July 2010 | Rs. 50
Vol 2 Issue 16 | A 9.9 Media Publication
SPECIAL CHANNEL EDITION
Distribution L CHA L ENGES The business of IT distribution is not exactly what it used to be. Whether it is credit control or inventory management, partner training or warehousing, the challenges have grown manifold. A ringside view
Empowering workers while keeping apps secure PAGE 10
Vendors tout them, but do ergonomic products sell? PAGE 18
First Step to Cloud
Ganesan Arumugam of VMware on virtualisationâ€™s cloud relevance PAGE 06
The Distribution Dilemma
veryone and their dog know that India is a vast, complicated market in terms of reaching and catering to consumers of diverse tendencies. For IT distribution, too, the picture is quite intriguing. For several years, vendors and channel partners worked the Indian market as happily married consorts, advising businesses and consumers on their purchases. Whether it was the bustling squares of Nehru Place, the winding streets of Lamington Road or the dirt-caked lanes of small-town India, the so-called traditional distribution channels emerged and grew from strength to strength. The entire chain of large distributors, regional distributors, sub-disties, resellers and assemblers thrived by serving consumers whose taste for tech products was new and knowledge about them almost non-existent. Then somewhere down the line, a few critical changes stirred up the status quo in channels: rising population of internet surfers, increasing public availability of information on products through web and other media and, yes, the sudden rise of modern retail in the form of swanky mobile spots and glitzy malls. All these factors have been causing multiple headaches for a lot of channel partners. And channel media has been abuzz with talk of the end of midtier distribution as we know it. Fortunately, most mid-tier distributors and resellers have survived thus far. For one, large-format retail
A lot of traditional partners are at a crossroads where they must make some critical choices
still constitutes only 2 to 5% of the entire IT business. Two, the overall market pie is constantly growing, making room for all kinds of players. Nevertheless, there’s no question that the share of organised retail will grow much faster than that of traditional channels and will probably settle somewhere between 15 and 25% over the next three to five years. And that the telecom channels will also make a dent into IT sales (we are already beginning to see that). Combine this with a more aware consumer who has a higher appreciation for ambience and the worries hanging over traditional partners look like the sword of Damocles. In the days to come, we are likely to see more instances of vendor-channel friction over past loyalties and new-fangled relationships. However, those partners who continue to give value to both their vendors and customers – through a vertical- or product-specific approach, better service support network and diversified reach – will carry on in marital bliss. Elsewhere, there’s bound to be some strife.
SANJAY GUPTA Editor Digit Channel Connect
sounding board sounding board July 2010 | Rs. 50
Vol 2 Issue 16 | A 9.9 Media Publication
SPECIAL CHANNEL EDITION
Sudhir S, MD, Inspan Infotech: “The distribution business is a double-edged sword...On the one hand, it needs to continuously keep the channel partners happy by offering the best possible prices and products; on the other hand, it needs to support the brands by providing the required reach.”
Umang Mehta, CEO, Roop Technologies: The key challenge in distribution is inventory management. Distributors take bulk quantity of inventory from respective vendors. Most often, distributors work on low margins and if there is low demand for a product (this happens due to numerous reasons), keeping inventory for long becomes a challenge, as this is a big cost for the distributor.”
Distribution CHA LLENGES The business of IT distribution is not exactly what it used to be. Whether it is credit control or inventory management, partner training or warehousing, the challenges have grown manifold. A ringside view
Empowering workers while keeping apps secure PAGE 10
Vendors tout them, but do ergonomic products sell? PAGE 18
First Step to Cloud
Ganesan Arumugam of VMware on virtualisation’s cloud relevance PAGE 06
Write to the Editor E-mail: firstname.lastname@example.org Snail Mail: The Editor, Digit Channel Connect, B-118, Sector 2, Noida 201301
DIGIT CHANNEL CONNECT
Champakraj J Gurjar, MD, Maxtone Electronics: “Already, the margins are so narrow and the risk so high that it is important for the industry to reduce the credit days and encourage cash business. This will improve profits and also keep the defaulters away from the markets.”
VOL 02 ISSUE 16 | JULY 2010
Managing Director: Dr Pramath Raj Sinha Printer & Publisher: Kanak Ghosh EDITORIAL Editor: Sanjay Gupta Copy Editor: Akshay Kapoor Sr. Correspondent: Charu Khera (Delhi)
Some key channel partners share their perspectives on the evolution of the IT distribution business and the challenges they face
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Distribution CHA LLENGES
SALES & MARKETING VP Sales & Marketing: Navin Chand Singh National Manager - Events and Special Projects: Mahantesh Godi (09880436623) Business Manager (Engagement Platforms) Arvind Ambo (09819904050) National Manager - Channels: Krishnadas Kurup (09322971866) Asst. Brand Manager: Arpita Ganguli Bangalore & Chennai: Vinodh K (09740714817) Delhi: Pranav Saran (09312685289) Kolkata: Jayanta Bhattacharya (09331829284) Mumbai: Sachin Mhashilkar (09920348755) PRODUCTION & LOGISTICS Sr. GM Operations: Shivshankar M Hiremath Production Executive: Vilas Mhatre Logistics: MP Singh, Mohd. Ansari, Shashi Shekhar Singh
SECURING THE MOBILE WORKFORCE
Going ergonomic might be in vogue, but vendors still have to work hard to build a market for these devices
Companies need to ensure that their mobile workers get maximum access to their applications without compromising on security
MAKING CHANNEL ITS KEY PILLAR
Surajit Sen, Director of Channels Marketing & Alliances at NetApp, talks about the company’s growth strategy in India
COMFORT 18 SELLING
FROM VIRTUALISATION TO CLOUD
VMware’s partners director Ganesan Arumugam reveals why virtualisation is the first step towards cloud computing
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DIGIT CHANNEL CONNECT
vendor speak “VIRTUALISATION IS THE FIRST STEP TO GETTING ON TO CLOUD COMPUTING” – Ganesan Arumugam, Director – Partners, VMware India
Ganesan Arumugam, Director – Partners, VMware India, shares with Charu Khera the potential that cloud computing as a technology has for partners. DCC: A year or so back, VMware was commonly addressed as “Global leader in Virtualisation from desktop to datacenter”; but now, it is better known as the “Global leader in Virtualisation from desktop to datacenter and cloud”. How are you addressing cloud computing? What is the potential of cloud computing in the Indian market?
We announced our management vision during VMworld 2009 – a paradigm shift from component-level infrastructure management, to cloud-based delivery of IT services, helping reduce the cost and complexity of managing IT, helping customers use IT infrastructure to drive business results. With our core product, ie, VMware vSphere 4, we provide a cloud computing environment to our customers that spans internal and external cloud infrastructure, presenting a seamless, managed cloud to the business. VMware provides the platform for India’s journey to the cloud. It can be said that virtualisation is the first step to getting on cloud computing; hence, we are very much at the helm of affairs in the cloud computing arena with respect to the Indian market. Also, with regards to the Indian market, we have seen a lot of interest in the cloud computing space and traction in among enterprises of all sizes when it comes to virtualisation. Cloud computing is the next step from virtualisation for transforming IT.
We believe that we are pioneers of
DCC: What have been some of your recent achievements?
