CHANNEL SATISFACTION SURVEY/CHANNELS' CHOICE AWARDS 2005: HP on a Roll, HCL Surprises

They say old habits die hard. And with the results of fifth annual Channel Satisfaction Survey-commissioned by DQ Channels and conducted by IDC-now out, the phrase seems to fit perfectly for HP, though on a positive note. The company has made winning the Channels' Choice Awards almost a habit by now. For the second consecutive year and fourth time in last five years, HP bags the coveted Channel Champion title. Needless to say, the story is more or less same in most other award categories as well. Except for the year 2003, where its performance dipped and that of Samsung shone bright, HP has remained the darling of Indian channel community since 2001.

But apart from HP's success story that the 2005 survey paints, it also brings quite a few ups and downs. The biggest fall has been that of Samsung. From being Channel Champion in 2003, to winning Channel Champion-Silver trophy in 2004 to just managing one silver award this year, the company sure is going through a rough patch. Last year's sterling performer IBM emerged even stronger this year and claims the Channel Champion-Silver title. Intel's performance has been
consistent all these years and this year is no different. What is different this year is the entry of two new players: HCL and Seagate. With one gold and one silver, HCL affirms the change in its identity from being a more direct-selling organization to that of a partner-centric one. But before we have a closer look at various awards and analyze the rise and fall of various vendors in this year's Channel Satisfaction Survey, lets first have a glance at some interesting revelations that the survey throws up.

Satisfaction, Not Size Matters

Establishing a huge channel base alone is not good enough for vendors;
ensuring the satisfaction of each of its partner is what really matters, as is
indicated by the survey. A look at the overall satisfaction graph will tell you
that with the exception of HP, which has a vast partner network, players like
Intel, Samsung, LG and Canon score equal to or lower than the industry average
for partner satisfaction. Compare that with IBM and HCL, both of which have a
relatively smaller channel base, but command a reasonably good overall
satisfaction scores.

The reason why the overall satisfaction score becomes very significant for
vendors is that these are reflections of their performance on a range of macro
parameters as seen by partners. And these parameters in turn are ones which
partners feel are paramount in ensuring success and prosperity to their own
businesses.

Top-most on the list of these parameters is product quality, an attribute
which has been voted as most significant determinant of satisfaction by partners
year after year. Following that is after-sales support and brand image. While
attributes like commercial terms, relationship management and online support
rank lower on partners' priority list, their relative significance is quite
high.

At a micro level too, partners are very particular about product quality and
they feel that technological leadership, price vs performance ratio and
user-friendliness of a product has a great role to play in ensuring their
customers' satisfaction. Among other micro attributes, profit margins, service
infrastructure, turnaround time are some of the key aspects, which partners want
principals to focus upon. The 'Tactical Resource Allocation Quadrant' further
illustrates the areas where vendors need to improve or leverage upon.

Among other things, the survey also sheds light on a very crucial aspect:
that of partners' dissatisfaction (see box: top 10 areas with highest
dissatisfaction). These are areas where partners are highly dissatisfied with
vendors despite being very important attributes. Clearly, training and
certification programs top this grievance list. In past surveys too, this has
consistently been one area where partners feel that vendors are not doing
enough. This year is no exception. Another key concern that respondents
expressed was with regards to the online support that vendors offer, both in
terms of the resources that are made available as well as their efficacy.

A significant disillusionment with tall promises made by vendors about shortening their turnaround time was also evident. While partners still express discontentment with the back-end incentives and overall profitability offered by principals, a strong sentiment is also visible against lack of consistency and effectiveness of communication sent out by vendors. Respondents were also found to be demanding more transparency in the commercial terms and wanted companies to make their market development programs more innovative.

Another disappointing revelation of the survey comes in the form of overall
satisfaction scores of the major IT vendors present in the country. Only five of
them have managed to achieve a score equal to or more than the industry average.
This clearly demonstrates the stark difference between the claims made by
vendors, vis-à-vis the actual partner experiences.

