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HP offers Green Solutions for SMBs

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DQI Bureau
New Update

Time and again it has been proved that personal touch serves as a critical

component for developing healthy relationships. This is a reality that affects

both our personal as well as business worlds. In the tech hardware business

world, this theory was adopted by moblile handset majors like Nokia, Samsung and

Motorola, and the result was an inevitable success story. More recently Lenovo

did it for its IT business, and again it was a triumph.

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Sunil Dutt was the man behind both Nokaia and Samsung successes; it was

achieved through region centric distribution models helping OEMs and their

partners to come closer and work in a more trusted and transparent environment.

Undoubtedly, Dutt has been actively involved with the growth of the Indian

mobile industry and has been one of the pioneers in building the channel

distribution network for mobile handsets, driving higher regional penetration

and retail business across the country. His move to join HP PSG as the president

seven months back, was signal enough that HP was planning to do something new

with its channel distribution model for the personal computing division. And now

that the cat is out of the bag, we know what is in the offing.

What it Means



In what seems as a major restructuring of its distribution business strategy

in India, HP is adopting a completely fresh and experimental model for selling

its consumer PC range, replacing the existing traditional distribution model.

Under the new model, HP is reducing its billings with big national distributors

like Ingram Micro and Redington India and strengthening business ties with the

regional and tier-2 partners having strong holds in their respective pockets.

While this initiative sounds unique for the IT hardware distribution

industry, the other important aspect of this entire reshufflingHPs decision to

appoint telecom distribution channel to sell its range of netbooks and entry

level notebooksis completely unheard of.

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Understandably, HP is trying with full vigor to rejuvinate its consumer PC

business that is largely dominated with its notebook sales. However, in recent

years it seems HP has reached a saturation point and its notebook sales has

failed to move beyond the 2 lakh unit per quarter mark. It is therefore not

surprising at all that the PC major will try to device a fresh approach and

strategy to increase its market share and reach out to newer customer segments.

According to HP, the new strategy has been designed based on few

fundamentals. The first objective for the IT major is to ensure that the new

model is in co-interest with the partners and that their profitability level as

well as growth is protected. Secondly, it is that personal touch that HP wants

to recreate among its partners by setting up direct interaction methods even

with small tier-2 and tier-3 partners. In a bid to achieve that, the PC vendor

intends to increase and improve the level of information flow between the

partners and HP. And it is looking at implementing systems where mechanisms on

information for products, inventories, sales, etc, can improve its forecasting

process ensuring availability of the right kind of products at the right place

and at the right time. In short, a lot more process efficiency is being planned

to bring in within the channel distribution space through this renewed strategy.

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The third objective of this latest distribution model is to help HP address

the key issue of city-wise approach or limited geographical spread and reach.

Arguably HP has drawn inspiration from the telecom channel distribution model

that is tailor-made to reach and penetrate the hinterlands, touching every small

town and citiy.

Essentially we want to bring in vertical level specialization towards our

distribution model. We now have distributors focused exclusively in the HP

Worlds, retailers and large format retails (LFRs), we have distis focused on

sub-distribution and distis focused on commercial back-to-back business and so

on, informs Sameer Mathur, head, solution partner organization, HP India.

Therefore, the idea is to create a portfolio, wherein we have partners catering

to specialized verticals. The approach also takes care of fighting for

profitability which is common among partners overlapping each others territory.

They can now focus on their specialized verticals and ensure a higher and steady

profit margin which is fully protected, he explains further.

Meanwhile, HP is also re-energizing its focus on retailing that is the HP

World model. This is a very important part of our channel business and we want

a rejuvenated focus on this. We are planning to expand this initiative on a

pan-India level, he says. Presently, there are 200 HP Worlds and in the next

one years time the company targets to expand it to 300. We are planning for

more investment in this space. We are looking at appointing distributors who can

support us gain in this move, partners who have the expertise and infrastructure

to address the retail market in an efficient and organized manner, informs

Mathur. HP has appointed Savex Computers as the exclusive distributor for all HP

Worlds across the country.