Our recent announcements in the application front is with Salesforce (VMforce) and Google. They are powerful endorsements of the Spring framework as the way to write applications in the future – applications that can be portable across private and public clouds. SpringSource was acquired by VMware last year. DCC: Can you explain the role of virtualisation in the cloud?
DCC: What is the core strength of VMware?
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virtualisation and are commonly recognized in the Indian market as a company for taking datacenters, servers and desktops and making them cloud friendly for customers. We even provide the essential bridge to enterprises for taking their IT system to the cloud. For large enterprises/IT organisations, VMware vSphere provides the power to join the cloud computing bandwagon. VMware also brings customers control – they do not have to be locked into one cloud provider. VMware enables a virtual private cloud and you can think of it like a Virtual Private Network (VPN). When businesses have a VPN, they control it, they can extend their business using publicly available or external infrastructure, but it still feels like their network. In short, customers have the control. This is what we’re doing with the private cloud – empowering customers to gain the benefits of the cloud, but giving them the control.
Although alternative approaches may be pursued, VMware believes that virtu-
We believe that we are pioneers of virtualisation and are commonly recognized in the Indian market as a company for taking datacenters, servers and desktops and making them cloud friendly for customers. The company plans to expand the System Integrators (SI) partner space and identify key partners who have commitment and skills on VMware products and solutions.
alisation is the key underpinning technology to enable the cloud. This technology is the infrastructure on which the cloud is built; so, in that sense, it is an intrinsic part of the ‘moving to the cloud computing’ stage. DCC: Can you brief us about your Partner Exchange 2010 programme?
The partner exchange programme is divided into four different stages across India, with events lined up in Mumbai, Delhi, Bangalore and Chennai. This event takes place across the globe in China, Australia, Japan and Singapore. The partner exchange programme was designed to bring all our partners and customers together for them to benefit from exchanging information about the industry and also hearing about VMware’s plans first hand. VMware recognises the importance of the role our customers and partners play in developing our business and spreading our messages across all industries and verticals and hence this program also acknowledges the hard work our partners put in throughout the year. DCC: Currently working with leading vendors, such as HP, NetApp and EMC, what is your growth strategy for 2010?
VMware will continue to focus on partner engagement programmes during 2010. The company plans to expand the System Integrators (SI) partner space and identify key partners who have commitment and skills on VMware products and solutions.n email@example.com
“CHANNEL IS THE KEY PILLAR OF NETAPP’S STRATEGY FOR INDIA” – Surajit Sen, Director Channels Marketing & Alliances, NetApp
Surajit Sen, Director Channels Marketing & Alliances, NetApp India shares with Charu Khera the company’s growth strategy in India. DCC: What is NetApp’s channel strategy for India?
Channel is one of the key pillars of NetApp’s strategy for India that helps us support our customers, products, services, and support needs. Our partners are closest to our customers and help us get a better appreciation of customer challenges and their requirements. We are committed to helping our partner ecosystem evolve in keeping with the changing customer needs and technology trends. We have various comprehensive channel programs that empower partners and offer a win-win situation to both NetApp and its partners. NetApp works in India with a number of partners including large System Integrators (SI’s) like TCS, Wipro and HCL, solution providers like Apara, Locuz, MIEL and ACE Data; technology distribution companies like Redington and Inflow Technologies, through which we reach out to their country-wide network of resellers. We have a unique services strategy. Our strategy is to deliver services through our partners. NetApp ensures that partners build the competence and infrastructure to deliver world class support.
exclusive access to select selling tools, lead-generation programmes, marketing activities and financial rewards for closing business. The first in the series were virtualisation and backup and recovery, with additional specialisations scheduled to be added in the coming year. DCC: What are some of the key storage trends in the Indian market? What are the benefits it brings for the channel community?
Firstly, architectures are changing; we are coming in for a refreshed cycle, customer’s buying options are changing, environments are being made more virtualised and this has been made possible by the likes of VMware, Microsoft and Citrix. They have made the server virtualisation possible, and this is where datacenter design is shifting. Another fast-growing change is scale–out, which is the capability to grow when you need. Additionally, Ethernet storage is gaining ground, which is moving onto 10 gigabytes. As customers become better conversant with new technologies, they would become discerning towards new technology innovations and the rate of adoption would accelerate.
We recently implemented a partner technology specialisation programmes based on our solutions that helped drive deeper penetration based on their core competency and business focus. Over 70 partners completed the authorization and enrolment process. Partners received
NetApp provides storage virtualisation technologies, which can significantly reduce the storage required for production, backup, and DR with server virtualisation.
our industry is growing rapidly, there is an acute demand for skilled and talented people. Resellers and principals invest heavily in building skills and competence, however, very often, they are unable to retain the people. DCC: NetApp has recently appointed Progressive Infotech as its gold partner. Are there any further appointments that you have planned?
Our strategy is to continue to add partners that complement their heritage of storage-focused integrators - such as platform/server integrators, networking integrators, and application specific integrators. These partners often call into accounts or opportunities not traditionally serviced by either NetApp representatives or their storage-focused partners. Further, we are looking at increasing our presence in tier-2 cities in the coming year and are looking to expand our overall partner base to about 80 by the end of 2010. DCC: Can you share what pre-requisites do you look in a SI?
DCC: What challenges do you face on the channel front?
We want to appoint partners who have competence in the solution areas that we are focused on, like virtualisation, enterprise applications, messaging & collaboration; partners who carry complementary products from our key alliance partners like Cisco, VMware & Microsoft and those who are focused on the verticals that we focus on like BFSI, telecom and government. n
The biggest challenge faced by us on the channel front is talent retention. Since
DCC: What are your target verticals? DCC: Can you share with us your recent initiatives for the channel?
We regularly provide comprehensive, affordable, and easy-toaccess technical and sales training and accreditation programs to our partners, as well as a variety of regular knowledgesharing opportunities.
Our target verticals primarily are telecom, BFSI and the government sector. We also see a focused increase in healthcare, media and manufacturing going forward.
DIGIT CHANNEL CONNECT
financing Customer Schemes
FUNDING By providing good financing schemes to customers, channel partners can actively increase revenue streams and profits GAUTAM MUNISH
study by the research firm AMI Partners has determined that the recent economic turmoil has caused companies to re-evaluate their budgets and to review the criticality and timeliness of their IT projects. But, as the situation began to improve, it was estimated that Small and Medium-sized Businesses (SMBs) in India would invest $1.04 billion on networking products and services alone in 2009. Out of this amount, medium-sized businesses (companies with 200 to 999 employees) were expected to generate the major proportion, accounting for nearly 59% of the total SMB networking expenditure. While on the whole, these estimates paint a positive picture, it must be noted that the competitive scenario which businesses see today demands that they make full use of available resources. The clear philosophy followed today is to do more with less and to safeguard capital expenditure budgets. In uncertain economic times, liquidity can evaporate, causing capital to become scarce and credit spreads to widen, making the cost of borrowing more expensive. So, what can SMBs do to combat this? Whether the objective is to keep technologies current or to safeguard capital expenditure budgets, financing is the answer.
DIGIT CHANNEL CONNECT
Financing offers an alternative, flexible method for acquiring technology by allowing for predictable monthly payments that spread the acquisition costs over time, the preservation of capital and lines of credit, and the removal of cash flow concerns. Financing has become an integral acquisition strategy for many companies, as these companies realize that the decision about how to acquire technology and services is just as critical as the investment decision itself. The clear demand on management today is to be more strategic with budget and technology investments. By financing technology equipment and services, businesses ease the uncertainty of future technology developments and their impact on business planning, and increase their flexibility to upgrade to new technology as the business demands. Most importantly, financing solutions make it possible to proactively establish a technology lifecycle management strategy.
