Things haven’t exactly toed their usual line for yours truly, as far as channel partners are concerned, for the last fortnight or so. My mailbox has been bombarded with complaints, accompanied by a few odd telephone calls, from resellers about a news item we reported on ChannelTimes that IBM’s consulting partners while deciding on the issue of pricing.
(Refer to News Item: IBM Taking Partners into Confidence for Pricing)
The refrain from channels is that the real picture’s quite the contrary — not with IBM alone, but with the vendor community, in general. I pity my good friend Tapan Mehta, country channel manager (Software Group) of IBM India for having made the statement, which we had to dutifully report.
But I have no hesitation in stating that partners have reason to complain as vendors are selling their products at a price rate, which is allegedly higher by almost 20 to 25% vis-a-vis the international market – say in Dubai, Singapore or Bangkok. They refer to this as price disparity by monopolistic companies.
India’s a price sensitive market where — partners, distributors and vendors agree, that deciding the price of a product is a crucial decision. No wonder, whenever IT channel journalists encounter top executives of vendors, we throw in this repeated query only to be told, and retold, that today’s customers are increasingly becoming knowledgeable about different IT products including software and their prices.
But vendors maintain a characteristic coolness, often stating openly or indirectly, that the price disparity is fully justified as long as it’s a part of “marketing strategy”. This only puts partners in a fix and more often than not, I can bet my shirt that the channel partners are at the receiving end of questions raised by customers regarding this parity.
But the reality is that a few vendors who have monopoly in the products they offer in India are making the most of their upper hand – owing to the brand standing in the market.
To combat this, partners have tried experimenting different methodologies at times, but most often those have ended as exercises in futility. The issue of ‘parallel trade’ — importing products from idyll destinations like Dubai or Bangkok — is one aspect. However, this also turned out to be a bone of contention with Samsung knocking the doors of the court against ‘parallel importers’.
Now, I don’t want to be seen as taking sides. And therefore, making an objective view I find three compartmentalized situations those factor either jointly or individually contribute to price disparity.
Scenario one’s where vendors alone ought to be blamed. Any normal run-of-the-mill partner would only vouch for that. In the second scenario, some partners blame distributors for the discrepancy – and there’s real merit in it too, as there’s no smoke without fire. And there’s a third scenario — wherein, a cross section of market players generally believe that the high taxes levied on software goods, shipping and delivery costs among other reasons are to be blamed for this.
But amidst the debate on all these, what’s vitally important is that partners are losing out on business substantially. I know of partners in Bangalore who have lost orders when one or more customers have decided to source the product from US directly.
In fact, pricing for software, especially in relation to market share can only become an issue when the products in the market turn ‘commoditized’.
So, the only way to differentiate is via pricing! This is something that IBM’s Tapan Mehta also agrees as he refers to pricing as “a pure game of value addition or the lack of it”.
But the smart vendors have developed their own effective mechanism to handle the issue. The software giant Microsoft and a few other vendors, for instance, generally keep 1 or 2 percent variation in prices as they always try to keep customers in mind.
Actually, partners say, these vendors have a proper set up that can keep a check on the pricing issue. To wrap up, one thing that partners want is of course a utopian and idealistic wish list — a uniform pricing strategy.
But the scene today is that the channel is dependent on the vendors to set the prices. But with the Indian market growing, on the software front as well, price parity will be more in demand and the vendors will have to do some rethinking.