"We want to take channel partners up the value chain"

A graduate of Delhi University, Rajendra Kumar is a HCL veteran. Since joining HCL in 1976, Rajendra has seen a steady growth up the career ladder. He has handled jobs in procurement and tackled strategic vendors. He is in-charge of the HCL manufacturing organization based at Pondicherry. At the same time, he is also the chief of Frontline--HCL's arm to handle indirect channels. He shoulders the responsibility for HCL Infinity's channel sales as well. Here Rajendra speaks to CI on HCL's plans for the channels. 

What is new in HCL Frontline for channels in the next quarter and beyond?

We have a number of exciting products lined up. The Pentium 4-based PC is rolling out for the channels now. We are the first to roll it out and it is available under our Beanstalk brand. The standard products are also available, which are the variants coming with Pentium III and Celeron. A big focus for us in the coming quarter for the channels, which will be the servers. This being the corporate quarter, it is a natural choice as an area of focus. 

With the launch of HCL Infinet, we will also now be enabling the virtual private network (VPN) business through our channels. We will impart training to our key channel partners to be in the service area. VPN is one of the major extensions for us to offer to our channel. Apart from market communication and media support, we will also be looking at other initiatives, consumer finance. 

You talked about servers and VPN being your focus areas. Do you have any special schemes or promotions to market these products?

We will be undertaking a number of brand building exercises for Net Manager, our brand of servers. We are looking at a scheme where the channel executive earns an incentive on the server range. So it is not only the channel partner who gains from this, but we will also motivate the executives employed by him, to push our servers. 

We also have a roadmap for training, both technical and sales training. Training, we believe is a big enabler and by the middle of January, there will be extensive training happening for all the channel partners across the country. This will also include training of the executives of the channel partners. 

So we want to rope in the last rung of people too. Training on technical aspects is something that we have been doing, but sales training is something that we will focus for our servers. VPN, a new concept, has been introduced to the partners, but in-depth training of the same will also start soon. So our training focus will be on servers and

VPN. 

A sales training focus for VPN is essential because it is a technical skill-based selling process. This is very unlike the servers that can to a large extent be moved like boxes. But our focus on servers will also be on providing solutions like networking and accounting solutions through Accountant, the software that we have developed in-house. Its multi-user version is also available now. All this will help the channel partners not only reduce the cost of ownership for the client, but also to lock them in by offering a range of solutions.

Will you focus your VPN on a particular vertical segment or will it be focussed at the corporates in general?

We have channel partners who have performed for us very well in the home and SOHO segment and similarly there are partners who have done very well for us in the corporate and the SME space. So our initial focus will be the partners who have a strong relationship base in the SME and the corporates. We will look at their customers and help them to position VPN in a manner that best serves their customer base. 

For example, if there is a channel partner, who has a loyal customer, we will tap that base and help the partner in the entire process from making the sale to setting up the network and will also groom him to exploit similar business opportunities on his own later. The networking that we talk of here could be multiple location within a city or

geographically spread too. 

When Frontline launched its retail stores, HCL made a big splash. But then a certain downslide set in and sales failed to pick up. What is the status today?

We have been doing fairly well. We have four outlets that were originally set up by the company, but our idea was not to get in the real estate business. We wanted to have brand shops but always wanted to work through the channel. Today we have over 100 retail outlets over the country, which carry the HCL Store logo. And on top of this we have about 500 - 600 resellers spread across the nation. 

We however have no plans to set up retail outlets that will be under the direct management of the company. We want partners to do this. Besides contractually we do not prohibit the partners operating HCL Stores to stock other brands.

Are you at this point of time looking for more channel partners?

For us, quality is also as important as quantity. While we definitely have to increase our reach, quality also has to be looked into. Value addition is what we desire to give to them and value addition is what we expect from them. We also acknowledge that PC numbers are increasing with the Internet gaining popularity, a greater reach is desirable. But HCL has the highest penetration as far as the channel is concerned, because we have been in the market for a long time now, we were here much before the multinationals. As an ISP now, we definitely will add more channel partners and ensure the quality of partners is also maintained and will take them up in the value chain with services in the servers and VPN space.

Do you have a particular number to reach by March 31 2001?

Today we have about 800 partners and off these 600 or so are the very active ones, that is, we do regular transactions with them. We expect to add another 150 more partners. And about 40 - 50 people may drop out eventually. So this will put the active number at 700. 

For the Infinet start up packs, we have leveraged on our existing channel, but also created a channel for this. These partners were not working with us earlier and started with the dial up packs because of their greater comfort with the consumer and now some of are moving to becoming partners for our hardware too. We are confident that we shall be in a position to groom many of them to sell hardware too. So this will ensure that a funnel of channels is available with us to add value to and grow. 

What are the specific conditions that are laid before the partners who wish to graduate to selling hardware apart from the Infinet dial-up packs?