Customer financing Channel partners are now looking to evolve their businesses by moving from “provisioning” technology products to
By financing technology equipment and services, businesses ease the uncertainty of future technology developments and their impact on business planning. Financing solutions make it possible to proactively establish a technology lifecycle management strategy.
delivering fully integrated “customer solutions.” Naturally, the next step is to expand the end-to-end solution offering to incorporate a customer financing component. Instead of talking about what the solution costs, the need of the hour is to expand the dialogue to focus on the value the solution brings to the customer’s business and how the solution provider can map the monthly cost of the solution to its immediate business benefits. Such tactical dialogues open new strategic frontiers for channel partners who are ready to work with a customer’s business and technology leadership. By investigating the financing options, tools, and resources available in the marketplace, channel partners can actively increase profitability. However, partners must first identify and tackle the challenges that hinder them from availing of such options. Partners need to have strong financials and transparent reporting, which is currently lacking among a large number of partners in India. Partners should realize that smart financing enables them to improve their capabilities, benefit from new opportunities, and speed up growth. In essence, the ability to provide financing allows channel partners to have strategic discussions with customers that focus on the longer term. It gives channel partners the opportunity to help their customers plan for the future and to create financing structures that allow them to easily upgrade or add equipment over the course of the financing term. In doing so, resellers and partners strengthen the customer relationship and can more effectively manage customer accounts without having to continuously engage in price objection conversations. Financing is not new in the network infrastructure and communications industry. In mature markets, where technology obsolescence happens rapidly, this model makes strong financial sense, and channel partners have been profitably providing this service to their customers for quite some time. It makes natural sense for networking channel partners to closely examine the financing offers and programmes available from their vendor partners and to learn how to have meaningful financial discussions with their customers. By taking the requisite steps to grow this area of their business, channel partners will be rewarded with tighter alignment with their customers and a solid strategy for increasing revenue streams and profits. n Gautam Munish is Vice President, Cisco Capital India.
security Mobility Companies need to ensure that their mobile workers get maximum access to their applications without compromising on security DARIO FORTE
Mobile Workforce A t the current point in the history of information security, companies have spent a lot of time analysing various options for remote access to their information systems. Many of them have begun with IPSec-based systems to interconnect different sites. It all seemed rather simple at first, but as the number of sites (and clients) that needed to be interconnected increased, scalability and interfacing problems began to emerge. Many companies then tried to scale (or actually replace) IPSec with PPTP (Point-to-Point Tunneling Protocol). But a dual problem arose in this case: inadequate tunnel security level and difficulty in selecting permission and access types after the connection had been established. PPTP in particular caused serious problems in terms of intrinsic security, with repercussions on daily operations.
Client needs It seems almost superfluous to mention it, but
DIGIT CHANNEL CONNECT
right now, companies need to ensure that their mobile work force has maximum access to their information systems while also guaranteeing maximum security. Demands for network access are now many and varied and contain a series of unknowns that must not be underestimated. While the problem is rather simple to outline from the security standpoint, there are inner areas of criticality that must not be overlooked. One of these is hidden costs. One of the commonly recognised problems is the question of administration costs. These costs include those incurred during implementation, which are directly proportional to the difficulty of deployment. And we must also factor into the equation the fact that the number of virtualised, terminal-serverbased and, obviously, directory-based infrastructures is increasing. For these reasons, many companies have started to turn to â€œalternativeâ€? VPN (Virtual Private Network) systems, for example, those based on the SSL (Secure
security Mobility Sockets Layer) protocol. Many implementations of this type are commercial, while others are open source. The author has often met with clients who have attempted a “homemade” implementation based on Linux, and then moved on to more “solid” commercial options. The latter are usually based on dedicated appliances and provide a series of additional advantages that we will discuss one-by-one below: The hardware has been designed for a specific purpose. It might seem obvious, but an SSL-VPN appliance designed with ad hoc hardware provides superior performance and improved scalability with respect to an analogous system based exclusively on software; The use of dedicated appliances indirectly favours rationalised organisation of security management. Since we are talking about appliances, the devices are managed by the final client’s networking department. This means better organisation in terms of access management and secure
connections, which, technically speaking, are often already handled by the network staff; With the adoption of an appliance, it is the vendor who becomes the sole client interface, with consequential pre-sale and post-sale savings of time and money. Furthermore, given that the provider represents a single, unified commercial interface, a partnership may be established (and consolidated), something which is not exactly automatic in the current moment in history; Disaster recover y and business continuity. Thanks to their implementation architecture, SSL VPN-based appliances allow very quick restoration of connectivity in the event of a security incident or-worse yet-loss of network segments. This provides further assurances of preserving business continuity; Virtualisation and management of access gateways from a single point. Most of the options available on the market allow for the creation
Thanks to their implementation architecture, SSL-VPNbased appliances allow very quick restoration of connectivity in the event of a security incident or loss of network segments.
of multiple access gateways handled by a single appliance. This expands governance capacity of a large number of widespread mobile elements from a single control point.
Observations in terms of security: authentication method Password-based authentication presents a host of problems. First and foremost among them is the unlikelihood of knowing whether a password has been compromised. If a hacker succeeds in guessing a password, the legitimate owner often is unaware that his or her credentials-or entire identity-have been stolen. Sharing a password among a group is another area of risk in this type of authentication. Among other possible problems, it is also true that passwords that are hardest to guess are also the hardest to remember, and forgotten passwords add to administrative costs in providing services to people who need to recover their passwords. Furthermore,
DIGIT CHANNEL CONNECT
security Mobility since passwords are not necessarily easy to remember, users generally use the same one at different work stations. The hacker just has to guess it once to gain multiple accesses. And of course there are those who write down their passwords to make sure they won’t forget them, an open invitation to disaster. Hardware-based authentication keys resolve all these problems by eliminating the interaction between user and password. Users are provided with a physical device (security token) that must be present for authentication to be accomplished. These devices are often protected by a PIN, similar to that for an ATM card, so that they cannot be used if they are stolen or lost, creating a two-tiered authentication process. Hardware authentication keys are difficult to violate and practically impossible to share (without physically giving the device to someone else). The user’s “credentials” are memorized in the token and since the password resides there, the user only has to remember his or her PIN to access the network. If the token is lost or stolen, it is completely unusable and, as is the case with ATM cards, it is blocked after a certain number of incorrect attempts at entering the PIN. Security tokens for VPNs are still rare and generally difficult to implement. To meet the growing demand for this type of authentication, many VPN-SSL systems provide built-in security tokens.
Return on Investment The Return on Investment for these systems usually is calculated by assessing the following series of factors: Savings on implementation costs. During the preliminary feasibility study, estimated or actual costs for a “traditional” option (such as those mentioned at the beginning of this article) are compared to those for the SSL-VPN alternative; Savings in terms of administration costs. Another element to take into consideration when comparing options and calculating RoI regards the administration costs of the new option with respect to others. The possibility of centralized administration of the VPN
DIGIT CHANNEL CONNECT
is certainly something to be assessed in terms of cost management; Savings v. Green Computing. In certain cases during my work as an advisor, I have had occasion to estimate, together with the client, the impact on energy consumption of one option with respect to another. It is clear, for example, that the greater the virtualisation and throughput capacity, the greater the potential energy efficiency.
