'Unless the channel is able to add value, their presence or absence cannot make a difference'

He has been taking LanBit India from strength to strength after establishing it with Manoj Kumar in 1995. After traveling the length and breadth of the country due to his father's transferable job, Rajiv Mehrotra started his career with ECE Industries and later got in the IT industry with PCL Computers. Storage is the current focus of LanBit and Rajiv is spearheading this business to position it more as a service than a product. He tells DQCI that this gels with his philosophy of developing a channel that can add value. 

How is the slowdown impacting LanBit?

I don't think there is a slowdown. Most companies have shown positive growth. The volumes achieved show that the growth pattern is being maintained. LanBit will continue to have 25 to 30 percent growth. 

This is more a problem of over-distribution than an actual slowdown. Any sale that happens in the peripherals market has to be directly proportional to the number of PCs being sold in the country. But unfortunately both of them are not in sync.

The expectation of peripheral vendors is far exceeding than the real size of the market. And this has led to over-distribution. So, you will see the products getting discounted as the companies have set up ambitious targets. This pulls the market down thereby bringing profitability down. 

How do you plan to capture value in the storage and power electronics space, which are not only growing very fast, but also your focus areas?

We have actually realigned our business model. We have created a separate division for looking after the business of products. They include networking, communication and power correction products. So this separate entity will look at products. 

Our main focus in the coming years will be services. We would be offering services in the data storage area, which incidentally is the highest growth area in the industry today. Our focus is also justified by the fact that storage need of a company doubles every six months. So with that kind of growth and a first-mover advantage with us, it is an evident choice. 

The other focus areas for us are software development and training. Tulsient, our UK based subsidiary, is an effort to capture value in the software services area. Tulsient has picked up some large projects in last one year where we offered industry specific ERP solutions. We would soon be productizing the solutions. 

The current areas of operation are UK, Singapore and the Middle East and we have partners in other European countries. So this will also provide us with cushion in case of a slowdown in the US. 

So, in a nutshell, we will package storage as a service to capture value in the space and focus more on services. And, in the power correction space, the nature of the product is such that it will continue to be sold as a product for a little more time. 

What is the role of channels in your business model?

Channels play a very critical role in addressing the market. No company can boast of addressing the entire length and breadth of the market. So it is here that channels play a very significant role. 

Unless the channel is able to value-add, their presence or absence cannot make a difference. By breaking boxes and selling piece-meal will not help. Just pushing boxes will not be enough. Our focus is to build and leverage on a channel that is capable of adding value. 

What is your vision for the channel?

The fly-by-night operators have to go. There is already a large infiltration of such operators. There will be a lot of de-layering happening, because the margins over a period of time will shrink. Adding value becomes even more critical especially in services. 

The companies, which are closest to the customer, will be the ones who will have a final say in business. When you say closest, it could be doing business on the Net, directly with customer or through channels. Companies with direct interaction with end- customers will win in the long run and others will fall apart. 

The very fact that Dell has dethroned Compaq as the largest PC company proves that the direct model is here to stay. How fast in the Indian context, I am not sure, but one is already beginning to feel the pressure. 

What are your efforts to ensure that profitability within the channel is maintained?

A very significant factor that ensures that partners make money is to avoid over-distribution. The second is to ensure that unhealthy competition is avoided. And, another aspect is to see that there are some incentive-based sales. This should not encourage the resellers to sell at a price lower than the suggested price. But if you look at all three factors in totality, the crux of the matter is to avoid over-distribution. 

What place does training and support hold in your business model?

If you want people to contribute more and earn more, they have to sell well and smart. And for this, training is the most important tool. The only differentiating factor over a period of time with regard to people is how well they are trained, how well they know the product, how well they can support the product, how well they can hand-hold a customer. All this is possible only if they are adequately trained. We have reserved weekends for trainings and encourage our channel-partners to send their people for these training sessions. 

Any new schemes and promotions that are currently on the anvil for the channel partners?

I think the channel is sick and tired of all the schemes, because in reality these schemes in the past have actually made a dent in the profitability within the channel. So, it is better to give a good value-for-money product and ensure that they are able to sell those products profitably. 

Schemes tend to lead to a lot of unhealthy competition and that must be avoided. But, smaller variants of these schemes that win gifts and prizes for the partners are on the anvil and we are thinking of them. 

What are the new products that you are planning to launch?

We are planning to launch a number of new products in the storage business. We have also tied up with Hitachi in this area. Hitachi has incidentally become the largest storage company after overtaking EMC. We have also tied up with a company called Auspex for NAS products. These will be the high-end NAS products, where each system costs upwards of $100,000. 

The idea is to have a complete storage product offering from low-end NAS to top of the line SAN. Of these, the low-end NAS products will become distributable products rather than be limited to institutional sales. This will make them in line with our philosophy of following the distribution model. These will hit the markets nationally within the next two or three months. 

Are there any expansion plans for LanBit?

Within India, we have all the key locations in place. Outside India, expansion is on the cards. We are looking at expanding at other locations especially in Europe. Apart from the UK, we are looking at two more offices in Europe. Singapore will also be upgraded to a full-fledged office from the present resident representative status. For the SAARC markets, India will be the base, as these cannot be ignored as they are growing rapidly. 

Mohit Chabbra in New Delhi