. We will rework our strategy and would not have reached here.” try to build on our expertise to come out with a more The company focused on IT-ITeS companies and the acceptable business proposition,” Rao discloses. manufacturing sector. Explains Rao, “We were very clear Archon has plans to create a separate business that we would not go after the defense, government and unit for its managed services, and will expand education verticals for the first three years as they have geographically from 2015 onward. tough guidelines and eligibility criteria.” Remarks Rao, “We are building an organization where Archon also increased its focus on virtualization, the first preference is given to employee happiness and thin clients, servers, storage and services, and won satisfaction. We have been customer-centric from day several new projects which ranged from a few lakhs one, and we feel that as long as we build a customerto crores. “The projects that we won in FY2012-13 centric company we cannot go wrong.” were very different from our previous wins,” says Ramanujam. “We won an analytics project where we set On a personal note up infrastructure for SAP HANA. For another customer Both Rao and Ramanujam are avid readers. While we did software implementation—complete service Ramanujam loves to read fiction, especially thrillers, desk management tool deployment. For yet another be it psychological, mythological or legal, Rao loves to customer we deployed network management tools for a read thrillers, management texts and self-help books. data center.” Ramanujam is currently reading Amish Tripathi’s The Other wins during the last fiscal included an ERP Secret of the Nagas while Rao is reading Ken Follett’s Winter of the World. Rao loves traveling and often hits the road in his “Certifications helped us win the confidence SUV for joy-rides. “Driving helps me concentrate and gets my thoughts organized. It also acts as a stressof customers. This reflected in our buster. I spend hours driving through interesting places communications, thus leading to more on weekends.” He is also a movie and music buff, and watches and listens to all genres. n customers and more business”

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tech focus

Ways to defend against ransomware threats

CryptoLocker, a virulent form of data ransom malware, puts businesses and individuals at risk of permanently losing files by encrypting them and demanding payment to regain access. Prevention is much easier and cheaper than recovering, say malware experts n Robert Westervelt

ryptoLocker is making headlines for encrypting data and holding it to ransom, but leaving some victims in the lurch despite paying out to regain access to their files. It uses strong encryption, making it next to impossible to crack. Solution providers said that they are advising clients to first focus on basic security measures and then offering to assess the adequacy and configuration of existing security systems. Addressing ways to reduce the risk of a crippling CryptoLocker infection can thwart other malware threats like it, they say. The cybercriminals behind the extortion threat, which spreads through email phishing attacks, recently increased the fee to unlock the data the ransomware encrypts from approximately $200 worth of Bitcoins, a digital currency, to about $2,000 worth of Bitcoins, according to Jerome Segura, Reseacher, Malwarebytes, who has been monitoring the threat. Here are five security measures that could be taken to reduce the risk of an infection.

Backup Cloud-based backup is fine, but security experts warn that if your cloud backup is set to automatically sync, the files encrypted by CryptoLocker will replace the files synced to the backup service. Businesses and individuals who follow the best-practice 3-2-1-backup rule will be in great shape to recover from a CryptoLocker infection. Keep three copies of any important file; backup important files to two different types of media such as a DVD or hard drive; and keep important files in an off-site location. Backup alone is no panacea, warns Segura. Recovery from a CryptoLocker infection can take several hours depending on the amount of data that needs to be restored, and downtime can be costly. Individuals who have paid out the ransom have found that the decryption still takes hours and there is no guarantee that malware still isnâ&#x20AC;&#x2122;t lying dormant on the recovered system.

Cybercriminals have recently increased the fee to unlock the data encrypted by the ransomware from $200 worth of Bitcoins to about $2,000 worth of Bitcoins 30

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The screen pop-up on the PC infected by CryptoLocker

Updated antivirus software According to VirusTotal, a website that checks malware against dozens of antivirus engines, most antivirus software can detect CryptoLocker malware. CryptoLocker spreads via malicious file attachments and can also be detected by antispam appliances and most filtering software. Beware of relying solely on antivirus software for protection, says Segura. If antivirus detects an infection after files are encrypted, removing the threat can make decryption difficult, he said. Some people have sought to re-infect their systems in order to pay out the ransom to cybercriminals. To address systems that have had the malware removed, the cybercriminals behind the scam have set up a CryptoLocker Decryption Service. The service, which is cloaked from investigators behind the Tor anonymity network, can produce a decryption key to victims who upload an encrypted file. The service is expensive at 10 Bitcoins, or approximately $2,300.