Rent or buy? This question is of much relevance to those who make the expenditure
on how the provision of technology is formulated. Living in a period of limited or even frozen budgets, some propose these technologies as a service and/or pure rental. And it is a choice worth considering, given that we are talking about core infrastructure of the client companies. Some opt for the traditional solution since they want to avoid any further interference on the part of suppliers or service providers. Others instead seek alternative methods of provision, working out a plan with the service provider to ensure they get the most out of their planned investment. I can confidently affirm, on the basis of my direct experience, that service provider and final user have a complete array of commercial options available to them making a win-win result quite easily achievable. Another very important aspect to keep in mind in building a VPN are the service levels that will be
Hardwarebased authentication keys eliminate the interaction between user and password. Users are provided with a physical device (security token) that must be present for authentication to be accomplished. These devices are often protected by a PIN.
Many companies have started to turn to “alternative” VPN (Virtual Private Network) systems, for example, those based on the SSL (Secure Sockets Layer) protocol.
demanded of the network. If the information traveling over the VPN is of critical importance to the company, it is necessary that the network be dimensioned appropriately to ensure the desired level of performance, which can be achieved by establishing the proper bandwidth for the network. However, something that is even more important to guarantee is that the performance provided by the network is constant over time and ensures an information flow that will meet company needs. In the case of VPNs on public infrastructure, different service providers often enter into play and it is not possible to predetermine the route that the information will take in travelling from one node to another. In this case, it is only possible to ensure adequate bandwidth, but it will not be possible to dictate a minimum service level because it is not possible to control the intermediate carriers. Thus, this type of VPN can only be used for mission critical applications in which an interruption or slowdown in data flow will not produce serious consequences. The appeal of this type of networking solution is it’s relatively low cost. If a constant flow of information is vital, it will be necessary to opt for a VPN that is supported by a single carrier. In this case, a service level agreement can be drawn up specifying important parameters such as minimum and maximum bandwidth and the time slots in which an above-average connection quality is guaranteed. The costs of this type of VPN are strictly linked to its geographical extent, the guarantees included in the contract and the choice of carrier.
Conclusions Virtual Private Networks using the Secure Socket Level protocol will soon become one of the de facto consolidated standards for security of privileged communications and remote access. In a period when the mobile work force is undergoing continual and dynamic evolution, long implementation and administration lags are not an option. Furthermore, security protocols are now reaching a state of consolidation that should facilitate the choice of technology, allowing the client to concentrate more fully on the added features and commercial aspects of the services provided. n Dario Forte is the founder and CEO of DFLabs, a European firm specialising in Governance Risk and Compliance.
Distribution L CHA L ENGES The business of IT distribution is not exactly what it used to be. Whether it is credit control or inventory management, partner training or warehousing, the challenges have grown manifold. A ringside view CHARU KHERA
DIGIT CHANNEL CONNECT
CHAMPAKRAJ J GURJAR, MD, MAXTONE ELECTRONICS
ith the growth of our country’s economy, the technology distribution business has been growing rapidly as well. It has evolved a lot as compared to the scenario that existed a couple of years ago. Inventory management is no longer an issue in the distribution business. There are a lot of software available today, which provide ease with respect to inventory management and control. Moreover, with the help of innovative software, all data can be easily accessed at a single click and thus, inventories can be managed easily with minimal chances of error if maintained properly. As opposed to some years back, today, most products are instantly available for distribution once they are launched in the Indian market. Moreover, when a company launches a product in the market, it is extensively supported by advertising and marketing activities. Sourcing of products is also not an issue anymore, as vendors are easy to approach. But, there are still some challenges for distributors that need to be tackled. Take, for example, the issue of warehousing. Real estate rates are sky high already, and
the availability of affordable premises is a challenge. Moreover, with margins being wafer thin, it’s very important to control the cost of warehousing and at the same time, the convenience of the location has also to be kept in mind, so no additional transportation cost occurs. Credit has always been a major factor in the distribution business, either taking or giving it. As the volumes and targets are high, the credit exposure has increased and the credit days are going as far as 45 days in channel, which we consider unhealthy. Thus, this kind of situation gives rise to bad debts, and already the margins are so narrow and the risk so high that it is important for the industry to reduce the credit days and encourage cash business (0 Credit Days). This will improve profits and also keep the defaulters away from the markets that just use channel money in rotation to conduct business without investing a risk (Capital) of their own. Only people with good intentions and potential will be able to do healthy and safe business. This is the only remedy available that can save the distribution industry from bad debts. In fact, we have already started working towards this solution.
A MANOJ GUPTA DIRECTOR, FORTUNE MARKETING
f you talk about distribution industry alone, it is multi-billion dollar industry. There are big players, there are national as well as regional players, there are niche players and also there are players at the lowest level, which are small distributors. The industry has evolved in many ways. Inventory management is no longer a big issue. However, some issues like credit control continue to exist. Accessing the right partner and giving him the right credit is a big challenge for any distributor. Vendors want to achieve increased growth every quarter, irrespective of any conditions, and to keep up to their expectation is also difficult at times. Warehousing, with prices of property reaching the sky, is becoming a big challenge. Distribution in India is a volume business. All distributors operate at wafer thin margins. After all expenses are incurred in making the products available for retailers, partners, and LFRs, the profits made are very less as opposed to partner expectations.
s far as the Indian distribution market is concerned, I would say it is very dull as of today. The clients are few, the government is not supportive, the financial market is slow and thus our business is also very slow. There are very less buyers and while our margins are very low, it is a big challenge to grow and sustain in the market. However, we are optimistic to survive and succeed in this cut-throat competitive environment. There are a lot of challenges in the distribution business, with the most vital being that of inventory management. Most distributors buy in quantity, but the sale is less, which in turn leads to inventory issues. Achieving the growth expected by vendors becomes a challenge. However, vendors are cooperative. MAYANK BHARTIA Though there are many challenges, I can say that CEO, GELA TIDA INFOTECH the industry has evolved over the last couple of years. Product availability is no longer an issue. Warehousing is not a challenge. With respect to credit, that depends on product to product, person to person and region to region.
T VK BHANDARI CMD, SUPERTRON ELECTRONICS
here are a number of challenges in our business, with inventory management being one of the most important issues. It is challenging due to the variable market conditions. Then, warehousing is also a challenge because of the fact that it plays a major role in the over all cost of distribution. If we talk about sourcing of products with respect to distribution, it is not very challenging, as you need to source from the vendors and they normally offer the products at a fixed price. But, the major problem that distributors have to deal with is the issue of credit. The margins are becoming thin day by day and credits are not getting reduced at the same pace, which is not a very healthy sign for the industry. As our industry is a “buyer’s market”, the entry barrier for any new partner is quite less.
