With almost 7,000 value-added resellers/distributors in the market today, the value-added partner (VAP) segment is witnessing aggressive competition. While more and more VAPs take to providing value-added services to gain an edge over competitors, vendors are reaping immense benefits. Gaurav Patra reports

The channel community has now realised that they need to change the way they do business. With hundreds of resellers/distributors entering the market, today vendors have a range of choices. Hence, Value-Added Resellers (VARs) or Value-Added Distributors (VADs) addressing software as well as hardware requirements of specific customer segments are striving to provide compelling value to customers by catering to their particular needs.

Alok Bharadwaj notes that while these partners were providing real value, the scenario today is quite the opposite, with them selling brands more like commodities

Today, these Value-Added Partners are also considered crucial for the growth of a vendor. Says Roli Sagar, head of the peripherals research for IDC India, “After the debacle that followed the economic slowdown, VAR is being seen as a key growth segment. This is one segment which is growing at quite a good pace.”

VARs play a pivotal role in a product/company’s success as they provide the right mix of customised solutions as per the end-user’s varying needs. They also go on to become the company’s frontline for corporate customers.

VARs customise software for select applications and therefore perform an important function. “We have an array of PDAs. These PDAs can be customised to suit individual requirements and it is the value added partner who can customise them as per the customers’ need. That is why they are important for us,” says Kulbhushan Seth, chief manager—market planning with Casio India.

Value-added resellers are very important for products that require hand-holding during selling and operation of the product. For new product introduction or for that matter in handling complicated products, they are important because all products cannot be sold via a distribution model of moving boxes. For selling high-end technology products vendors definitely view the effort put in by value added partners with respect. “Today, they are acting as a one-stop technology advisors. They are quite critical for any vendor in the market place,” says Manish Agrawal, who is the director for operations with Vintron.

Changing role of VAPs
VARs basically provide something over and above the normal job of being a logistics partner, while also ensuring the availability of products, credit and pricing. “VARs are those who add value in terms of offerings to their customers. They bundle products along with something extra to give value-add to their offerings,” says Alok Bharadwaj, general manager for the Consumer Imaging & Information Division with Canon India. Thus, a reseller/distributor can be called a VAR only when he participates in the pre- and post-sales process that gives significant value to its principals.

Today, a vendor expects a VAR to handle activities like channel promotion, building end-user awareness and marketing activities. In short, value addition involves everything—from end-user awareness programmes to channel development activities, including technical and sales training to higher-level value addition of compassionate sharing of knowledge and ideas with their partners.

VARs who have an in-depth understanding of local markets can leverage the vendor’s expertise and competitive pricing model for a win-win relationship. Vendors also expect their VARs/VADs to provide assistance in additional geographic coverage and also to better serve their clients. “Today, mere box-pushers won’t survive. Besides the box, they also need to provide various programmes and value-added services on top of the box. In the hardware segment, these partners are expected to provide value additions in terms of networking and services like facilities management, providing connectivity solutions. In effect they should provide end-to-end solutions to customers,” says Rajendra Kumar, vice president of operations with the Frontline Division of HCL Infosystems.

Partners play a critical role even as far as vendor strategy is concerned. As the market matures, more and more customers are demanding end-to-end solutions. So, it has become a necessity for players to graduate their partners to value-added partners. “It is very important for them to understand customers and provide single-point solutions. We are encouraging and enabling our partners to get into the role of providing value add,” says Kumar.

According to Sharad Srivastava, since both the US and Indian market conditions are different and are wheeled by non-comparable factors, to comment on any similar treatments based on dissimilar parameters would be unfair

“VARs contribute by providing complete solutions synergistic to the product and are extremely cost-effective. Besides, they provide a single interface for all the solutions, which is advantageous for the customer who does not have to shuttle between different vendors. Hence, the investment is justified,” comments Seth.

