COVER STORY
Harshavardhan Kathaley Director, Partner Sales, India & Saarc, Juniper limits. Most of the time, we are able to negotiate a deal with payment terms in tandem with credit period offered by distributors and vendors,” says Ajit Mital, Managing Director, Acme Digitek. Harshavardhan Kathaley, Director, Partner Sales, India & Saarc, Juniper, recommends negotiating better payment terms with the customers. “Try to get 80 percent of the payment on delivery of the product itself rather than linking entire deal payment to installation and implementation. This way partners can maintain a good flow of money.” In the majority of the cases partners rely on credit period from distributors and vendors, which is normally in the range of 30 days to 45 days. In few cases, the credit period is extended to up to 90 days based on the merits of the transaction and credibility of partner and the customer. “Relationship and payment credibility with the distributors pays well in 27 10
APRIL 2018
Partners must negotiate 80 percent of the payment on delivery of the product itself rather than linking entire deal payment to installation and implementation. This way partners can maintain a good flow of money. this case. In fact, this is the best way to save our margins. We opt for external funding in cases where credit period and payment terms don’t match and margins are handsome enough to accommodate additional burden from interest rates on loan,” informs Mehta of Future Businesstech.
Rohit Midha Director, Commercial Named Accounts, Lenovo India
Cost of finance The cost of finance and the complications associated with it have discouraged a number of partners from expanding. “There are very few risk-takers in our industry,” comments Gupta of Cache. “Many are wary of taking loans, and want to work within the limits of the credit extended by suppliers.” Others point out some unpleasant realities. “The margins in the business should correlate with the cost of finance. I believe that for healthy growth the average margins should be a few times of the cost of finance. Regrettably, that’s not the case in most systems integration transactions and projects. This is the reason most of us are dependent on vendor and distribution credit,” remarks Mital of Acme. Many in the industry point out that there is a significant difference in the cost of finance depending on the players – it skews unfavorably for the smaller channel partners. “While most established players enjoy bank interest rates which vary from 8-16
In the past, channels have been wary of exploring funding options. Today that is not the case. It is time IT channels start learning from the automobile and consumer durable industries which thrive on smart financing options.
percent, smaller players are offered loans at 18-36 percent. Since the margins are not so great the equations are unfavorable for smaller partners,” explains Gupta of Cache. Others insist that it is a matter of educating channel partners about smarter options. In fact, Rohit Midha, Director, Commercial Named Accounts, Lenovo India, is a big advocate of learning from other industries. He says it is time IT channels start learning from the automobile and consumer durable industries which thrive on smart financing options. “In the past channels have been wary of exploring funding options because they never had to. Today that is not the case. I believe every vendor has been asking channels to consider all financing options to fund their business as well as their customers’ businesses.”
Vendor finance Almost all major vendors including HP, IBM, Cisco, Dell EMC have their financing arms operating in the country. These arms are keen to work with channels to fund quality customer business. This is where industry pundits have been telling IT channels to follow automobile industry. Though a majority of auto customers are consumers, almost the whole automobile industry sells its products with finance options. While almost all vendors have been operating for a long time with their financing arms, a sense of aggression has crept in only a few years back. While earlier these companies were strict about funding only those orders where 70 percent of the bill of materials were their own brands, in many deals the vendors have relaxed the norms. “In some cases, we have seen vendors like Cisco funding customers where Cisco component has been as low as