DIGIT CHANNEL CONNECT
UMANG MEHTA CEO, ROOP TECHNOLOGIES
ack in the 1990s, distributors were called importers. They were not authorised distributors (hence, importers) of a particular vendor. Today, a decade later, distribution is an organised industry; its structure has evolved with the distribution network being structured. It has a hierarchy. At the top level is the vendor, which has his distributors. In India, there are two kinds of distributors â€“ national and regional; under both, there is a wholesaler, followed by a system integrator and a reseller. National distributors are much more financially as well as logistically strong, whereas regional distributors are focussed and their penetration and reach is widespread. But, there are some challenges in the distribution business. The key being inventory, which is crucial as far as costs is concerned. Distributors take bulk quantity of inventory from respective vendors. Most often, distributors
work on low margins and if there is low demand for the product (this happens due to numerous reasons), keeping inventory for long becomes a challenge, as this is a big cost for any distributor. I can say that inventory management is a crucial aspect for distributors. Reach to the market is another crucial challenge in distribution business. Reach can be seen â€“ by the way of geography, by the number of people, and by number of people in various geographies. Also, setting the credit limit for partners is a concern for distributors. We give credit to all our partners, but to decide credit worthiness of a partner can be a major issue. However, all distributors have their own set of rules with respect to credit. In cases where partners are unable to pay, credit debt poses to be a big challenge. Then, giving a partner credit for the second time, when the last payment was delayed, or partners asking for more extension, not making the final payment within the terms as decided, turns out to be challenges as well. However, all products in the distribution business have different credit limit as well as different terms and conditions. To maintain profitability is also an issue with most distributors, which generally operate at a very thin margin. Competition in the trade is constantly increasing and thus maintaining profit is a challenge. However, a lot of things have improved over the years. For example, things such as warehousing as well as delivery (transportation) can be outsourced.
s far as the distribution industry in India is concerned, there are many players â€“ national, regional, big, and, small. I can say that everyone is succeeding, in spite of the challenges. Technology, like earlier, is not a challenge in the distribution industry. Most distributors adopt key technologies easily. Indian distribution industry
SURESH PANSARI MD, RASHI PERIPHERALS
DIGIT CHANNEL CONNECT
is immune to technologies. Earlier, inventory management was a key challenge that most vendors faced. However, inventories, if planned properly, are easy to maintain and handle. One should forecast inventory management after getting the numbers from the vendor. Though last year, due to the slowdown, inventory was difficult to manage; but that too depended on state to state and region to region. Most vendors supported us in tough times by increasing the credit and thus inventory was regularised to a great extent. Vendors deliver us products through local invoice. Because of issues like VAT, we have to sell the product in the same state. This sometime becomes a challenge for us. Then, there are seasonal challenges that are common to all and have no solution. However, a distributor should invest smartly and should not buy same quantity of products every month. With respect to credit, India is a safe market. There are no big credit blocks. All key distributors, put together, meet regularly and take due care with respect to regularising policies for vendors and partners. Warehousing is also a cause of concern. While businesses grow, we require an additional space to store products; but in spite of all challenges, the industry has being growing constantly and I expect a growth of 15 percent this year.
DUSHYANT MEHTA CEO, MEDIAMAN INFOTECH
lot of things have changed over the years in the distribution business. Technology has made a lot of things a lot simpler for us. Prices of products for all distributors have made our problems much easier. But still, there are quite a lot of issues in the distribution industry. There are different taxation rules for different products. VAT (Value Added Tax) varies for every product and in every state. Also, some state still have feudal mentalities. The entry and exit of a particular distributor is controlled by the local government and thus it becomes a challenge for distributors to operate in such states. But, we are optimistic and hope for a positive development in this area. Issues like Octroi are also not a concern for distributors. Octroi has been abolished in all states in India, except Maharashtra. In IT, most products are imported. We, as distributors in India, import products from outside and a key challenge that we face is with regards
to excise and custom duties, which changes very often. There is no standard format, due to which we suffer as well as our consumers. Inventory management, as a challenge, has evolved. Inventories depend on sale, which in turn depend on region to region, time to time and product to product. For example, May being a holiday season, there is more sale; where in February, people make less purchase, as they expect alteration in the prices of products because of the annual budget in March. In the same way, there are good sales in October due to the various festivals. So, distributors should invest smartly in buying products from the vendors. Credit, the most common challenge for most distributors, is not a big concern for us. We have very strict policies for partners with respect to providing them credit. We work only with selected partners and provide a maximum credit limit of 14 days.
T DEBASISH BISWAS (LEFT) AND ASIF KHAN DIRECTORS TECHNOCRAT INFOTECH
here are many challenges that distributors have to face nowadays. First of all is the challenge of credit control. I think every distributor must follow some set of rules before giving credit, and not do it on their own terms. The practice of open credit is very dangerous. Distributors must find out the partner’s strength for repayment before giving credit. As far as the launch of new products and their marketing is concerned, it is very challenging for both vendors and distributors. There is no doubt that IT in India is growing, but at the same time, the competition is also very tough. So, it requires strategic positioning of products because only marketing won’t help the distributor for a long time. Unless you will find some different way to position your products in the market, it will be very hard to run in the rat race. Inventory management is also an issue that troubles almost every distributor. There has to be a fixed practice for inventory control; otherwise, it will be a big loss for every company. Then, there are warehouse challenges, which continue to this day. As business is growing year on year, we need proper planning for tackling these challenges.
he IT distribution business has evolved from providing mere logistical support like reach, payments and commercials to what is now called as value added distribution. Now, this value addition can be in terms of clear focus both in geography and product range or simply in terms of the vertical that one would like to cater to. Vendors and principals are also quite clear to choose their distributors. But, distribution business is a double edged sword and can cut in both ways. On one hand, it needs to continuously keep the channel partners happy by offering the best possible prices and products, and SUDHIR S on the other hand support the brands that MANAGING DIRECTOR, INSPAN INFOTECH it carries by providing the required reach. In this highly volatile market where prices fluctuate and the products become obsolete in a short span of time, distributors should adapt right strategies to balance both. Another challenge is partner education. A distributor needs to continuously engage the partners by introducing new product ranges while making them see the benefits. The distributor must make that intelligent evaluation of the range of products that he would like to carry both in terms of brand and product segments while ensuring optimum bottom line to partners. Geographical reach is yet another challenge that is faced by distributors. In a vast country like ours, it is very important to have the presence and logistic support that ensures seamless availability with attractive price and delivery time. As for the future of our business, I’m confident that it is bright. Newer products supported by newer technologies would keep us busy in near future. The emergence of C & D category markets would ensure volumes. Having said that, one needs to be cautious in addressing these trends. Effective automation systems, gauging the market pulse and intelligent expansion are the key things that would make the difference in the long run. firstname.lastname@example.org
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SELLING Comfort Going ergonomic might be in vogue, but IT vendors still have to work hard to build a market for these devices KARAN
he customer is considered king and his comfort is most important. Well, that’s what has become the norm even in the IT industry. More and more IT vendors are promoting their products as being ‘ergonomic’ and customers too (mostly the tech-savvy young generation) are specifically asking for these products. Keeping this in mind, many IT vendors have launched a number of ergonomically designed products for the Indian users. But what defines an ergonomic product? Simply put, an ergonomic product is an innovatively designed product that provides users with enhanced comfort and ease while using it. The range of ergo-
nomically designed devices spreads from a mouse pad to a LCD monitor. An ergonomic product is more design-specific, and is not limited to a single product category. As per industry watchers, the need as well as demand for ergonomic products has risen due to the sudden increase in computer-related health issues among users. In the US, every company has an ergonomics programme for its employees. However, in India, due to lack of any formal government policy in this regard, there are no health policies designed for users. The lack of use of ergonomically designed products leads to a number of work-related health risks. The most common and major one is Carpal Tunnel Syndrome, which is an inflammation caused by repetitive movement of the hands and wrists. This inflammation can cause numbness, tingling and pain. Other key health concerns with extreme usage of computers can be headaches, blurred vision, neck pain, fatigue, eye strain, dry, irritated eyes, and difficulty in refocusing the eyes. Though vendors are going strong on launching ergonomically designed products, the market for these devices seem to be suffering from slow adoption and low demand. A key factor leading to low demand is the price factor. “Most ergonomically designed products are priced higher than their counterparts. Hence, after distributors and channel include their share of profit, the price of such products becomes much higher for a consumer, hence leading to a low demand factor,” says Paresh Shah, CEO of Mumbai-based
PARESH SHAH, CEO OF MUMBAI-BASED PH TECKNOW
Need for Ergonomics
DIGIT CHANNEL CONNECT
“Products like these that are priced high because they are ergonomic in nature lose out on the ‘value for money’ proposition.”