Considering low margins in the channel business, box players need to focus on providing value-add for better RoI and to keep customers intact. “Value-added partners form a critical part of our overall delivery chain and provide the necessary local expertise to execute customer-centric solutions,” says Sharad Srivastava, country manager for the SAARC region with Seagate. Seagate has recently launched three new Partners’ Programmes in India, which are essentially aimed at further value addition to the existing channel partners network in India, for both buying and selling of Seagate disk drive products. “The ‘Seagate Enterprise Partner Programme’ has been launched to establish direct contact and to foster relationships with the VAR community in the country,” he adds.

The move upwards
Most value-added partners are today putting systems in place to increase the share of value products/offerings to ensure more profitability. Realising that it is time to provide substantial value in the channel market space, some of the leading resellers/distributors have also tied up with various value product vendors. Some of them are even trying to enhance their services further by roping in technical specialists for specific products, and also focusing on value added services.

There are several ways in which a partner can value add. One emerging trend is that most of the system integrators or network integrators have started adding security products and services as value addition to their suite of networking solutions.

With a large number of resellers, another challenge for most of the vendors is to identify players. If vendors identify these resellers in advance, they can focus their energies upon promoting them to become value-added resellers. As these value-added resellers deal directly with customers, companies also want to know from them the skill-sets that will be in demand tomorrow and also the future of the market segments. This enables vendors to formulate future business strategies. And accordingly, they want resellers to build expertise in those areas. This knowledge sharing is a positive aspect of the emergence of value-added partners. Again, it is also expected that value-added partners would help their vendors in their channel development programmes.

Problem areas
Today the channel structure has become lopsided with about 4-5 layers of VARs emerging. This is also hurting the channels. According to industry experts, the presence of around 7,000 VARs/VADs in the market place has led to aggressive competition within this segment. To survive the competition, today most VARs are working on pricing factors, instead of focusing on value-add programmes. This does not augur well for the overall VAR segment.
This was not the scene a couple of years ago when VARs were providing lot of value addition. They started with adding value to their offerings and educating the customers. However, now some of them have ended up becoming price conscious ‘deal-makers.’ Bharadwaj notes that while earlier these partners were providing real value, the scenario today is quite the opposite, with them selling the brand more like a commodity.

Adds Sagar of IDC India, “In the VAR segment, the problem is not of margins but of the need for providing value by building customer relationships or providing the right kind of customer service.”

However industry observers believe that as brand awareness increases and companies build a good consumer pool, the number of VARs who are not adding any real value will dwindle away.

Kulbhushan Seth feels that VARs provide a single interface for all the solutions, which is advantageous for the customer who does not have to shuttle between different vendors

Days to come
Over the years, value-added partners have come to be considered the backbone of the channel market. Today, with stiff competition amongst vendors and the overall IT market trying to come out of the slowdown, the industry requires the value-added partners more than at any other time.

Upcoming value-added opportunities are emerging in areas of disaster recovery and security. VARs are also going to play a major role in the software segment. They will continue to provide services around different software packages to provide end-to-end solutions to customers. “In comparison with the US market, the Indian VAR segment today is still in a nascent stage. That’s why companies need to stay focused on providing value addition to end-users. For example, they should be moving towards the systems integration arena or offering more IT services, rather than only providing a mere solution/product,” says Sagar.

When compared to developed markets, Indian value-added partners are also lagging behind as far as technology is concerned. “Value addition in India does not yield the same result as in matured markets like the US. Hence, VARs need to be more technology-oriented to match their counterparts in the US,” says Agrawal.

However, Srivastava feels, “Since both the US and Indian market conditions are very different and are wheeled by non-comparable factors, it would be unfair to comment on any similar treatments based on dissimilar parameters. However, since the value-addition is dictated by customer demands in respective markets, it’s more a factor of what end-users are expecting rather than what the VAR has to offer. Thus it’s not a geographical consideration.”
Seth foresees a bright future for this field. “We expect that it will grow at a rate of 15-20 percent in the next two years,” he says. To see that kind of growth however, all these value added partners—whether resellers or distributors—will have to pull out all the stops.