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Trends And technologies 2009

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DQC News Bureau
Updated On
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It is that time of the year when all market analysts don a purple robe and

attempt to do some crystal ball gazing. We will do nothing of the kind. Instead,

we will draw back from the happenings of this year and try to understand the top

five trends that would further precipitate into 2009.

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Trend #1



More M&As on the anvil



Till Oct 2008, India Inc had finalized overseas mergers and acquisitions

(M&As) worth $26 billion. What made this commendable was the fact that this was

despite the global slowdown and not so buoyant domestic market. Of course most

of these M&As were in the non-IT industries.

In the IT spectrum, biggies like Tata Consultancy Services, Infosys

Technologies, Wipro Technologies and Satyam did venture out to buy smaller

service companies in Europe, Latin America and Asia. But, the ball for most of

these acquisitions had been set rolling well before the recession came to full

bloom. And since the domestic market was sluggish, these giants decided to look

outward for their growth.

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Closer home, we heard about Avnet taking over Ontrack Solutions and the

creation of Avnet Partner Solutions-the solutions distribution arm of Avnet

India. While this was a case of an MNC taking over a solution provider, recently

Sunfire Technologies and Concept Information Technologies-two of Pune's leading

solutions providers (SPs)-joined hands to create a new entity-Green IT

Solutions. The reason was to leverage on each other's core competencies and have

better coverage throughout the country under a single brand.

This is why Kiran Kirtane of Concept Information Technologies had commented,

“Both companies have complementary strengths, and that's what prompted us to

merge. Sunfire is strong in virtualization, networking and data center

solutions, and has a strong customer base in ITeS and manufacturing, while

Concept has a proven track record in providing HPC and storage solutions in the

R&D, government and defense segments. The merger gives us comprehensive

technology skill-sets and a broader customer base.”

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News of similar tie-ups will be heard in 2009 as SPs increasingly talk about

wanting to tap newer markets and customer verticals but lack the means to do it

independently. Of course, the nomenclature might vary. While most partners would

shy away from terming it as a takeover, the concept of consolidation will find

further roots in the channel community.

What is interesting is that an increasing number of partners are already

talking on these lines and there are several negotiations underway, though few

are willing to talk about it till the dotted line is signed upon.

There is no doubt that M&As are an inorganic way to grow. But this is one

path that needs to be tread with caution. Some of the companies which are

contemplating it are already working out their exit options. It is a little like

the pre-nuptial agreements made popular by the Hollywood stars clearly detailing

that in the event the union fails then how each of the involved parties will be

compensated.

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Trend #2



Credit squeeze and more defaults



This one is the most unwelcome trend that is soon going to become evident in

2009. Already, rumors have started circulating in the channel grapevine about

increasing defaults.

There are several reasons why most cases of defaults will surface in 2009.

Most distributors and even SPs have extended flexible credit limits and period

to their customers. This was because in good times these customers were able to

honor their payments. Also, when the recession started taking ground, in a rush

to meet targets distributors had to push their customers to take as much

inventory as possible.

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At the same time customers too started overdrawing on their credit limits in

a hope of liquidating inventory and being able to repay their creditors. It soon

became a vicious circle in which everyone was getting mired.

Now customers are finding it difficult to honor their payments on time, the

channel is thereby unable to repay distributors who in turn are finding

themselves in a cash crunch situation. Some distributors have started putting

some of their partners into a credit hold till the situation improves. But this

is more a knee jerk reaction than a solution.

Besides this, several corporate customers have tightened their budgets and

are postponing their IT acquisition plans. This puts more pressure on partners

to sell their stock to be able to keep their working capital going. This is also

why all the pending payments of 2008 will soon be due in 2009 and therefore more

instances of defaults will be evident.

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Top 5

trends

1. More M&As on the anvil

2. Credit squeeze and increasing defaults

3. Association work will suffer

4. Attrition rates will go down

5. Services will gain focus

Saket Kapur, CEO of New Delhi-based Green Vision said, “There is no denying

that there is a slowdown in the market. Till recently the IT industry was

witnessing a growth of 40-50 percent. This growth now stands at about 25-30

percent. Since IT outsourcing is the major contributor to the economic growth,

there is an increased dependence on the IT industry. This aside there is

constant pressure from the vendors on the channel partners to make timely

payments. This need for speedy recovery is also leading to defaults in

payments.”

Trend #3



Association work will suffer



Associations were once the cornerstones of a channel community's well-being.

But in recent times, most of the 70 odd associations have remained a community

body on paper alone. Even among a handful of associations which are still

active, one will see decreased initiatives from their end.

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This is because at a time of slowdown, the very members who constitute the

association's executive council and even the core member group, will be more

focused on keeping their business growing. They would prefer to focus their

energies on ensuring the growth of their own business houses.

A good case in point here is Chetan Shah of Xpress Computers in Mumbai who

resigned from the executive council of Trade Association of Information

Technology (TAIT) after eight years of serving it. His decision was brought

about by a need to concentrate more on his own business. Shah said, “For a very

long time now, I have felt the need to spend more time in growing my business,

especially in the face of the current slowdown. I am sure there are people in

the executive council of other associations in the country as well who will

mirror my thoughts and understand my decision.” This is why as a parting shot he

advised that all associations should have one independent person who is not

affiliated to any company in the team to manage the back-end operations of the

body. “Such a person will have the requisite time to dedicate to discharging the

duties that an association demands,” added Shah.

Trend #4



Attrition rates will go down



This is probably the only upside to the slowdown in business. For once,

partners can rest easy that the attrition rates will plateau or go down. For a

long time now, SPs were at their wits end trying to retain manpower. In fact

several of them had blatantly stated that it was because of their attrition

rates which were ranging from five to 15 percent that their growth was stunted

during recent times when things were on the upswing.