On individual macro parameters too, not more than 5-6 organizations were
found to score more than the industry average. In fact, in case of online
support and relationship management, only two vendors have scores above the
industry average. These incidentally, are also the parameters with lowest
average satisfaction score.

Channels' Choice Awards

On one hand where Channel Satisfaction Survey gives vendors plenty of room
for introspection, its traditional consequence in the form of Channels' Choice
Awards brings enough reason for jubilation as well. Of course, the extent of
this jubilation may vary from one vendor camp to the other. But unlike last four
years, where most of the awards got rotated among four vendors: HP, Samsung,
Intel and IBM; this year it's a slightly different and encouraging story.

While HP has retained its Channel Champion crown (for the fourth time in five
years), IBM has further strengthened its position from last year by winning the
Channel Champion-Silver title. Intel too has re-affirmed its leadership by
claiming two gold awards. Traditional winners for Best Software Products,
Microsoft and Symantec, continue their form for the third consecutive year.

However, there are two big news at this year's award. The first is a lone
silver trophy to Samsung this year, which reflects a major aberration in the
company's performance and its acceptability among the channels. Second, HCL and
Seagate made an impressive debut in the elite award winners club. This also
reflects that channels favor not just the big five players but even those who
demonstrate serious commitment to their business.

This year's Channels' Choice Awards are also different in a unique way. It is
for the first time that a product category awards have been instituted, where
partners have voted for their Vendor of Choice across 10 major product
categories. Here too HP has established a 'complete monopoly' by winning awards
in 6 categories. The other winners being Epson, D-Link, APC and Kodak (See box:
Vendor of Choice Awards).

Unshakeable Champ

The company has attracted sharp criticisms, faces cynicism and at times
sheer bad publicity. But none of this has unnerved HP, whose channel commitments
has never been compromised upon and remains as the blue-eyed baby of the Indian
IT channels. So its not surprising to see it winning the Channel Champion title
for a record fourth year. The only year where it didn't win the gold trophy was
in 2003, where Samsung overtook by nudging it to the runner-up spot. One of the
biggest factors that almost always work in favor of HP is its huge portfolio of
products and an equally huge network of partners. It's a marvel in itself that
the company's channel management team has been able to stay tightly integrated
while ensuring a win-win proposition for each of its partner.

But HP has a close competition shaping up. Last year, we had put our bet on
IBM to outperform in the coming years, and this year it has done so in some
ways. The company claims the Channel Champion-Silver title for the first time.
This too, is a clear reflection of the kind of channel focus it has showed in
last couple of years. While IBM's channel base may not be as wide and deep as
HP, its level of engagements with its partners are remarkably high. And this
gets aptly demonstrated by the efficient communication strategy that the company
adopted post its PC business sell-off to Lenovo.

On part of Samsung, which took home the Channel Champion-Silver trophy last
year, this might just be the right time for introspection. There clearly is an
erosion of confidence among its partners with the top line executives quitting
the organization. The company needs to act quickly to put its house in order and
re-instate the channels' faith.

Best Hardware Products

HP gets the top honors in this category while IBM comes a close second. Last
year too, the equation was same with the exception of Samsung too getting a
joint Silver award in this category. There were primarily four criterions on
basis of which partners voted for the best hardware vendor. These were:
technological leadership of the products offered, diversity of product range,
its user-friendliness and the price vs performance ratio. While one three of
these sub-parameters both HP and IBM got identical scores, it was the diversity
of product range, which tilted the scale in favor of HP. Seagate and HCL were
the other two close contestants in this award category.

Best Software Products

Ok, lets face it. It's monotony here. For third year in a row, its Microsoft
that gets the Gold award for Best Software Products and Symantec follows it with
a Silver award. Co-incidence? Not really. Given the fact that these two are the
most channel-focused software vendors managing the entire value-chain of
partners, results are not really surprising. Further their products also are the
most visible ones in the marketplace and command lion's share in most of the
product categories that they operate in.