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The PC major is also planning to invest a considerable amount of money in

marketing, so that it helps to create a market demand and pull for HP product

range and drive traffic into its retail stores. We will also be training our

partners accordingly. Additionally, we are also planning to rejuvenate our focus

towards doing business with the LFRs, which is another important sales channel.

Talking on Savexs new role, Anil Jagasia, CEO, Savex Computers says, We will

handle the HP Worlds nationally. Its a new focus area for us. We feel its a

new task entrusted to us as HP is going to increase its focus in the HP World

model. And with this renewed focus, I think the business will grow better.

We are trying to redefine our distribution

strategy which will prove to be a win-win situation for each one of us in

the long run

Sameer Mathur, head, solution partner

organization, HP India

As HP embarks on a new strategy, we hope

it will continue to protect its partners growth prospects

K Jaishankar, MD, Ingram Micro

We must give HP credit for thinking and trying out a new

GTM route

PS Neogi, president, Redington India

Its important to revitalize the distribution strategy in

order to increase the footprint in emerging markets

KL Lalani, chairman, Lalani Infotech

The Impact for NDs



Albeit this is a redefined business strategy for HP in India, wherein the

regional distributors are entrusted with more responsibility, theres going to

be some negative impacts on the big distributors. Following this sudden move, it

is learnt that Redington India will face a marginal hit of Rs 130 crore on its

topline in the current financial year (FY 2010-11) or approximately 12% drop in

its overall PSG portfolio. Commenting on this report, PS Neogi, president,

Redington India says, Of course, it would have an impact, but only on the HP

portfolio of the consumer PSG business. For Redington, the overall impact is

estimated to be less than 2% of our India distribution revenuewhich we are

absolutely confident aboutthat would be easily compensated by the aggressive

growth plans that we have put in place with all our vendors in the consumer

PC/notebook space.

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However, denying to comment much, K Jaishankar, MD, Ingram Micro says, As HP

embarks on a new strategy, we hope it has designed the same keeping in mind the

future growth potential and will continue to protect its partners growth

prospects. Whatever new decision it takes, Ingram will continue to support HP

and be its important partner.

According to Mathur, the large distributorsnamely Ingram and Redingtonhave

and will continue to play a very important role for HP. Its just that we are

trying to redefine our distribution strategy which will prove to be a win-win

situation for each one of us in the long run, he says.

As HP realigns its distribution strategy with the tier-2 and tier-3 partners,

it automatically changes the role played by them which will definitely grow

manifold. Of course this new structure entrusts more responsibility on the

tier-2 partners in terms of identifying suitable channels to sell our products,

train them, support them, and increase market visibility of the brand and its

products, says Mathur. HP has already appointed Linkworld and Karuna Management

as zonal distributors in the east. The entire idea behind this is to appoint

local distis who understand their respective local market dynamics better and

can generate better business and growth. And we believe partners like Linkworld

and Karuna Management whom we have appointed in the east zone fits the role

well. This will help us to expand the market and reach out to a broader customer

segment, explains Mathur.

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A Hit or a Miss?



While many debates and apprehensions are going around this new model, the IT

hardware channel space is abuzz with mixed opinions. However, the bigger

distributors seem to be confident of overcoming whatever impact there might be

and is standing by HP.

We will handle the HP Worlds nationally. Its a new focus

area for us

Anil Jagasia, CEO, Savex Computers

Introduction of telecom channel is another experiment. It

might click, it might not. Only time will prove

Sanjeev Krishen, chairman, Iris Computers

Ingram has been a very important partner for HP in India and much of its

success is credited to Ingrams contribution to its business. I think HP is

implementing whatever it thinks is right for business growth, says Jaishankar.

According to Neogi, different vendors at different times have adopted different

models for their GTM strategies. At Redington, we feel very comfortable that

given the physical and financial infrastructure at our disposal, we would

continue to have a very pivotal role to play with all our vendors, he points

out. There will be some hits and misses and impacts on business but thats part

of the game. Like we lose out our sub-distribution business but in addition we

get the responsibility of handling entire HP World outlets across India, so

thats a kind of compensation we get and we can do a more focused business with

HPs retail model, explains Jagasia.

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Kolkata based Lalani Infotech is one of the oldest partners of HP and is

primarily into regional sales focusing in the east. The company has become the

zonal distributor for HPs Compaq range of products for Orissa under the new

strategy. I certainly support this new business model that HP has initiated.