Now, as the slowdown takes roots job opportunities are limited. Most

employees would rather continue having a well paying job than take chances of

jumping to a new opportunity alto­gether. Another reason why job opportunities

are harder to come by is because most vendor companies, which used to poach

trained manpower from SPs , are now pruning their own stuff in a bid to stay

more competitive.

Others have put a recruitment freeze policy in place and are making do with

the staff they have on hand. One SP recently said, “I am a very happy man right

now. Where earlier I used to see at least one resignation a day on my table, it

has come down to one a week.”

But there is a downside to this as well. Though people will stay on board, it

is quite difficult to motivate them to do their best, especially in sales

organizations where the sales people have to get business from customers who are

not very keen on investing in IT infrastructure. Navnita Nair, Manager-HR,

NewWave Computing said, “In a recession, the challenge is not to retain

employees but to motivate them to perform their 200 percent to achieve results.

Being in a sales focused organization, the easiest thing for an employee to do

is to shrug his shoulders and say 'recession-no business'. The question here

is-what makes an excellent organization different from the others? Why do some

organizations withstand pressure, while others crumble? This is the time when

employees and employers have to understand that they need to think differently.”

Truly a time of introspection is coming!

Trend #5



Services will gain focus



Services, which were on the fringe of an SP's business area, will soon gain

more focus. At the time of slowdown the plain vanilla solutions will not find a

lot of favor with customers. What will set an SP apart is his ability to offer

solutions that are complex in nature, but offer good results, with minimal

management and better cost efficiencies.

This is also the time when companies that had invested in improving their

service skill-sets over the years will start seeing it paying back. Bengaluru-based

Future Businesstech had set up a full-fledged service center with direct

connectivity. Of its 150 employees, 100 are in the service department, which is

divided in after-sales service team and the pre-sale and deployment team.

Last year, New Delhi-based PC Solutions invested close to Rs 70 lakh in

upskilling it service team on advanced unified communication and other

skill-sets. And it boasts of a service to non-service team ratio of 82:18.

TECHNOLOGY

FORECASTS

Business efficiency is highly

tied up in technology these days. So though companies are cutting a lot of

corners to keep themselves profitable, they are still willing to stretch

their dollar to invest in technologies that they feel will offer them better

operational capabilities with minimal operational problems and enhance their

overall competitiveness.

There are several technologies out there

which can help them achieve all this and more. And there are the very

technologies that will find favor in 2009. We present some of them to you in

a nutshell.

Green IT: This will be the most prominent

buzzword of the year. Anything that is green will find faster attention

amongst customers. And it is not merely because green is about altruism. It

is because green technologies, though a little heavy on the investment at

the start, will start showing better return on investments over a longer

period of time. So if a customer has to invest into five servers, he would

be more amenable to deploy green servers which will bring down his

operational costs over a period of time. This is the right time to find out

about the green options to the various solutions you are providing.

Security: As online data increases and

becomes more crucial, its security will become equally pertinent. But

end-point security is not what CIO's are looking at. On the contrary, they

want security solutions that work at the back-end, cover all entry and

end-points and secure them at the background. CIOs will need proactive data

security policies to be designed and implemented and then constantly

reviewed and improved upon.

Data storage and management solutions: Data

is increasing exponentially. And it has turned into a CIO's nightmare to

manage. This is precisely where data storage and management solutions will

play a big role. Storage, because the data has to be seamlessly archived for

quick and effortless retrieval, and management because the same data is not

regenerated or re-archived taking up more storage space.

Cloud computing: The jury is still out on

this one. This year a lot of companies have been talking about cloud

computing which is basically accessing servers on demand online and with the

end-points having only cached information rather than the permanent

information. Right now, except for the big vendors most of the sellers offer

fragmented solutions around cloud computing. It is only when there is a

fully functional architecture available with some agreed upon industry

standardized benchmarks around cloud computing, that the technology will

take off.

Unified communications: It was to be the

wonder solution of 2008, but though it did elicit a lot of interest, it did

not take off as per most vendor expectations. But with the recession as a

backdrop and cost cutting as the current corporate mantra, it has chances of

faring better in 2009 than it did this year. It will give corporate

customers a good alternative to expensive travel budgets and save on

manpower costs by deploying them into other productive areas.

Team DQC

There are others who are now catching onto the trend and are investing in

beefing up their service capabilities. One of them is Bengaluru-based Binary

Systems which will soon have a remote management facility to support the gateway

solutions it provides.

In services itself, managed services will be the front runner. As corporates

try to put their business in order they want someone who will take the onus of

their entire IT setup with an airtight service level agreement. Most SPs are

already offering piecemeal solutions around this. But in 2009, a lot more will

join their ranks.

An interesting trend that will also come to the fore is distribution

companies offering solutions than products. These companies are clubbed under

the aegis of value-added distribution houses, a much-abused term that till

recently had no clear definition.

So earlier this year, we heard of South Africa-based Datatec Group picking up

a 50.01 percent stake in Bengaluru-based Inflow Technologies. Later Sunil Pillai

started iValue InfoSolutions, following funding from Singapore-based EGuardian,

an IT security products distribution vendor.

Close to its heels came the announcement of Ahmedabad-based Virtual NetComm,

once a distributor of brands like BlueCoat, joining hands with Singapore-based

MTech to launch a joint venture. Yet another company, started by ex-Ingram Micro

personnel, is waiting in the wings to take off as well.

Needless to say, services will be the big news of next year and those

partners who are focused on it will find themselves on safe shores when the

business is turbulent. And turbulent times they will be. So if you want to stay

afloat, start looking the services way.

Vinita Bhatia



vinitavs@cybermedia.co.in

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