Focused Strategy, Niche Solutions

Distinct gaps exist between the top 4 National distributors
and the remaining in the race. The distinction could be made based on their
business turnover where the top 4 have four figure revenues, whereas the others
in the top 12 ranking are still in three-figures.

Neoteric Infomatique-earlier an importer and reseller of
computers and its components-has grown and leveraged on the industry growth to
be amongst the Top 10 distributors in the country. Having started its journey in
1991, Neoteric went on to move up the value chain, and after a complete overhaul
of the reseller business in 1997, got into the distribution business.

Amongst the challenges in the early teething phase, getting
the right people with the right IP and right expertise topped the list.

Rashi, which had started as an IT importer moved to the
distribution business and realized early in the game that mass distribution may
not survive. Value addition was the way ahead and the need was to distinguish
itself from the other players.

What worked?

While they are players in the same space, strategies that have worked well
for both Rashi and Neoteric are quite different. For Neoteric, what worked was a
distinct culture of delegating and creating value heads delegate and create
heads that have the expertise, and hone their skills and caliber. Being a part
of that industry, they had the pulse of the market and didn't have to spend
much time on strategizing and time to market. This made them a preferred partner
for vendors and channels in no time.

Parag Shah of Futech (Mumbai) who has been a sub-distributor
for Neoteric for nearly six years, and recently, has also started working for
Rashi, amongst few others, feels that a strong disty with a focused model plays
an important role in its line of business. Neoteric has been supportive on price
and stock availability, which is critical to the business. "Only when there
are significant margins, prompt availability, and replacement of the products
that the operations are smooth and lucrative," says Shah.

Currently in the 200 crore plus revenue stream, Neoteric and
Rashi both expect to touch 400—450 crore plus by year end 2006.

Consolidation and verticalization for Neoteric

Last year Neoteric focused its energies on consolidating its business and
fine-tuning its processes. The company segmented its brands into various
solutions verticals like systems integration, internal storage, external
storage, digital imaging, digital video, digital pre-press, and photo retail.
This verticalization was its bid to differentiate itself as a value-added
distributor, rather than just a fulfillment agency.

There was also re-arrangement of manpower as they appointed
business heads for the verticals. Transparency in activities and business to
enhance trust from vendors and channel partners is

the imperative aspect of Neoteric's operations.

Neoteric, as its vision and strategy, evaluates futuristic
products and creates a solution around its offerings rather than just pushing
isolated products. It works in close association with vendors and resellers to
bring knowledge about new technologies to the market, bring the products through
the resellers, train the resellers, and provide sales and technical support as a
part of their value add distribution strategy.

The company expects to have an above industry growth at
nearly 50% in 2005-06. They will get into the enterprise solutions space, as
that is yet an unexplored area. Large volumes will come from the large SIs and
the SME and upcountry markets will be a large growth area.

End-to-end solution provider-Rashi

Rashi's vision is to identify growth paths like the networking business and
add value to the business as a distributor. This space allows them to make
maximum value addition, knowledge implementation, and training. With their
logistics capability, Rashi has had an advantage in gaining maximum from its
investments in training people. They expect the networking business to grow to
10% from the current 2%; mobiles to be at 30% and the components business to
constitute 60% of the total revenue chart.

In the coming days service will be an important focus area as
third party services is considered important. Their conscious move from being
box sellers to end-to-end solution providers has allowed them solid growth both
in numbers and geographies. From mass distribution to selling niche products has
also enhanced their quality of products.

The RPtech care centers have gained popularity not only with
customers, but vendors too. Asus, AMD, Compex, and many others opine that these
service centers are not linked with the sales office and their location at a SI
is a great advantage. They also offer easy access to the channels.

With Metros nearing saturation in terms of products and
competition future growth lies in the B and C class cities. Rashi undertook an
ambitious plan to cover 35 cities and 2,500 partners in just about 60 days,
through their Channel Business Forum, to get closer to their partner base and
spread awareness of the brands and services it offers.

Some education and awareness with the right impetus is all
Rashi needs to get these markets on the growth map. With their move to being an
end-to-end solution provider there is an increased focus for Rashi in networking
and wireless. Netgear was one of its acquisitions, and it also marked Rashi's
entry into the network integration business. The idea was to get into complete
solution providing with consultancy, pre- and post-sales support, in a
burgeoning segment like networking. Sales growth for wireless has been 200%
y-o-y.

Another strategy for Rashi was its takeover of Zeta
Technologies, a Mumbai-based distributor, to get into the audio speaker segment,
and since Zeta was a distributor for Altec Lansing, it simply acquired its peer.
The takeover has also made Rashi the exclusive distributor for Altec Lansing, a
long seeked position.

Besides this, Rashi tied up with XFX for its graphics card
range. Also, since Plextor was largely sold into the niche segment-as Rashi
also believes in catering to that segment-the company took this decision
without any regrets. Sony, Logitech, and Asus are the main brands of the company
with each chipping in 20%, 17%, and 15%, respectively to the overall turnover.
IBM is also a profitable principal, with Rashi selling roughly 1 lakh of its
laptops every quarter.

Challenges

The main challenge lies in balancing the act between vendors and channels.
Strict financial management is most critical to set good opportunities for the
channels to earn lucrative margins for making them viable to be in the business
and also convince vendors with the financials to get enough for all the links in
the chain. A constant challenge is to provide good opportunities for the
customer, to earn more to be loyal, and innovate all the time for better product
schemes and offerings. A difficulty being faced by the national distributors is
the aggression from both vendors and customers (channels), to be competitive in
the market, and to continue to increase their share of the pie.

Neoteric has forayed in the gaming market in a very
aggressive way as that market shapes in India.

It has a strong focus on the SAARC region-Bangladesh, Sri
Lanka and others (where operations are initiated).

Neoteric has made sizeable investments in ERP and connected
all its branches across the country. They have tie-ups with 18 vendors, which
include Adobe, Wacom, LaCie, and BenQ.

Minu Sirsalewala