Whitelisting technology Businesses that want to ensure that CryptoLocker and other malware threats fail to execute can roll out whitelisting software. Security experts warn that the technology, which maintains a list of known good software, can be burdensome to IT administrators and have a negative impact on end users. Some whitelisting

tech focus technologies are not as robust. Another way to reduce the risk of malware infection is by applying group policies to prevent people from opening executable files. Most people that open file attachments are not going to extract the file first and open it; they will double-click on a zip file, which can be blocked from executing through group policy.

Businesses who follow the 3-2-1-backup rule will be able to recover. Keep 3 copies of important file; backup them to two different types, and keep a copy in an off-site location have the ability to provide this kind of protection, say solution providers.

Intrusion prevention systems Intrusion prevention systems can block the communications protocol sent from the CryptoLocker infected system to the remote command-and-control server where the malware retrieves the key to encrypt the files. Blocking the communications can prevent the encryption from taking place. Security firms have figured out the CryptoLocker algorithm that produces about 1,000 unique domain names every day, says Segura. By monitoring the domains to determine the IP addresses attempting to connect to them, security researchers have determined that the US and UK are the most affected countries followed by India, Canada and Australia. Researchers at Kaspersky Lab said the threat gives infected systems three days to pay for the key to unlock the encrypted files. Both next-generation firewall appliances and intrusion prevention systems

User education Technology alone is not going to solve the longstanding problem of social engineering techniques coupled with malicious file attachments. Security firms need to build up a security-aware culture to help recognize phishing emails. Email attachments associated with the CryptoLocker threat are accompanied with Fake Amazon invoice email messages, phony DHL express delivery slips and other common phishing emails that are known to circulate with other malware campaigns, says Segura. The attackers have not regionalized or targeted the campaign at any specific group of individuals, keeping the campaign broad in scope, which potentially makes it easier to identify. n

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tech focus 8 key features of iPad Air Weighing just under one pound, iPad Air is also the slimmest tablet and packs a punch with its processing power and innovative features n Lisa Barry

he tablet innovator has re-invented its latest tablet again, or at least upgraded and morphed it a bit. Apple’s fifth-generation iPad, unveiled last month began shipping worldwide starting November. Following are 8 key specs and features of Apple’s newest edition to the iPad family, the iPad Air.

Design A full-sized tablet that only weighs 1 pound? That’s the design feat Apple accomplished with the iPad Air. And it is thin too, measuring in at a depth of .29 inches. Apple claims its latest innovation is the lightest fullsized tablet on the market. In comparison, both Apple’s iPad 2 and Lenovo’s new Yoga Tablet 10 weigh in at 1.33 pounds, whereas the Samsung Galaxy note comes in at approximately 1.2 pounds.

Display The 9.7-inch retina display on the iPad Air is the same size as the previous iPad with retina and iPad 2 displays. However, the edges around the display shrunk, making the total width of the device 6.6 inches. Though the display remains the same size, it accounts for more surface area of the entire device than before. The retina display packs in 264 pixels per inch.

Battery

Chip

Wi-Fi performance also doubled in the iPad Air with two antennas and MIMO technology. In the best circumstances, the Air can achieve download speeds of 300 Mbps. The device has both Wi-Fi and cellular connectivity. Apple claims that by supporting more LTE bands, the device is faster than broadband in some cases.

The iPad Air also sports Apple’s own 64 bit, A7 chip and M7 motion co-processor, first seen in the iPhone 5S. The A7 chip gives the Air twice the CPU and graphics performance power as was seen in the previous iPad with retina. Dividing duties between the processor and the M7 coprocessor also allows for greater battery life.

Camera The iPad Air is loaded with a 5 MP, rear-facing iSight camera as well as a front-facing, FaceTime HD camera. The FaceTime HD camera now has a backside illumination sensor to brighten up whatever appears in the frame. Since Apple is shipping all new iOS and Mavericks products with the iLife suite for free, users can amp up pictures and videos with iPhoto and iMovie at no extra cost.

Apple claims its iPad Air is the lightest fullsized tablet. But its iPad 2, Lenovo’s Yoga Tablet 10 and Samsung Galaxy note weigh in at 1.33 and 1.2 pounds respectively 32

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Historically, 10 hours has been the standard battery life of an iPad, and 10 hours it has stayed. The device contains a built-in 32.4 watt-hours battery. Battery life is estimated based on mixed usage of Web browsing, listening to music and viewing video.

Connectivity

Apps As with all of Apple’s new mobile devices, the iPad Air runs on iOS 7. All new devices shipped with iOS 7 or the Mavericks OS X operating system come loaded with the creatively-geared iLife suite as well as the productivitygeared iWork suite. Users are also able to seamlessly share projects and media from one device to another through iCloud.