Best Brand Image

Vendors spent like never before on branding exercises during last year. From
print to web to television to outdoor publicity, technology was THE flavor.
Partners voted for principals with strong brand positioning ensuring high
respectability and positive image of that brand. And who else to do the job
better than Intel. Its branding was visible almost everywhere, including
campaigns run by other MNCs like HP and IBM. Such has been the brand recall of
the 'Intel Inside' campaign, that many view it as a standard for PCs. The
company also ran a variety of brand-building campaigns together with its
partners earning it many a brownie points over the runner-up in this category,
HP. In all the three sub-parameters in this category, HP was found to be at
least two percentage points behind Intel. Last year's runner-up IBM couldn't
maintain its lead and lost narrowly to HP. Interestingly Intel's satisfaction
score of 89.2% in this award category was also way above the industry average
(80.9%).

Best After-sales Support

It's oft said that the actual business relationship begins only after the
sale is done. And HCL seems to have understood this fact better than others. The
company wins the Gold award, for the first time ever in this category. Over the
years, it has consciously tried to rectify its image of a more
direct/franchisee-sales company to that of a channel-centric one. But unlike
many other vendors, who rush in to add partners mindlessly without putting in
place an effective after-sales backbone, HCL sought to address the biggest pain
point of any channel partner: that of satisfactory after-sales support.

The company rightly focused on four key elements: adequate presence of
service centers, low turnaround time, satisfactory repair/replacement services
and availability of competent account managers/help desk. This also reflected
clearly in the leadership position they were able to achieve and maintain in the
desktop PC business.

HP and Seagate tied-up for the silver award in this category. Traditionally,
HP has been one of the award winners in this category and this year too, it has
emphasized its unwavering focus on ensuring high levels of after-sales support.
Its first time for Seagate, which deserved this recognition by virtue
establishing an unparalleled network of SeaCare centers across 43 cities. Also
its strategy of offering 5-year warranty seemed to have worked in its favor.

It is also interesting to note than another Indian vendor WeP Peripherals too
closely fought to get the silver award.

Best Marketing Support

For the fourth year (second in a row), HP wins the Gold in this category
while Seagate gets the Silver. Four sub-parameters that were taken into
consideration for this award were: vendor's advertising, availability of point
of sales material, innovativeness of market development programs and allocation
of funds for marketing. HP scored over Seagate in terms on advertising and
overall performed much better than the industry average.

Both TVSE and IBM trailed closely in the fight for this award.

SATISFACTION VS IMPORTANCE  HP INTEL

Best Commercial Terms

Product pricing, profitability, transparency in policy and settlement of
back-end incentives-these were the key aspects that partners took into
consideration while voting for their favorite vendor. IBM gets the Gold while
HCL claims the silver. Last year, this recognition went to Intel. But with the
kind of ethical practices that IBM has been able to practice even in the face of
stiff competition, partners voted it by big margins. Not only does the company
score much above the industry average, it was also few percentage points ahead
of HCL. D-Link, another very channel-dedicated vendor trailed closely behind HCL.

SATISFACTION VS IMPORTANCE  SEAGATE IBM

Best Relationship Management

Unlike many other award categories, where the results reflect a vendor's
performance in last year, this category is actually a cumulative indication of
its equations with the channel community over the years. And for the kind of
investments that Intel has done to build and sustain a healthy relationship with
its partners, the company stands to win the Gold award. IBM repeats its
performance of last year by claiming the Silver. Ironically, this category-where
partners vote on parameters like training/certification, reward systems and
consistency in communication-the industry average score of satisfaction is
pretty low at just over 68%.