PH Tecknow. Another key factor is the lack of consumer awareness. Most users do not understand the phrase ‘ergonomic’. “Ergonomic products for an Indian user, as of today, hold almost no significance, as the awareness on the same is very limited. Hence, most consumers hardly take ergonomics as a factor in consideration before making a purchase,” says Arun Managave, Director, Aditya Peripherals, Kolhapur. Most partners that DCC spoke to complained about the tough time they face while selling these high-priced ergonomic products. Many even expressed concerns that they do not have an option of saying ‘no’ to the manufacturer for selling ergonomically designed high priced products. “As an average Indian consumer still prefers to buy a product that provides required functionality at the lowest possible price, products like these that are priced high because they are ergonomic in nature, lose out on the ‘value for money’ proposition. However, the channel has to work as per the market dynamics,” says Shah.
Future can be bright
“People are now more aware of the health hazards of using IT products, and thus the demand for ergonomic products that offer least health risks, is sure to exceed in the Indian market.” SUBBARAM GOWRA, MANAGING PARTNER, GOWRA BITS & BYTES, SECUNDERABAD
Given the increasing maturity level among Indian users and growing health awareness, the demand for ergonomic products is slowly on the rise. “People are now more aware of the health hazards of using IT products, and thus the demand for ergonomic products that offer least health risks, is sure to exceed in the Indian market,” said Subbaram Gowra, Managing Partner, Gowra Bits & Bytes, Secunderabad. The acceptance of these ergonomic products is one of the key reasons for the channel to stock them up. As more and more organisations and customers become aware that an ergonomic design leads to higher comfort and safety, the demand for these products would certainly rise, leading to reduction in their prices. Vendors too have been trying to make the market for ergonomic products grow by announcing huge product range that is ergonomic. Industry watchers and partners say that as the market evolves, the demand for ergonomic products is expected to arise. For now, the channel partners are stuck in the middle with a mixed demand for such products from the users, while facing a growing supply from the vendors. The need of the hour is widespread awareness in regards to the benefits of ergonomic products. n email@example.com
service oriented architecture Governance
Having the correct processes in place is important to ensure SOA governance REGUNATH BALASUBRAMANIAN
he first thing most people in IT leadership think of at the mention of SOA (ServiceOriented Architecture) governance is the service registry because software vendors have successfully promoted the view of automating SOA governance through their respective products. Effective SOA governance requires more than just a service registry and, in fact, is much more dependent on people and processes than on technology solutions. SOA governance and consequently, the service registry, are merely enablers for SOA adoption. It is therefore logical to consider the drivers for SOA adoption and how they are realised through governance and the service registry. The foremost drivers for SOA are integration and reuse. The latter, when measured, is an indication of success of the initiative. Common challenges to reuse are fulfillment of business functionality, service level guarantees for hosted services, service ownership, incentives for reuse, and available service information. A multi-level and strong governance
framework is needed to address these challenges with the service registry servicing mostly the information needs of the framework. This article identifies the core elements of SOA governance and discusses how and where a registry may be used in the service life-cycle. SOA and IT governance: The strategic nature of many SOA programmes implies the need for strong governance. SOA governance is in fact an extension of IT governance. Enterprise IT principles and governance decisions drive SOA principles and decisions as SOA is but one of the many solution architecture paradigms used to produce an enterpriseâ€™s architecture deliverables. The governance framework is, therefore, mostly an extension of the responsibilities of existing stakeholders with the exception of a dedicated SOA centre of excellence created for large SOA initiatives. Core elements of SOA governance: Almost all SOA governance aspects may be articulated into the three core elements (This categorisation gives a birdâ€™s eye view
Effective SOA governance requires more than just a service registry and is much more dependent on people and processes than on technology solutions. The strategic nature of many SOA programmes implies the need for strong governance. SOA governance is in fact an extension of IT governance. Standards, specifications and guidelines, when defined, provide a good framework for using the service registry in SOA governance and, consequently, realising the benefits of SOA adoption
of decisions to be taken and managed in SOA adoption.): Software vendor literature emphasises technology solution capabilities and seldom address the people and process aspects of governance. This gap has a profound impact in achieving reuse, which, then, negatively effects ROI measurements for SOA adoption. Multi-level SOA governance: SOA governance has multiple implementation levels; each mandating involvement from distinct groups of stakeholders. The various groups defined in governance activities need access to different sets of information on deployed and available services at different points of time. Service specification documents explain the externally visible features of the service to a service consumer and are mostly limited to the interface details (WSDL documents in case of web services). Better and more comprehensive service specification documents may additionally define service level characteristics like reliability, policies, and state. Service specifications focus on describing the service in its static form, but fall short in providing a real-time view of the deployed service being used as a reusable asset in the enterprise. The service registry addresses this shortcoming. The service registry - The service registry has at least two antecedents: first is the document repository and the second a UDDI registry. The term service registry may be a misnomer since the registry is also a repository of service meta-data. A service registry is quite useful in the following stages of the service lifecycle as an information store of service meta-data:
A case for standards Work is underway by consortia like OASIS, IEEE, W3C, IETF and WS-I, to define standards and specifications around SOA. While some may view it as standards overload, there undoubtedly is a case for defining guidelines on service specification and service life-cycle processes. Best practices for using service registries in SOA governance and feature-set specification of a service registry are useful too. Standards, specifications and guidelines when defined, provide a good framework for using the service registry in SOA governance and consequently realising the benefits of SOA adoption.n Regunath Balasubramanian leads the Technical Achiever Program at Mind Tree and is a practicing architect.
DIGIT CHANNEL CONNECT
The Channel Champs programme of Digit Channel Connect continued its march across cities in the Southern region. Here’s what the attendees have to say...
CITIES MANGALORE, COIMBATORE, TRIVANDRAM, TRICHY, MADURAI, VELLORE.
The guests were quite interactive at the event. The support from the 9.9 team was also quite good. JUDY PAUL
Territory manager, Gigabyte.
This event gave us a good oppurtinity to exhibit our products and also provided us a one to one interaction with channel partners.”
The main issue affecting our community is that the member margin is very low. Also, the MRP is low in many products. R.RAJKUMAR
Secretary - Srimathi Computer.
This is the first channel champ event that I have participated in. I haven’t read the DCC magazine, I would like to subscribe to it.
