In their bid to resolve matters pertaining to taxation imbalance and discuss ways to get rid of the current liquidity crunch bothering the software resellers, Infotech Software Dealers Association (ISODA) held a tri-party conference at Hotel Sahara Star on Aug 21 in Mumbai. The event witnessed participation from vendors, including McAfee, Sify, Websense, Symantec and Adobe. In addition to more than 100 members of ISODA from across the country, leading distributor Neoteric Informatique and Inflow Technologies were also a part of the tri-party conference.

During the event, the members discussed several implications of dual taxation on the software business and the resulting loss borne by the software reseller community. The discussion was followed by panelists pointing out the benefits of opting for SAAS or managed services model of business and the emerging opportunities that the partners can concentrate on to expand their businesses further.

Dual Tax is here to stay
Speaking on the subject of taxation, Shriram Krishnamachary, Head-Channels & Distribution, Adobe Software, India clarified that Nasscom and other IT associations in the industry had formulated a group and approached the finance department within the government to resolve the issue of dual taxation and further abolish it. However, according to the service tax commissioner the dual taxation policy is here to stay and it is only TDS that will be abolished.

(L-R) Shiv Nath Gosh, VP & Head-Enterprise Applications, Sify; Paras Shah of Neoteric; Naveen Kapoor of Iris Technology; Sudhir Kothari of Embee Software; Alok Gupta of Softmart Solutions; Jaimin Shah of Dev IT; Jyoti Prakash of Websense, G Anand of Inflow Technologies; Sriram Krishnamachary of Adobe; Kartik Sahani of McAfee

G Anand, VP, Inflow Technologies opined that the confusion around dual taxation is going to remain until a constitutional amendment is made to the recent bill that has been passed by the government.

Alok Gupta, Proprietor, Softmart Solutions and one of the panelists at the event shared, “The amendments that have been made in the current ruling around taxation on software is going to benefit Nasscom and other such associations. Today an international vendor can sell software directly to the customer, since he is not bothered about paying service tax and VAT. This will kill the channel community since they will no longer be required to further the product. Hence, it is important to negotiate with the government and not to take them head on.”

Liquidity crunch
Panelist alongside the members also held a healthy discussion around the current liquidity crunch scenario that software resellers are experiencing on account of extending advance payment to government, as part of service tax.

Pointing that payment of service tax has led to software resellers furthering a lot of advances to the government and further they (software resellers) are unsure of recovering the amount, Naveen Pansari, MD, Iris Software mentioned, “It's important to ask customers for 100 percent cash payment. Besides the suppliers will have to be approached for extending the credit period. Bank finances and equity can also effectively be used to raise capital and thereby maintain cash flow.”

Sudhir Kothari, CEO, Embee Software opined that it was important for an organization to have the right policies in place. “It is very difficult for organizations of our size to afford a CFO or a CIO, hence we ourselves will have to take charge and do an inspection on a daily basis to beat credit crunch. It is important to set policies and map the processes, since we are going through tough times. One needs to invest prudently in infrastructure, buildings and offices and look at rental options,” he elaborated.

Jyoti Pakash, Channel Manager-India and SE Asia, Websense elucidated, “In times of recession, it is best to do an introspection and evaluate the best options for investment and understand customer challenges to avoid delay in payments.”

Speaking about the recession and suggesting ways to beat credit crunch, Paras Shah, MD, Neoteric pointed, “The world economy and GDP is witnessing a reset and not recession since excess money was pushed into the economy and finance was easily available. Growth will take place only when partners will curtail their overspending habits and frame right policies.”

On the other hand, Jaimin Shah of Dev IT, pointed that the today channel partners are least concerned about the productivity and not collaborating within the partner community. “Today even the high-end system integrators and solution providers ranging from TCS, Wipro and HCL are getting into our business. Hence, it has become very important for us to collaborate with each other and strengthen our service portfolio.”

New Opportunities
Yet another topic that was widely discussed during the event revolved around opportunities emerging from managed services or Software as a Service (SAAS) model of business.

Throwing light on the emerging opportunities, Kartik Shaney, Regional Director-India, McAfee shared, “A lot of obsolesce takes place in the security products and what is right today cannot be applied tomorrow. Hence, the reseller community can envelop the security products with their solutions as it offers huge scope for earning service revenues. Even while deploying the project software resellers can look at extending value-added services to their customers.”

The discussion was followed by Q& A sessions. During the session partners raised queries around extension of credit limit and period, dual taxation and whether SAAS will actually change the business scenario from a cash flow point of view.

While the panelists did suggest that extending credit limit would mean creating an imbalance in terms of audit and compliance, they also suggested that the credit period can be relaxed on case to case basis.

On the query around SAAS, the panelists pointed that the software reseller can look at the opportunity in SAAS and managed services by either concentrating on the business partially by taking on the vendors infrastructure and white labeling the products/solutions being offered by them or be a provider on his own by using his/her existing infrastructure. The tri-party conference was sponsored by Symantec and Sify, and collateral sponsors included Adobe, Websense and McAfee. The event was hosted by Vipul Dutt of Future Soft Solutions.

Puja Sharma
poojas@cybermedia.co.in

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