Kenneth Low, Channel Sales and Marketing Director, SGI Asia Pacific

"We want our channel partners to move towards Linux penetration"Kenneth Low, Channel Sales and Marketing Director, SGI Asia

Pacific has channel and desktop responsibility for four geographic areas, namely

the ASEAN, ANZA (Australia and New Zealand),Greater China (People’s Republic

of China, Hong Kong and Taiwan) and Korea. He spearheads SGI’s

channel business strategy in the Asia Pacific. Kenneth has

helped to establish channel infrastructure from scratch,

ventured into new channels of distribution and assisted

traditional channel partners to migrate to new models of distributions.

CI met him to find outwhat new initiatives SGI is taking on

the channels front.

How wide is SGI’s distribution network?

More than 96 percent of our business is done through our

channel partners. In other words we really don’t want to have any direct deals

unless the customers specifically insist on working with us. Reasons are

manifold. One is that we have a very clear channel strategy where we don’t

compete with our channel. We do not want to go direct. We would rather partner

with our channel in providing a complete solution.

Also we are more of a hardware company. We have got very

limited software products. But it is the channel that packages the solutions

together and gives it as a complete package to the customer. So this is the main

reason that we really have to work with our channel partners.

In India, we work with some key distributors like Tata Elxsi,

CMC, Discreet Logic, Summit, Pentafour - some of them are VARs and focused SIs.

We are also going after newer volume products through channel partners. These

partners are traditionally known as very high-end solution providers. But as we

go more into the Intel-based products like workstations, servers, we need to

work with whole new set of channel partners who can move volumes. So we are in

the process of identifying new partners.

Right now we have active and inactive channel partners across

the country. About 10 to 15 of our active channel partners today run most of our

business.

Are there plans to increase the existing channel base?

Definitely. In fact, one of my strategies across all

countries is to make sure that we have a rich channel base. The whole idea of

having the channel structure is to reach those areas where SGI cannot reach

directly. So the strategy is to go towards the two-tier model.

Today we are operating on a one-tier model and the

cost-effective reach cannot be provided because we have limited sales force. In

two-tier strategy, we would appoint master reseller and few hundred of

second-tier resellers. We are in the process of identifying the master reseller.

We think that volumes of Intel-based products need one reseller and UNIX-based

products need another one.

In other countries, roughly the size of India, we have two

separate master resellers. Smaller countries have a combined role. We are going

towards two-tier especially for volume-based products. It has to operate on

two-tier model otherwise the cost structure of supporting that number will not

be possible.

What are the initiatives you are carrying out for India?

What are the initiatives you are carrying out for India?

In India, we are doing a good job in the top tier. Our

strategy for growth in India is to move towards two-tier and go to secondary

cities. I think the way to do that is to have effective two-tier distribution

model. The second strategy is effective usage of the technology and

infrastructure. Today we are not using the technology enough.

We are using web-based tools with an electronic way of

tracking. I would call this as a more operational excellence strategy where

everything must be operational in the most cost-effective model with the

shortest supply chain. Today the most profitable business is high-end computing.

There are very few companies who are into this. We need to create that part of

business by going after very focused main account process, working with channel

partners. We want to make sure that we sell high-end systems effectively today

through volume business - high-end, high profit business.

Will you be providing service support to these channel

partners?

Obviously when we go through channel, we need to make sure

that we have a very good sales support infrastructure. So we should have basic

stuff like training for our channel partners. We will have the configuration

tools, sales tools to help them with the sales. There will also be regular

communication through our web site. This is our e-commerce strategy which will

implemented across Asia-Pacific and is called channels@SGI.

Through this we will manage and communicate our channel

partners online. They will be able to access the product information, pricing

information, local promotion and everything through the Web. In addition, they

will be able to access configuration tools that will have price changes. In

future, we would allow placing orders through the Net. They will be able to

track all their purchasing orders continuously. Today most of the countries have

their own web site. We are trying to have a consolidated program by the end of

September.

When is the two-tier model coming to India?

We are actually in the process of negotiations with some of

the players but I can not divulge names right now. But one thing is very clear

that two-tier model would soon be coming to India. India is a large geography.

When a country like Singapore has a two-tier model there is no reason why India

should not have.

How different is the Indian market from the other

Asia-Pacific market?

India would be pretty similar to China where all the

businesses are pretty heavily centered to few cities. India is a large geography

and to cover smaller cities is a real challenge and that can only happen through

none other than channel partners. We don’t have a bandwidth to set up a SGI

office in every city.

In India we would now be concentrating on B and C class

cities as well. We are doing a pretty good job in all the three

cities where we have a presence. Growth of SGI in India has

been quite consistent as compared to other countries.

What are the problems you face while dealing with your

channel partners?

It’s the same kind of problem that most vendors would face.

The typical pricing, competitive issue, demand issue and the supply chain issue

because the channel today doesn’t want to carry too many inventories. That

increases the cost of doing business.

On the other hand, we want them to do that more because that

is the whole idea of a channel. So, there is always a constant negotiation

between vendor and channel. We try to strike a balance. Today, our biggest

challenge is supply chain predictability.

What are your expectations from channel partners?

We expect our channel partners to have enough mind-share for

SGI products and play an effective role in the expansion of SGI, especially in

areas and cities where SGI is not represented. This is something, which takes

time to develop like trust and sharing. We want them to have engineers that are

trained and certified on SGI products and technology.

What kind of training program do you offer to your channel partners

What kind of training program do you offer to your channel

partners?

SGI has three types of training programs. One is for sales in

which all the sales people are updated with new products. We also give technical

training for the engineers and that could be based on different levels of

understanding. We have an entry

level and highest level training. We also train them on the

industry standards.

For example, today the hottest topic in the market is Linux

and since we are leaders in this market we want our channel partners to move

towards Linux penetration. We will help them attend Linux workshops and how to

move there together.

How do you think the advent

of e-com would affect channels?

I think there is a lot of talk about e-com invading channels

territory and channels are very worried that the middlemen’s

role would go away. But it is not

really possible. It might be possible for consumable side of

business. But when you go for the purchase of PC from a shop, it is more complex

corporate purchase. It is very difficult to have a vendor sell you a box when

they want a solution.

You need somebody to package the solution for the customer.

Can a software company package the hardware and sell it?

No. Only the channel partner can do that. However, there are

certain sets of channel partners who will go away like the traditional pure

box-pushing resellers would go away. Then the role of volume distributor would

come into play because the vendor will not be able to handle a lot of things

which resellers can do.

What is one message you want to give to your channel

partners?

We are serious about channel business and we want long term

partnership. The traditional SGI way of selling has been very much direct. But

we have made a switch two years ago and we want to make sure that we try the

channel initiative all the way. Worldwide our CEO has been very clear to say

that the certain part of the business would be definitely 100 percent channel

driven. We cannot sell one unit of workstation directly.