Price and availability Apple’s iPad Air began shipping on Friday and is available in silver and space gray. The iPad Air with Wi-Fi-only capability comes in 16 GB, 32 GB, 64 GB and 128 GB options priced at $499, $599, $699 and $799 respectively. The iPad Air with Wi-Fi and cellular capability also comes in 16 GB, 32 GB, 64 GB and 128 GB options and is priced at $629, $729, $829 and $929 respectively. n

channel buzz

n Parag Shah, CEO, Futech Computers, is the new President

n Former President, Rushabh Shah the will now serve as Treasurer

TAIT appoints new committee The Trade Association of Information Technology (TAIT) has appointed a new committee. At its recent annual general body meeting held in Mumbai, Parag Shah, CEO, Futech Computers, was elected as the President. KR Chaube, CEO,

Techlink Infoware, was elected Vice President; Vivek Gandhi, Partner, Software Mart, General Secretary; and Rushabh Shah, Director, Graham Information Systems, Treasurer. Speaking on the occasion, Parag Shah said that the association will continue with the transformation started last year and will form new alliances and conduct several innovative events. “Our utmost focus will be on protecting partners from the BIS compliance guidelines and also the challenges from online sales.” Other newly-elected office-bearers of the association include Champakraj Gurjar, CEO, Maxtone Electronics; Bimal Jhaveri, Director, Hardtrack Computers; Vikram Mehta, Director, Techmatrix Infotech; Samir Mehta, CEO, Computer Corner; and Vinod Vanigota, Director, Chipcom Traders; all as Directors, and Chetan Timbadia, Director, DC Infotech; Mukesh Mehta, Director, Orno Computers & Peripherals; and Magan Gangani, Director, Newtrack Computers; all as Co-opted Directors. Shah of Graham is also media spokesperson and Chairman, Events Committee. Gurjar has been elected as Chairman, Special Task Force. n

n Asirt members discussing the impact of compulsory registration order which requires BIS certification n Partners attentively listening to a presentation on the

company’s future roadmap

Strontium concludes partner meet Strontium Technology recently concluded its Channel Partner Conference in New Delhi. The conference highlighted the changes in the memory industry and discussed strategies to turn market challenges into opportunities. The company showcased its new products and presented its roadmap for the new fiscal. Said Vivian Singh, President & CEO, Strontium Technology, “The latest smartphones and tablets need high-performing memory cards for capturing, storing and accessing HD videos, pictures, media files, apps and data. Strontium’s NITRO cards with 60-85 Mbps transfer speeds are an ideal solution.” n

ASIRT celebrates Techday ASIRT recently concluded its Techday in Mumbai. The highlight of the event was the keynote Your Time Has Come by Kshitij Kotak, CEO, Fortune Grecells, and President ASIRT. In his keynote he lamented that the IT hardware industry is not given its due. “Despite expertise, skill-sets and resources, IT support and services are provided for a pittance and there is no regard to man-hours. Under-pricing continues unabated.” Champakraj Gurjar, CEO, Maxtone Electronics, highlighted the problems faced by the partners because of the compulsory registration order (CRO) which requires BIS certification for most IT products. “CRO is a threat to smaller players and if implemented will wipe them off. The future of almost 1.2 million small IT partners is at stake.” n

To feature your company’s events in CRN, send write-ups with photographs to editor@ubmindia.com

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New Products Asus Fonepad 7 A

sus recently launched its updated version of Fonepad called Fonepad 7, a 7-inch tablet with calling facility. The device is powered by an Intel Atom Z 2560 processor with hyper-threading technology and runs on Android Jelly Bean 4.2 OS. The tablet has a screen resolution of 1,280x800 with in-plane switching technology for wide viewing angles. The new device is 10.5 mm thick, weighs 340 gm and sports a smudgeresistant coating that keeps away fingerprints. It has Miracast wireless video streaming which allows compatibility with HDTV for big-screen display. The Fonepad 7 features a 1.2 MP frontfacing camera and a 5 MP autofocus rear camera with a 100 continuous-shot burst mode and 1,080 p full HD video recording. The 3,950 mAh battery provides up to 28 hours of 3G

talk-time, 35 days of standby time and up to 10 hours of video playback. The tablet sports built-in 3G with HSPA+ mobile data with download speeds up to 42 Mbps and an upload speed of 5.76 Mbps. Other connectivity options include Bluetooth and 3G telephony support across GSM and WCDMA bands. Fonepad 7 is available with 16 GB internal storage via a microSDHC card slot. 5 GB of lifetime Asus WebStorage is included. Asus WebStorage Office provides a full Microsoft Office experience on the move. The tablet comes with dual-front speakers with Asus SonicMaster audio technology. The Asus Fonepad 7 ME372CG is available at an MRP of `17,499, and carries a 1-year warranty. n