Zonal manager – Business solution (LG).
J.S MD. ASIF
I really liked this informative event and would like to attend it in the future. I would also like to subscribe to the DCC magazine.” K.K.SURESH BABU
Proprietor, Spectro systems.
Vectra Computer Solution.
The event was quite knowledgable and it helped to update us on the latest technology in the market.
We thank the 9.9 team for arranging this event and helping us to meet all our partners in Madurai. We’ve got good feedback from our partners.
Area Manager-BS (LG).
President, MITDA (Mangalore IT Dealers association.
It was a really good event, where technical knowledge was shared among a number of channel partners.” PRADEEP KUMAR
Events like these help us to gain vital knowledge and that is why they should be held at regular intervals. SUNIL . K.
Proprietor, Linus Computers.
We thank the 9.9 Group to provide a stage where partners can communicate with each other. The interaction between the dealers was excellent. The event was a wholesome experience in itself.” ASWANI KUMAR Area manager, LG.
This was my first Channel Champs event. It was really informative and knowledgable.”
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This was indeed a good programme and was conducted quite well. Keep up the good work!”
Proprietor, V. Care Systems.
The arrangements at the event were good and everything was managed properly. The interaction with the dealers was quite interesting.” SUSHEEN BHANDARY
Area sales manager, Gigabyte.
The issues that are affecting our community include low margin and poor support from vendors. GOKUL GOVIND
This is my first outing at the Digit Channel Champs event, which I found to be exceptionally good. I would like to be a part of this endeavour in the future also. BENIN BHASKARAN Falcon Systems
Attending this event proved to be an overall good experience for me, as it was quite informative. I have read the DCC magazine and would like to subscribe to it as well. NAVANEETHAN
Navya Computers & Peripherals
channel champs Vellore
The event was well organised and very informative. But I would like to point out here that the main issues affecting our community are product awareness and services. UTTHAM CHAND
President, Association of computers, Paras computer.
Such events help to shed light on the many problems that the channel partners are facing. I would like this event to be a regular feature. C.DANU MALAYAN
Secretary - Association of computer Trichy - CITYMONS Technologies
This was my first Channel Champs event and it was indeed a good experience. I have read the DCC magazine and would like to subscribe to it as well. S. PRABHU Sam Infotech
I have heard a lot about the Digit Channel Champs event and that is why I decided to participate in it for the first time. I found it to be beyond my expectations and would love to be a part of it in the future also. N.KARTHIKEYAN Best Solution
DIGIT CHANNEL CONNECT
best of biz Leadership
Building a WHAT VICTORY AND FAILURE IN THE HIMALAYAS CAN TEACH LEADERS DAVID LIM
towards Effective COMMUNICATION
he obvious is not always obvious if you see the world through your own filters and biases. Let me give you an example from the ice climes of Ladakh, which is on the top left-hand side of India. Some of the highest peaks in the Indian side of the Himalayas are located there, and it’s popular with mountaineers. In 1995, I led a large team of Singaporean mountaineers to climb Kun, a 7000-metre peak which is part of the twins, Nun-Kun. This was the largest team I had ever led in the mountains, and was the first of the many smaller and larger peaks on our programme to train for an eventual expedition to Mount Everest—the 1st
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Singapore Mt Everest expedition in 1998. I set off with much enthusiasm and planned the climb down to the smallest detail, thinking that a group motivated to climb and to train for Everest would find ways to make the whole trip a success. However, what seemed obvious to me was not necessarily obvious to the team which comprised a mix of individuals. There were overlapping cliques, stronger and weaker links of friendship and collegiality. Things started to go pear-shaped when we encountered bad weather near the Kun. The horsemen transporting our heavy equipment went on strike and we had to settle with attempting the sister peak Nun. Nine months of planning was substituted with a rough sketch on a piece of paper. We agreed that owing to the tougher conditions, not all the team members would be given a crack at the summit. We then supported a smaller group of what we considered stronger climbers of our team to help them reach the top. Straightaway, cracks began to form in the team. Some climbers carried half loads, selfishly saving their strength, and some failed to support a secondary climbing objective I had selected. I forged ahead thinking the rest would follow, but they did not, making up some excuse after another. So, the following day, I solo-climbed a small peak which was challenging. Climbing the peak was so absorbing and I failed to realise the risk I was taking. The Nun summit team spotted me on their long trudge back, having been beaten by dangerous conditions, stunned that some “idiot” they could see at a distance was pulling off a solo climb. We failed in that expedition and returned to a thorough debrief. We returned to Leh rather demoralised. With just four days left, we identified Stok Kangri, a shapely 6000-metre-high peak that could be climbed in lightweight fashion, from Leh, but only if we all performed like the team we thought we were. In that climb, members who had previously been selfish began to do things such as fetching water from the river for the
best of biz Leadership rest of the team members. It was amazing how the team transformed, realising that this opportunity would be our final chance of climbing anything on the trip. Four of us reached the top on that expedition within an expedition, and we returned to Singapore with this modest success. Three years later, one of our Nun-Kun team members climbed Mount Everest in a landmark 1998 expedition. So what can you learn from this experience in guiding teams to effective communication?
1. Identify areas of common interest and ensure that everyone agrees on working towards the same goal and sharing the burden. I failed as a leader. I was not specific enough about how we were supposed to climb the peak. On Kun, more problems were created when some were happy to let others take up the slack they left behind, and weren’t put straight until afterwards. Address bad behav-
iour as quickly as possible. 2. As a leader, have clarity of purpose and communicate this to the team. On Kun, I had let my “mountaineer” mode kick in, and failed to discuss in detail with my team as to my intentions to climb solo, or engage them sufficiently to follow me that fateful day. 3. Manage expectations by outlining what you expect of each team members and invite the same. Many members of the team had not climbed with each other and had dif ferent expectations. Some had only climbed in the relative “pampered” comfort of expeditions supported by several climbing Sherpas or local Nepalese guides. 4. Focus on specific observable behaviours. Do not focus on promises, intentions and cheap talk.While fixing dysfunctionalities, focus on behaviours, not personalities. When we
Invite ideas and views by using openended questions. Ask close-ended questions that elicit “yes/ no” answers when clarifying or winning support and making a decision.
debriefed the failed Nun-Kun attempt, we made efforts to focus on good work, as well as poor behaviour. 5. Invite ideas and views by using open-ended questions. Ask close-ended questions that elicit “yes/no” answers when clarifying or winning support and making a decision. 6. A l l ow p e o p l e t o ag r e e t o disagree so long as it does not paralyse action or endanger the team goals. Ultimately, your role as a leader is not to have all the answers all the time, but to effectively engage, frequently ask your team for ideas and inputs. After absorbing all these, you are better placed to reach a decision, based on the style best suited for the team in question, and move towards action. n David Lim, founder, Everest Motivation Team, is a leadership and negotiation coach, best-selling author and two-time Mt Everest expedition leader.
