‘Helping partners move up the value chain is an area of prime focus for us’

57-year old Hans T Koppen, 57, joined Ingram Micro in January 1998 from General Electric Capital Information Technology Solutions, where he was President, Latin America. At General Electric Koppen was instrumental in setting up the channel network by integrating resellers and distributors throughout the region. His current responsibilities at Ingram include sales, marketing and purchasing, finance and credit, as well as implementation of the company’s strategic programs throughout the region. DQCI caught up with him at Showcase 2001 in Agra to understand Ingram Micro’s global vision for channels.

What is your global vision for the channels?

We feel that consolidation of channels will continue to progress globally and in some places faster than others. But there will be fewer distributors and there will be greater pressure on the second tier to move into value- added services as opposed to moving boxes and making money on touching the box. 

We see new channels growing in terms of how people can do business with their resellers and distributors. For example, e-commerce is now becoming a reality and an opportunity to do business in a different way. And that will continue to evolve. 

We see vendors becoming more interested in working with fewer distributors and doing a lot more intense integration of the supply chain to ensure that they can work with partners and the channel to speed up the distribution cycle. So, there are many things happening at the same time that are causing the changes. 

Showcase 2001 is the starting point of a lot of channel activity. So, what can we look forward to?

Showcase 2001 is the first step for Ingram Micro in becoming a distributor with a nation wide presence. It also marks the starting point of establishing good relationship with an expanding customer base of channel partners across India.

What are your expansion plans in India?

Our expansion plans are very simple. One, cover as many state capitals as possible since so far only a few have been covered. We want to add more product lines to our offering so that we can give the customer more choice and have a complete range of products. 

We will now look for more value added and higher end systems, networking and wireless products in India. As of now we have 25 product lines and the number of new product lines that we will be adding will evolve over time looking at how the market develops. 

In other regions we have thousands of product lines that we offer, but not so in India. You add a product line in a country after assessing the needs of the market and it largely depends on what the vendors think should be promoted and pushed in a country. For example the market for very high-end monitors in India is probably very limited. 

How many more branches are you going to add in India?

We are presently operating out of 22 locations in the country. And we plan to be present in every state capital and union territory. So we will add another ten branches in the coming year. 

What will be your focus on networking as it is a high growth area now?

To give a simple answer, we did $1 billion worth of Cisco products in the US market alone last year. And this year we plan to do $2 billion. Add to this the Asia Pacific market, we are doing $120 million there and we have only just started.

Moreover with brands like 3Com, Nortel and other products, you will see that it is a large amount of business. 

What will be the focus on networking in India?

The focus in countries like India will be all the more greater for the simple reason that there is a lot more catching up to be done, a lot more infrastructure to be built. This translates into lot of equipment that will be needed to accomplish this. 

Is there any channel demand that is peculiar to India and is not seen in countries outside India?

At the macro level there is not much of a difference. But a deeper analysis points to the fact that there is a skew towards low- cost platforms and high solutions are very limited. But overall I don’t see any difference. 

What do you think are the strengths of the Indian channel?

I would say that we have a fairly strong organization. We have a good geographical spread and our relationship with the multinationals, global vendors and supply chain managers is very strong. And in many cases, we are their number one customer worldwide and this gives us leverage. It is a very profitable business. 

I think we have people who understand the business very well. They not only know how to operate well, but also how to avoid problems.

The Indian channel partners are typically unhappy about margins. What is Ingram’s story?

The global vendors have in the recent past been taking away a lot of their rebates, discounts and funds away from channels. So basically it means that prices have gone up. They compensate everybody in the value chain by becoming more efficient; carrying less inventory, but the problem is that margins in this business are very slim. 

Customers do not want to pay anymore if they do not perceive any value. Lets say a box that moves through the channel and gets touched many times, but there is no reason to touch it and it is just moving it from one distribution center to another, then the customer is not going to pay for the additional cost that comes with this. And in many cases the second tier doesn’t have a need to take in the boxes from the distributor to keep them at their own premises.

Is there any thing that Ingram Micro is doing to keep the margins healthy?

We keep lowering our costs as a percentage of the revenue. And we keep improving our information systems infrastructure. We keep looking for ways to get a different type of interaction with the channels. For example, with e-commerce infrastructure in place, you can get tactical information, you can get pricing information, you can get order status from the Web. You don’t have to go for call centers anymore and a call center is a lot more expensive than a website. 

What are you doing to ward off the threat of the Internet?

For us the Internet presents an opportunity and we are using it to the best possible extent. So, what one needs to do here is change. And if you don’t know how the technology can be used to the advantage of your business then the threat does exist. But if it is integrated into the business it will benefit the business. We are doing a lot of work in developing an architecture for the future. 

What is Ingram Micro doing to see that the reseller moves up the value chain?

I will give you one example. We are currently experimenting with something like this in Singapore and see if we can move it in other territories. We are trying to help partners to bundle complete solutions around servers, whether they are Intel servers or Unix servers. For this we are doing a lot of training. We are setting up a number of training centers around Singapore to educate resellers and move them up in the value chain. If all this works well, up to now it is, we will start getting our India enterprise systems people linked to that and take whatever makes sense or change it and apply it to the India market. So helping partners move up the value chain is an area of prime focus for us. 

Mohit Chhabra in Agra

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