Lenovo IdeaPad Flex

HP ZBook

enovo has launched its 14-inch IdeaPad Flex, the worldâ&#x20AC;&#x2122;s first dual-mode notebook PC with a 10-point multi-touch display. The device is powered by an Intel Core i3 processor, 4 GB DDR3 L RAM and Nvidia GeForce GT 740M 2 GB graphics (optional), and runs on Windows 8 OS. The notebook can flip at an angle of 300 degrees. It can instantly switch between laptop and stand modes. While the laptop mode features an integrated keyboard and touchpad, the stand mode is designed for touch usage and social functionality. For connectivity options the notebook comes with one USB 3.0 and two USB 2.0 ports, and two SD/ MMC card readers. It has a 4-cell lithium ion battery which supports up to nine hours of battery life. The notebook sports a built-in edge 720 p HD camera with array microphone. The product features integrated stereo speakers and is Dolby Advanced Audio-certified. It features a voice control system and comes in black with silver gray. The device is priced at an MRP of `42,250, and carries a 1-year warranty. n

P recently launched its first mobile workstation called the HP ZBook in three variants of 14-, 15- and 17-inch displays with built-in client security features. The device features fourth-generation Intel Haswell dual- and quad-core processor options and nextgeneration graphics technologies from Nvidia and AMD. The laptop can support up to 32 GB DDR3 RAM and 2.8 TB HDD storage, and runs on Windows 8 OS. The ZBook 14 comes with the option for a touchenabled panel. The ZBook 15 has the option for a high-resolution QHD+ 3,200x1,800 display. The ZBook 15 and 17 feature a Thunderbolt port which can allow data transfer at up to 20 gigabits per second. The workstation comes with an optional DreamColor Display panel that provides accurate and consistent color from the display to print. The workstations come with the HP Performance Advisor, an application to ensure the device operates at its optimum potential and remote graphics software that allows collaboration on the move. They weigh a minimum of 1.62 kg and have a battery life of up to 14 hours. The ZBook 14, 15 and 17 are priced at `1.5 lakh, `1.75 lakh and `1.85 lakh respectively, and carry a 3-year warranty. n

The products featured here have not undergone any benchmarking or testing. The trailers contain information provided by vendors and distributors. To feature your companyâ&#x20AC;&#x2122;s products in CRN, send write-ups with photos to editor@ubmindia.com

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shadow ram Defaults rising in the market

he market slowdown, currency fluctuations and other factors are resulting in increased defaults and frauds. A large SI in Bengaluru allegedly siphoned off `10 crore from an escrow account created for a large IT project. At the receiving end is Bengaluru-based VAD. “Under a tripartite agreement between us, the customer and the partner, we had created an escrow account to manage the finances of this project. However, we were shocked when we found `10 crore diverted from this account. Upon investigation it was found the partner had done this,” said a senior executive of the distribution company. According to sources from the distribution fraternity, Indian distributors are confronted with an estimated `700 crore worth of outstanding, which is unrecoverable. While some of it has been due to customers not paying on time and some due to failed or delayed projects, a part is also attributed to frauds. Speculation is that of the `700 crore of almost-bad debts among distributors, `80-`100 crore is owed by Ahmedabad-based Sai Infosystems, which reportedly owes more than `1,000 crore to banks alone. As a result, distributors have now formed an alliance to tackle frauds and defaults. n

GET

Personal

“I‘d like to date Julia Roberts”

Gaurav Mathur

Gaurav Mathur, Country Business Head, Genius India, has over 13 years of experience in retail including IT and BFSI. At Genius India, he is responsible for driving the company’s growth. Prior to joining Genius he has worked with Transcend, Wipro Technology, InterGlobe and Tata AIG.

If not in the IT industry: I would have been into the fashion industry. Biggest passion: To overcome challenges. Behind the wheels: Mercedes-Benz SL65 AMG. Gadgets I can’t live without: My mobile phone. Weekends are for: My family. Favorite holiday destination: Mcleod Ganj in Himachal Pradesh. Hate the most: Delhi traffic. Favorite movie: Dilwale Dulhania Le Jayenge. Favorite stars: Shahrukh Khan and Jim Carrey. Role model: I don’t follow any specific person. Ultimate ambition: My own start-up. Wildest thing I have ever done: Cliff jumping. Thing I most want to do in life: Visit the Amazon rainforest. If I became the PM: I would implement and fasten the infrastructure development projects in tier-2 and -3 cities of India. Celebrity I would like to spend a day with: Julia Roberts. One person I would like to meet and why: I would like to meet PM Manmohan Singh, and learn the secrets of keeping calm and patience during extreme situations. Deepest and darkest fear: Return of 2012, end of the world prediction. n — CRN Network

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