SATISFACTION VS IMPORTANCE  HCL SAMSUNG

Best Online Support

Though partners rate the importance of online support to their business as
lowest, its relative relevance has only increased as compared to last year. In
this category, the richness and overall effectiveness of online resource and
support were taken into consideration. For third year, HP gets the Gold award
while Samsung gets its solitary award this year in the form of a Silver in this
category. While the industry average for satisfaction is lowest for online
support, what was even more disappointing is that only the above-mentioned
vendors have scores above this average. Last year's winner IBM fares quite badly
in this category.

VENDOR OF CHOICE AWARDS

Being instituted for the first time, Vendor of Choice awards seek to
recognize the most popular vendor as voted by partners across 10 product
categories (see box: Vendor of Choice Awards).

DESKTOPS: Partners vote HP as their favorite vendor while HCL comes a
distant second in this product category. Those voting for HP cited the reason of
good product quality and strong brand image as the main reason.

NOTEBOOKS: HP gets the thumbs up again while IBM tries to gather
increased partner attention. Product quality and value for money were the main
reasons favoring HP.

X86 SERVERS: Here too HP rules despite IBM following it very closely.
Apparently partners feel that HP servers are more in demand as compared to other
brands.

INKJET PRINTERS/MFDs: The marketshare figures seem to reflect the
choice of partners here. HP gets the top vote while Canon and Epson trail
distantly. After-sales service is a significant factor according to respondents.

LASER PRINTERS/MFDs: HP again. Samsung tries for channels' mindshare
but can only finish a distant second.

DOT MATRIX PRINTERS: Close contest between the three major players in
this space: Epson, TVSE and WeP. But Epson nudges them all narrowly to get the
trophy.

NETWORKING PRODUCTS: Value for money products and excellent
after-sales support, earns channels' favor for D-Link.

UPS: APC gets a unanimous vote of approval from the partners. WeP and
Microtek, though get small vote-share, present themselves as very serious
contenders for next year.

DIGITAL CAMERAS: Kodak has finally made its mark in the minds of
channel and gets the majority vote for digicams. Canon and HP trail in the

distant.

SECONDARY STORAGE: HP has the final word by winning the last category
of award.

End Note: With IBM selling off its PC business to Lenovo, leadership
changes in HP as well as merger of its PC and printer business, and sudden
exodus of the top management at Samsung India; it would be really interesting to
see who manages to remain channels' favorite next year.

SURVEY METHODOLOGY

The results of Channels' Choice Awards 2005 were arrived at as part of the
comprehensive Channel Satisfaction Survey (CSS) conducted by IDC India across 15
major cities covering 827 partners. The CSS respondent base included a
heterogeneous mix of partner profiles comprising of distributors, reseller and
assemblers among others. A well-established IT Channels Satisfaction Measurement
Model (ICSM) was adopted by IDC India for the survey, which involved various
stages.

This included further enhancements in the model based on feedbacks from
channel community. After that came the fieldwork where one-on-one interviews
were conducted with each of the 827 respondents. For ensuring unbiased opinions,
DQ Channels' name was disclosed to the respondents.

And finally, the data was collated and checked for consistency and quality.
An analysis of this data using various statistical methods was then done
and  interpretations were arrived at. Like all the previous years, this
year's survey too set out with a set of macro as well as micro objectives.

Macro objectives of this year's survey were to identify the technology
vendors with whom channel partners are most satisfied. Apart from this, the
survey also had an increased focus this year to find out the channel's
preference for best vendors across a range of products.

On the other hand, micro objectives largely dealt with the attributes that
the channel recognizes as the most important determinants of satisfaction in
their business. Additionally, the survey also attempted to determine the
channel's satisfaction with various vendors across key attributes.

TOP 10 AREAS WITH HIGHEST DISSATISFACTION

1. Training and certification programs

2. Turnaround time

3. Richness of online resources

4. Overall effectiveness of online support

5. Back-end incentives and its settlement

6. Consistency and effectiveness of communication

7. Transparency in commercial terms

8. Profitability

9. Innovativeness of market development programs

10. Reward systems

Goldiein Bangalore