The year 2017 was truly the year of disruption for the IT channel. The surprise of demonetization and implementation of the historic Goods and Services Tax (GST), largely impacted the Indian IT Channel business in 2017. Though the effects of both the crucial events have now largely subset, the challenge of shrinking hardware demand and E-Commerce continues to haunt the partners.
The IT channel has evolved over the years and partners are bravely experimenting new and innovative business models to sustain in the competition. Today, partners are steadily graduating from product selling into Solutions selling. However, these efforts need more push in the digital economy to be profitable in their respective lines of business.
While being techno-commercially sound is a prime requisite for partners in 2018, value addition will continue to be their major differentiator and catalyst for growth. So, how the FY 2018 will look like for the Indian IT Channel? Rajesh Goenka, Vice President, Sales & Marketing, Rashi Peripherals, highlights major trends that will influence the Channel business FY in 2018.
Consolidation of Channel
The Indian IT channel was broadly classified into three major categories: Component Channel, Branded PC Channel and System Integrator Channel. Due to the stagnant TAM and huge variations in the business quarter over quarter, the three channels are today rapidly merging into the one to find new business prospects and earn better margins.
Today, most of the Component Channels sell branded PCs and Desktops and the PC Channel is now graduating into the Enterprise Channel, where the major focus is on solutions that encompass the supply of a complete range of IT products and services.
Hypothetically in three years’ time, there will be a completely new set of partners, who will play all the three roles simultaneously to sustain their growth momentum. and if they don’t graduate into a holistic solution provider role, they will not be able to sustain in the business. In short, be it regular IT Channel or System Integrators, partners will have to cross sales and also be innovative in FY 2018.
Different Business Models
The IT Channel has predominantly remained focused on the B2B business. However, with the growing adoption of software solutions, the role of partners has now limited to supply of hardware, hence, the earning capacity and payment realization have become extremely difficult. Considering the shrinking profitability in the B2B space, it is a high time for IT partners to explore the evergreen B2C market. When I say B2C it does not necessarily mean the Consumer segment, it can be Corporate as well as Enterprise. In my opinion, partners should first prioritize Corporate segment, second the Enterprise business and last Retail.
The channel business has evolved over the years and the hunger to improve the business has led both partners and vendors to try different business models to stay relevant in the market. But more importantly partners and RD will have to get into B2C, Corporate and Enterprise space to continuously grow the business and be profitable. In last 15 years, I have observed that there is no fixed formula, which is a right for the partners and vendors. Both the ways channel will keep on adapting the changes and thereby get the market share.
Similarly, Value Add will be the biggest differentiator for the partners. In my view, the term ‘Value Add’ will graduate into ‘One Stop Solution’ in the coming years. We will see partners courageously exploring different permutations and combinations of different business models to fulfill their growth aspirations.
Brand Stores: New Business Avenue
The Brand Stores are rapidly emerging as the new stream of earning for partners. All the key IT and Mobility vendors are using this platform for brand visibility and development and are on the spree of expansion for their Brand Stores. Brands Stores tend to do well in terms of business, especially in the mid-end and high-end sales and are expected to grow in double-digits in 2018.
While I am not very optimistic about the general retail but the Brand Store business will continue to grow. The Brand Stores are the new avenue of business for Channel Partners and we will see partners aligning with Companies to set up Brand Stores to earn healthy margins.
Prospects in Cloud & Mobile Business
Cloud was largely seen as a major threat to the IT hardware business, especially the storage business. However, cloud services have seen a rapid adoption in the Indian commercial sector. Considering the huge demand for cloud services, leading cloud vendors such as Amazon Web Services (AWS), Google, Microsoft are setting up their data centers in India, therefore, the demand for storage solutions is high. Cloud is a good option for channel partners and they can explore working on cloud and provide cloud services to their customers. This is an additional line of business they can explore in 2018.
Similarly, the mobile channel will continue to grow with the proliferation of smartphones and internet. Currently, the Mobile Channel is largely unorganized but as the business progress, there will be more streamlining of process and there will be a robust support system in place to provide more consistency and value-add to the business.
All the partners will need to be techno-commercially competent as we progress in the year 2018. They cannot be only technically sound and not commercially and vice versa. At the same time, finance management will become important to get maximum business output. Partners will have to find means and ways for continuous growth. Things are changing very fast in the It Channel space and if they will not transform, they will not able to sustain in business. Hence, sustaining growth year on years at in line or faster than the market is key for partners in FY 2018.
Value Add: Key Differentiator
Initially, when the online marketplace came to India they were very disruptive in terms of pricing but we have seen major stability in pricing and brand exclusivity. In my sense, OLS will come with more aggressive pricing every quarter so the offline channel has to rework and face that competition irrespective of value-add retail. The E-Commerce is here to stay and it will continue to be the biggest competitor for offline channel partners in the retail space. Partners will proactively have to find new ways to cope up with the rising prominence of OLS in the retail space.
All the adverse effect of GST and demonetization are over with the end of the year 2017. The year 2018 is going to be the most exciting year for IT and Government’s continuous push for digitization will further propel the growth of the industry. We at Rashi Peripherals are super excited to welcome the new year and we will continue to achieve the consistent growth and be the most trusted value-added distributor in India.