ACCOUNTING in the time of IFRS A look at how the transition to the new standard could affect your financials with regard to employee benefits—and what is to be done ULLEKH NP
nside India Inc, there is a mix of excitement and trepidation about that change that is less than a year away: convergence with International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board. While this transition is expected to help domestic companies raise cheaper capital overseas, besides making foreign listings and setting up units and joint ventures abroad less cumbersome, many are curious to know about its impact on their balance sheets and financial statements, especially with regard to employee benefits—they are worried too, because many of them are unclear about what is to be done to minimise losses. A recent briefing session organised by the CFO Institute, in association with Mercer India, delved into the issue, especially the difference between the current
standard, AS 15, whose objective is to prescribe accounting and disclosure for employee benefits, and its IFRS version, IAS19. In an invigorating talk, Ben Facer, Regional Consulting Leader, Mercer, spoke at length on the
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best of biz Accounting
history and scope of retirement plan accounting, financial statement volatility, current benefits and future choices in employee benefit accounting. He started off by explaining various standards of employee benefit accounting from the 1980s to today, such as FAS 35, FAS 87, FAS 88, FAS 132, FASB 158 and the single framework, IAS19. Then he went on to talk about the scope of AS15 and IAS19 as regards retirement benefits, long-term disability plans, long-term compensated absences, long-term service awards and so on. AS15, which was issued as a stepping stone to full IFRS, is similar to IAS19. It had made a significant impact on corporates after it came into effect a few years ago, Facer said. Companies had to calculate the last salary drawn by employees and provide for pension and gratuity liability on that basis. Till then, many companies provided for pension and gratuity liabilities of their employees on the basis of their existing salaries, while the actual payment was made on the basis of the last drawn salaries of employees. In fact, AS15 requires an enterprise to recognise a liability when an employee provides service in exchange for employee benefits to be paid in the future, and an expense when the enterprise consumes the economic benefit arising from service provided by an employee in exchange for employee benefits. The key differences between
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AS15 and IAS19 are in discount rates, recognition of actuarial gains and losses and so on.
Advantages In the case of IAS19, detailed actuarial valuation to determine the present value of defined benefit obligation and the fair value of plan assets is performed with sufficient regularity so that the amounts recognised in the financial statements do not differ materially from the amounts that would have been determined at the end of the reporting period. IAS 19 does not mandate annual actuarial valuation, the Mercer executive said. AS15 is similar to IFRS except that detailed actuarial valuation to determine present value of the benefit obligation is carried out once every three years and fair value of plan assets are determined at each balance sheet date. In the case of IAS19, Facer explained, market yields at the end of the reporting period on high quality corporate bonds are used as discount rates. In countries where there are no deep markets for such bonds, market yields on government bonds are usedâ€”as in the case of AS15. Facer noted that actuarial gains and losses arise from two broad sources: changes in assumptions used from year to year and the experience of the plan, relative to the assumptions chosen. He brought attention to the fact that while in AS15, all actuarial gains and
Actuarial gains and losses arise from two broad sources: changes in assumption used from year to year and the experience of the plan relative to the assumptions chosen. Firms must work carefully on the assumptionsetting process in order to avoid unnecessary volatility resulting from poorly chosen assumptions, says Mercerâ€™s Ben Facer.
losses must be immediately recognised in the profit and loss account. IAS19 allows three methods of recognition â€” deferment in recognition of changes post employment benefits, immediate recognition in the P&L account and immediate recognition in the statement of comprehensive income. He also looked at some specific causes of actuarial losses: n Unexpectedly high or low rates of employee turnover, early retirement or mortality, or of increases in salaries, benefits (if the terms of a plan provide for inflationary benefit increases) or medical costs. n The effect of changes in estimates of future employee turnover, early retirement or mortality or of increases in salaries. n The effect of changes in the discount rate, or the differences between the actual return on plan assets and the expected return on plan assets. Facer added that companies must work carefully on the assumption-setting process in order to avoid unnecessary volatility resulting from poorly chosen assumptions. His advice: if volatility of balance sheet liability is a concern, consider asset-liability (duration) matching. For sure, the discussion Facer initiated at the meet made one thing very clear: that the transition to IFRS by next year could be either smooth or tough, depending on how hard companies work at it. n
Wireless on the Rise G
Going wireless is the latest fad these days, with business wireless e-mail accounts increasing in number
artner has predicted that worldwide wireless e-mail users will reach 1 billion by year-end 2014. Worldwide business wireless e-mail accounts were estimated at more than 80 million in early 2010, including large, midsize and small organisations, as well as individual professionals — corresponding to about 60 million active users. “Productivity gains with wireless e-mail are driving adoption beyond exec-
utives,” said Monica Basso, Research Vice President at Gartner. “In 2010, enterprise wireless e-mail is still a priority for organisations, whose mobile workforces are up to 40 percent of the total employee base. Most midsize and large organisations in North America and Europe have deployed enterprise wireless e-mail already, but on average, for less than 5 percent of the workforce,” she added. Wireless e-mail makes an individual’s e-mail account accessible and usable
On the REBOUND A new research by International Data Corporation (IDC) has said that despite a crushing global economic recession in 2009, the worldwide enterprise-class Wireless LAN (WLAN) market suffered relatively small market declines and is now poised for a strong rebound in 2010. According to IDC, the WLAN market will gain momentum throughout the year, growing 23% from $1.7 billion in 2009 to a robust $2.1 billion in 2010.
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The WLAN market is all set to spring back into action after last year’s recessionary period
Enterprises continue to embrace wireless to increase efficiency and user productivity. “Unlike other markets that were ravaged by the recession, economic uncertainty and the structural causes of the downturn did not change the fundamental drivers for the growth of wireless in the enterprise,” said Rohit Mehra, Director, Enterprise Communications Infrastructure. “New applications, new devices, and new verticals are all contributing to the organic growth of wi-fi across
Worldwide wireless email users will reach 1 billion by year-end 2014.
Wireless email makes an individual’s e-mail account accessible and usable via mobile networks on mobile devices
The WLAN market will gain momentum throughout the year, growing 23% from $1.7 billion in 2009 to a robust $2.1 billion in 2010. WLAN connectivity is shifting from “nice-to-have” to “essentialto-have” within the enterprise.
via mobile networks on mobile devices, within a local client application or through a web browser, through a software gateway connected to the e-mail server. As wireless e-mail begins to integrate with social networking and collaboration, social networking is increasingly complementing e-mail for interpersonal business communications. Gartner predicts that by 2014, social networking services will replace e-mail as the primary vehicle for interpersonal communications for 20 percent of business users. “People increasingly want to use mobile devices for collaboration to share content, information, and experiences with their communities,” Basso said. “Through 2012, wireless e-mail products and services will be interchangeable. Wireless e-mail will be highly commoditized and on any device. This commoditization will, in turn, drive standardization and price reductions on service bundles from mobile carriers,” said Basso.n all regions,” he added. The proliferation of wireless devices on the network increases both the importance and pervasiveness of the enterprise wireless network. “More and more customers are demanding resilient, intelligent, scalable, and adaptive wireless network infrastructures. They are gearing up for widespread deployments across the board -- not just in the carpeted areas of enterprise and in the education market segment, but in widespread applications across major verticals,” Mehra said. Recovery from short-term softness in retail, manufacturing, and services verticals, combined with the continued strength in education, healthcare, and government, will help drive WLAN growth in 2010. Additional findings from IDC’s research include the following: n WLAN connectivity is shifting from “nice-to-have” to “essential-to-have” within the enterprise. nWLANs will begin to dampen demand for ethernet switch ports in 2010. n The channel for WLANs continues to be increasingly important as the market goes global, especially given the variances in the technical competencies across the regions. n