Its important to revitalize the distribution strategy in order to increase the

footprint in emerging markets that will automatically help it to gain market

share and grow business, opines KL Lalani, chairman, Lalani Infotech.

Interestingly, Western Digital had introduced similar model as they created a

more zonal distribution model which helped them to reach out to smaller and

emerging markets. This new model has helped to achieve higher success and within

two years it has become the #2 player in its segment. As the regional players

deal with lesser number of players their focus is more. I feel with such a

model, partners will get better services from the regional distributors as they

are more equipped to deal with specific local markets, says Lalani who has been

a partner for WD as well.

Lenovo too had shifted into this model two years ago and it had introduced

the same model that it followed in China for its consumer PCs and tasted

success. The only difference is that it had appointed four national

distributorsIngram, Redington, Iris and Neoteric. In addition it appointed

regional distributors who were authorized to buy from one ND only. So

effectively this is what Dutt is trying to do. Instead of having multiple distis

fighting in each location, let there be one disti focusing in a specific zone

who is investing in the business, taking care of and promoting the business,

says Sanjiv Krishen, chairman, Iris Computers.

However, Krishen feels that this move will impact the NDs but then they will

try to rationalize the losses and make up the revenue through other areas. The

distis will have to be more focused towards what they have in hand. Like, we

worked much harder with the RDs so that they buy from us. We improved the

service levels and delivered better support to them so everything worked well

for us. We were able to invest more money in this model and we were able to grow

the business, and Lenovos business went up by almost 60%, he informs. In fact

the new model of distribution is what Dutt is trying to carry forward from his

Nokia and Samsung experience. Both Nokia and Samsung followed this model and

have been successful and we experienced the same thing when we were distributing

for Motorola. So, this model has worked well for the telecom industry in the

mobile phone business. So, I would say its a good initiative and we should give

it time to stabilize, he says.

How Good is it?



Although HP denied providing detailed information on appointment of telecom

channels to sell its range of netbooks and entry level notebooks, it is

confirmed that the PC major is all set to introduce this alternate means of

distribution channel. We cant specifically comment on the appointment of the

telecom channel right now since we are in the process to finalize this. But yes,

we are looking at appointing the telecom channel and to start with we are

looking at some states. We believe this will again help to expand our market

reach and penetration and increase the customer base, says Mathur.

As most of the established players are already selling smartphones,

understanding products like netbooks or entry level notebooks shouldnt be that

difficult for them. Again most of them are already selling various IT products

and have a taste of how the channel operates. However, they require proper

training and support, says Lalani. Interestingly, Lalani himself is planning to

work with the telecom channel for Compaq products in Orissa. However, he feels

that for the IT channel it will create added competition.

Explaining the move further, Krishen says, Introduction of telecom channel

is another experiment. However, whether the telecom channel can sell netbooks or

notebooks, I am not sure. I dont think any mobile seller can sell such

products, it would be difficult for them as they dont have the knowledge

neither the expertise. It might click, it might not. Only time will prove.

Jaishanker too has a word of caution as he feels there is a huge difference

in selling IT products and telecom products and also the way both these channels

operate in India. However, as far as HPs decision to introduce telecom channel

is concerned, I dont have anything to comment. Its purely their decision. One,

however, has to be extremely cautious while selecting the telecom partners. This

is a completely new game and one has to be very careful and take care of a lot

of dynamics in order to be successful in this model, he adds.

Supporting HPs move Neogi says, We must give HP credit for thinking and

trying out a new GTM route. In our considered opinion, the rhythm and cycle of

IT hardware and software business is markedly different from that in the telecom

space and the telecom channel partners would need to absorb and adapt to some of

these requirements.

Indeed, we should give credit to HP to be bold enough and go for some new and

untried model of distribution and that too in a country as diversified as India

which prefers to stick to traditional methods more than relenting to adopt

modern or fresh practices. While their success remains to be determined by time,

I being a HP user (in fact this story is being written on a HP notebook) can

only wish Dutt and his team good luck!

Piyali Guha



piyalig@cybermedia.co.in

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