Go, Go, For Services

The market may have taken a beating in recent times, but software dealers
have been experiencing steady growth in their business. A case in point is
Venkata Chalapathi, MD of Vikas Microchip, who has been in this industry for
over seven years selling packages as well as providing services. His company’s
revenues have grown by 100 percent in the past three years. The revenues are
expected to cross Rs 13 crore by the end of this fiscal.

His is not an isolated case. Revenues of Mumbai-based Aladin Software, which
deals in Symantec and Trend Micro anti-virus products as well as multimedia
packages, have been growing by 70 to 80 percent.

Bangalore-based Software Spectrum experienced close to 100 percent growth
over the past three years and is now focusing on remunerative and product lines.

SourcePro Infotech’s business has maintained a steady average of 30 percent
per annum for the past three years. Says its MD, Unmesh Mehta, "One thing
about the software sector is that the margins are good if one is willing to
provide value addition on top of the product being sold."

Margins generally vary from brand to brand as well as from products and
services. States Venkata Chalapathi, "One can enjoy healthy margins of up
to 10 percent in the technology solutions and services space. The worst margins
exist in product sales and distribution, which can be as low as 0.5 to two
percent."

Hiren Shah, MD, Dynamic Services validates this statement by pointing out
that though Microsoft as brand has a lot of pull, its margins are wafer-thin.
This is probably why, more and more channel partners are concentrating on
providing software services and consultations instead of mere box-pushing.

Service paves the road

The writing on the wall is very clear: Forget box-pushing, concentrate on
services instead. This is the route to retaining customers, not just bagging
them. Gone are the days when you could just sell a software CD to the customer.
Today, he expects you to sell him an entire inter-compatible solution.

Says Hans T Koppen, Senior VP, Ingram Micro, "Globally, the trend seems
to be a consolidation of the distribution part of the channel while resellers
and VARs are being pushed away from the products into support services and
integration."

Even in the Indian context, partners have started moving towards providing
total solutions. Concentrating on services is fiscally beneficial too. States J
Prasanna, CTO, Technovator-Team Blue, Prudente Solution, a consulting company
for Sophos products, "Our consultation and services division makes at least
thrice as much revenue as products." 20 to 30 percent of Vikas Microchip’s
revenues comprises of solutions and services. Over 50 percent of SourcePro’s
revenue comes from software services.

Skill sets

Software business might keep the cash registers ringing happily, but it is
not as easy as simple box-pushing. Instead partners have to develop certain
skill sets to enhance their sales propositions.

Explains Venkata Chalapathi, "To provide solutions you must maintain the
best technical team in the respective areas. There are no short cuts in the
solutions segments."

Adds a Mumbai-based dealer, "A partner selling products should possess
good communication skills and must know the customer base and the relevant
details of the companies."

And if selling solutions is your forte, then it is imperative to be armed
with good domain knowledge and the ability to cope with the latest technologies.
Says Unmesh, "Deep understanding of the technology, high degree of skills
in systems integration are also important along with commitment to provide
support to the customer long after the sales is done."

In fact customer commitment is one trait that can spell success or ruin for
any business establishment. Elucidates Zakir Hussain, Director, Aladin Software,
"The sale has to be backed by good customer support. This is precisely why
we offer service contracts ranging from one to two years for our
customers."

Creating brand pull

While word-of-mouth is still the best way to get and retain customers, most
vendors and their partners agree that promotions and schemes help in catching
the attention of prospective buyers. A proper mix of advertisements in the print
and electronic media, seminars, awareness campaigns and roadshows can keep a
steady stream of customers walking into the dealer’s outlet.

Muses Unmesh, "Promotions and schemes create the additional pull for the
product and recall for the brand. Our customers have benefited immensely over
the years due to additional advantages provided under the schemes." Adds A
S Prasad, Director, Software Spectrum, "Promotions ahve helped compressed
the time span for decision-making.

While it cannot be denied that promotions do help buffer sales, its direct
impact on sales is not necessarily encouraging. Points out Zakir Hussain,
"The direct impact of promotions on sales is very minimal, maybe 0.1
percent."

This is why channel partners have come up with marketing strategies of their
own. Quite a few rely on the medium of direct marketing, while others advertise
in local newspapers and hold roadshows in their cities.

The best of the rest

Majority of the partners are happy with the marketing support that vendors
extend to them. But they still seek more from the principals. Says Venkata
Chalapathi, "We expect our principals to support the best performing
partners in terms of education on the technologies and awareness campaigns for
their products and solutions range."

Also adds Unmesh, "The principals must create a benchmark for the
selection of well-performing partners."

But this need not mean that partners should indulge in unfair trade practices
to avail of benefits from the vendor. In fact, partners are unanimous that the
only way to chart out a long-term survival strategy is to improve the levels of
competition.

This can happen only if a limited number of resellers are appointed in one
geography. Zakir points out, "By establishing multiple channels, vendors
create over-competition and in the end, it is the customer who suffers."

Upcoming apps

While it is necessary to be well-acquainted with the existing technologies,
partners must keep an eye on emerging applications as well. So what are the
killer apps that are likely to taken the market by storm?

According to J Prasanna of Prudente Solution, security is gaining more and
more prominence as more and more people put their data online. Venkat Chalapathi
thinks that ASP solutions, VPN and disaster recovery management are some of the
fast-growing business areas.

Unmesh is betting on the usage of enterprise applications. In the operating
system field, Zakir feels that there is a lot of interest generated by Linux.

So there you have it in a nutshell. With services looking like a better
business prospect than box-selling, partners are now honing their skills in
providing solutions. And at the same time, they are preparing themselves for the
technologies that will further improve their bottomline.

VINITA SUVARNA-BHATIA in Mumbai