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Fri 12 Mar 2010 04:00 AM

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Year of the VAD

Emerging technologies distributor FVC is celebrating its tenth anniversary this year. Channel Middle East sat down with managing director, KS Parag, to discuss the future of the value added distribution model and hear why the company is listening carefully to what resellers have to say.

Year of the VAD
KS Parag.
Year of the VAD
Guru Prasad.

Emerging technologies distributor FVC is celebrating its tenth anniversary this year. Channel Middle East sat down with managing director, KS Parag, to discuss the future of the value added distribution model and hear why the company is listening carefully to what resellers have to say.

How many vendors are you working with in total today and is there scope to bring more brands on board or are you satisfied with your coverage?

We have about 23 vendor partnerships, but I would say the focus has been more around 10. I believe the portfolio does give us the coverage we want but we do have some areas we would like to expand into, especially on the security side and authentication to ensure that we could give the complete security offering, including a unified threat management. There are areas where we are looking at new vendor partnerships, especially in the identity management space, and we are going to be tying up with a new company in that area.

What is your take on the value added distribution landscape in the Middle East at the moment? Has it evolved in the way you expected?

I believe there has been a strong requirement for companies like FVC to show their value, both to end-users and partners, in bringing greenfield technologies to the market and ensuring they evolve and are successful in their respective regions. I think we have seen this happen, not only with us but also with others who have done it in the same landscape.

Distribution is definitely evolving, but it changes every day because acquisitions narrow down the market in terms of the new technologies. We are seeing more and more new companies acquiring and getting acquired - like TippingPoint (3Com), which is now part of HP.

The vendors you deal with generally provide specialised technology in niche areas, which tends to make them attractive acquisition targets. Do you make provisions for companies changing ownership when you partner with them? Or do you just accept that it is something that might happen?

Earlier we actually accepted it, but as we speak the strategy for 2010 is to look more closely at the business in terms of how resilient it is to takeovers and partnerships. We've been able to offer more services so that we are more resilient to it.

Is it part of your strategy to work with vendors on an exclusive basis?

We have typically always tried to work on a sole distribution strategy. The value add generally comes both for the vendor and the VAR when they synchronise fully within themselves. I don't believe it is a question of exclusivity, but a question of how much trust and faith both of the organisations have in each other's ability. As long as those abilities are matched - whether it is done by one partner or more - can only be determined by the market, but as long as one distributor can cover it I strongly believe it is fruitful for the vendor and the VAD.

The volume of business is not as quantified as the PC or components business, where the volume justifies the margin. Here the volume is not as high so the margins have to justify the business.

Is there any possibility that you would attempt to work with some of the more mainstream networking and security vendors in the future, rather than the emerging technology vendors you're typically associated with?

The strategy is still focused on the cutting-edge technology vendors; I don't see us doing mainstream, but you'll definitely see us evolving more into services. We will be more involved in things like professional services and consultancy in terms of post-sales. I could see us offering more in the way of product scope and services so that we are not only offering a higher level of service to our customers, but also to our partners. So these would be services that resellers sub-contract from you?

Yes, or we would basically be the level two or level three escalation for the vendors in the region. We are looking at being the level two, minimum, for escalation of everything. We are working towards ensuring that we even have a hotline in most of the regions and we should be kick-starting something like that in the UAE.

What else is on the agenda for FVC in 2010?

We are optimistic in terms of market growth. I think for most of us 2009 saw flat growth, if not marginal growth, so most companies, including vendors, will be looking for a solid performance this year. What we would like to do is look at being a more solid and unified team to ensure that we take a bigger chunk of the leading-edge technologies business in the region. We will be focusing on ensuring we can offer a complete portfolio of security services and solutions and also explore potential partnerships in areas such as virtualisation.

How do you view the competitive landscape these days?

The market has been competitive, but I think our unique value proposition to any vendor or partner has been our ability to be present across the Gulf at a local level. There is practically nobody who can say that they are in the same number of locations that FVC is present. We believe we have to act locally, work locally and think globally. It is very important that we work at a local level to drive the different technologies in their respective areas. Having 10 office locations is something that any vendor partnering with FVC has been happy about.

That must be an expensive business model to run...

It is a very expensive business model - very expensive!

Some IT companies, especially in distribution, have closed offices in the past year to cut costs amid the downturn. Do you find yourselves under similar pressure?

We are always being challenged, but as a company we have always looked at a long-term strategy rather than a short-term strategy. We have actually got a business plan for the next three years, so if today a region has not been performing or not been scaling up to the same level as the overall company's performance then obviously we do our best in terms of taking the required measures to ensure we improve it and enhance it. But I believe closing operations is not currently in the best of our interests.

Are VARs' expectations of you as a VAD changing?

Their needs are definitely changing. For instance, earlier we would do training for most of our vendors centrally in Dubai, but more partners are requesting training locally, whether it is in Saudi Arabia, Egypt or Lebanon. The second thing is the demand for ensuring that we have more logistics on the ground, including support and spares. We have done that as much as possible and we are actually working towards making sure our support spares are available in most of the other locations, not just centrally in Dubai.

Thirdly, we see that partners want to do more marketing events together locally. From 2008 to 2009, I believe the number of marketing exercises almost doubled. And last but not the least, there is a demand for having more core expertise in the required domain locally present.


Playing the consultant

FVC has created a new unit dedicated to channel development activities and strategic alliances, which is being led by Guru Prasad, the former head of its networking business.

FVC boss, KS Parag, says the move reflects the increasingly important role of channel development and empowerment in the value added distribution business today.

"This unit is the key driver to make sure that we develop a high-powered partner network, which is certified, trained and qualified - not only to sell the different technologies but to actually take care of the first-line support and provide the consultative role that is required," he explained. "Whenever you promote a leading-edge technology you need this consultative approach of actually positioning a product. We are very keen in terms of channel development and see it as one of the main areas we would like to improve upon in 2010," revealed Parag.

Although FVC has been providing channel development services up to now, the establishment of a dedicated division is designed to make the function more formal. The unit will address both vendor and reseller relationships, said Parag.

"It will map the vendor's channel strategy and make sure that is executed through FVC. Given the requirement to grow it is very important that we have the right partnerships at a channel level to drive it," he added.

The channel development team will initially contain three members. Meanwhile, the networking unit that Prasad was previously in charge of has been combined with FVC's UC business under the management of Prakash Krishnamurthy.

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