There is a certain minimum capability that we expect from the partners. There is no point in appointing a partner who does not have the capability to sell even one PC a month. A partner may not be in a position to generate sales today, but if the partner and the company have a vision together, then we start to help the partner and grow and forge a relationship. 

Typically we expect the partner to generate the sales of five PCs a month. But we are realistic and practical as it happens that the start can be bumpy and the targets are not met initially.

When you work extensively with the channels, what are your expectations from the channels?

The channel has a major contributor in the growth of the IT industry. We desire that the channel should understand how products are sold and their dependence on the margins of stand-alone product has to be low. They need to emphasize on adding value for the customer and that is most important. And this they have to do on their own. Even for the homebuyer, what can be done over and above has to be figured. They can either do that on their own or give feedback to us and we can then help them in fulfilling that latent need or advising them in how to do it. They also need to run a lot of programs that are creative. We need to do lot of out-of-the-box thinking. 

The conventional way of business does not work anymore. So they have to be innovative and must focus on providing a total solution to the end customer, whether it is the home segment or the corporate. And another key area should be to look at newer products, it could be servers, VPN or networking. They should also emphasize on the quality of people. Channel partners who are growing today have the right kind of people. Motivating and retaining the right people is very important today. And also providing them the right training.

What is your policy on warranty support? 

Since our parent company has been in the hardware trade for a long time, we have a lot of experience that tells us how important product quality is and how important product support is. We try to offer a good back end support to our support providers in terms of training and certification. 

We also ensure a smooth supply of spare parts. Since our purchases are huge, our relationships with our vendors are very strong so we are able to work out very good back-end warranty terms with them. And this we can pass on to our channel partners. We also ensure that a sufficient amount of spares are maintained by us also. For repairs also, we have a good arrangement in place and we can provide low-cost repair. We also involve the OEM vendors for an onsite repair.

Do you have a particular number to reach by March 31 2001?

Today we have about 800 partners and off these 600 or so are the very active ones, that is, we do regular transactions with them. We expect to add another 150 more partners. And about 40 - 50 people may drop out eventually. So this will put the active number at 700. 

For the Infinet start up packs, we have leveraged on our existing channel, but also created a channel for this. These partners were not working with us earlier and started with the dial up packs because of their greater comfort with the consumer and now some of are moving to becoming partners for our hardware too. We are confident that we shall be in a position to groom many of them to sell hardware too. So this will ensure that a funnel of channels is available with us to add value to and grow. 

What are the specific conditions that are laid before the partners who wish to graduate to selling hardware apart from the Infinet dial-up packs?

There is a certain minimum capability that we expect from the partners. There is no point in appointing a partner who does not have the capability to sell even one PC a month. A partner may not be in a position to generate sales today, but if the partner and the company have a vision together, then we start to help the partner and grow and forge a relationship. 

Typically we expect the partner to generate the sales of five PCs a month. But we are realistic and practical as it happens that the start can be bumpy and the targets are not met initially.

When you work extensively with the channels, what are your expectations from the channels?

The channel has a major contributor in the growth of the IT industry. We desire that the channel should understand how products are sold and their dependence on the margins of stand-alone product has to be low. They need to emphasize on adding value for the customer and that is most important. And this they have to do on their own. Even for the homebuyer, what can be done over and above has to be figured. They can either do that on their own or give feedback to us and we can then help them in fulfilling that latent need or advising them in how to do it. They also need to run a lot of programs that are creative. We need to do lot of out-of-the-box thinking. 

The conventional way of business does not work anymore. So they have to be innovative and must focus on providing a total solution to the end customer, whether it is the home segment or the corporate. And another key area should be to look at newer products, it could be servers, VPN or networking. They should also emphasize on the quality of people. Channel partners who are growing today have the right kind of people. Motivating and retaining the right people is very important today. And also providing them the right training.

What is your policy on warranty support? 

Since our parent company has been in the hardware trade for a long time, we have a lot of experience that tells us how important product quality is and how important product support is. We try to offer a good back end support to our support providers in terms of training and certification. 

We also ensure a smooth supply of spare parts. Since our purchases are huge, our relationships with our vendors are very strong so we are able to work out very good back-end warranty terms with them. And this we can pass on to our channel partners. We also ensure that a sufficient amount of spares are maintained by us also. For repairs also, we have a good arrangement in place and we can provide low-cost repair. We also involve the OEM vendors for an onsite repair.

Are the channels making money on your products? 

Our partners are making money on our products because we are not dumping products on them. This is because we plan our production very well. Since we don't work on a zero margin, therefore we don't expect our partners to work on a zero margin either. We ensure that no surplus stock remains with the channel so our production is well planned. And they always have an option of making greater margins on add-on products, a UPS for instance. And not to forget that it is the HCL product that pulls the customer in.

Sylvester Lobo & Mohit Chhabra in NOIDA