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Kolkata
August 22nd, 2007
The economic boom, coupled with high IT awareness among small and medium
businesses (SMBs or companies with up to 999 employees) is boosting the fortunes
of resellers or channel partners in India, with more than 90 percent of channel
partners reporting a rise in their annual revenues over the last 12 months,
according to the latest report by New York-based Access Markets International
(AMI) Partners.
The average revenue of channel partners focusing on IT needs of SMB in India
was $324,000 in the 2005-06 financial year. It has risen to $399,400 in the last
12 months. "This is due to a significant increase of IT services as
contributor to revenue growth of channel partners," says Partha Sarathi
Sengupta, Senior analyst at AMI-Partners. "Hardware reselling has become a
commodity business with heavy discounting. This is curbing reseller margins. To
stay profitable, channel partners have ventured into services and solutions as a
business model."
Channel partners in India have aligned their business models to suit the
current requirement of SMBs. Currently, channel partners focusing on SMB needs
are still product-oriented, and their revenue mix is dominated by computing and
networking hardware (about 52 percent).
"Getting entry into an account is becoming difficult for channels due to
multiple brands, endless offers and fierce competition," Sengupta says.
"So the channels are heavily banking upon services now." There has
been a significant increase of IT services - from 12 percent to 17 percent - as
a contributor to revenue growth of channel partners. However, resellers complain
that IT vendors are making an aggressive entry into services just to keep profit
margins up and are eating into resellers' shares.
Many channel partners are now also showing a keenness to venture into the
international market, mainly due to increased competition in the Indian market.
As it is, most IT vendors are looking to expand their addressable market and
target SMBs. However, SMBs are widely spread in terms of geographical coverage.
IT vendors find it difficult and costly to tap SMBs in every corner of a vast
country like India with their own sales force. Therefore, channel partners are
integral to reaching and selling to geographically dispersed SMBs. They are like
the conventional foot soldiers. Their knowledge of the market is excellent, so
is the trust they have built up among their customers.
"SMB channels have moved up the value chain," Sengupta says.
"Most distributors are now looking to increase their high margin, low
volume business vis-à-vis low margin high volume business. Accounting,
educational institutions, retail stores, manufacturing, and professional
business services are some of the industries where channel partners are
targeting sales."
AMI's 2006-2007 India Channel Partner Market Overview and Topline Assessment
study highlights these and other major trends in the context of channel
partners' business models, product and service offerings, decision-making and
demographics. Products and services covered include computing hardware,
software, internet, networking and security services. Based on AMI's annual
surveys of SMB channel partners across India, the study tracks a broad spectrum
of issues pertaining to revenues, employee strength, vertical markets served and
customer mix. These data point to key opportunities and messaging hot buttons
for vendors and service providers seeking to expand their business through
channel partners. Page(s) 1
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