All about automation

Online tools are here to stay and it’s now up to resellers to embrace them if they want to grow profitably. Yes, traditional trading methods remain as powerful as ever and conventional ways of doing business — face-to-face and on the telephone — are a tried and tested approach. But there is a real possibility that we are going to see this change with some force in 2007.

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By  Andrew Seymour Published  December 13, 2006

Online tools are here to stay and it’s now up to resellers to embrace them if they want to grow profitably. Yes, traditional trading methods remain as powerful as ever and conventional ways of doing business — face-to-face and on the telephone — are a tried and tested approach. But there is a real possibility that we are going to see this change with some force in 2007.

Middle East IT products distributor Aptec last week launched two new online tools designed to make it easier for resellers to interact with the company and reduce the time of certain tasks that often take longer than they should to complete.

Its online Return Merchandise Authorisation (RMA) system now makes it possible for resellers to verify the status of their RMA request, simply by logging into a fully automated system available any time of day. Gone is the hassle of chasing numerous members of the sales or logistics staff who may not necessarily have the latest information at hand anyway.

The same applies with Aptec’s newly available online financing tool, which cuts out the need for endless faxes to the credit department by offering partners immediate access to their updated statement of account and transactional history.

Other distributors in the market, such as Asbis and Tech Data, already offer comprehensive web-driven services to Middle East resellers although Aptec’s recent launches are particularly noteworthy because it first tested the water with online tools seven years ago. It rolled out a system for local corporate resellers to view and order stock, but the concept never truly caught on.

The launch of an RMA and statement of account service — along with its existing software licensing purchasing system — is regarded by the company as a precursor to its next attempt at going live with an online ordering system some time next year.

So why should we believe online tools will be better received by the reseller channel in this era than they were seven years ago? Well, a lot has changed in that time, not least the mainstream usage of the internet and a more rounded understanding of the value that it can bring to a business if used correctly.

The mentality of “if I speak to a salesperson I can always get a better deal” used to ring true, but that view has now diminished, even if only slightly. What’s more, the old adage that you should not believe what you see on the web is also starting to alter. The net is widely becoming seen as the one source you can rely on to find products at the most competitive price.

These changes in attitude, combined with growing constraints in terms of time, cost and competition, make it foolish for anybody to argue against online tools having a part to play in shaping the development of the Middle East reseller channel going forward.

However, the fundamental difference I see between this market and others is that any distributor committed to building a set of online services must ensure that it strikes a suitable balance with the human interaction that still forms the very basis of this vibrant market.

There can be no denying that the automation of certain processes has been exploited by many distributors around the globe as a way of slashing labour costs. But I’m not convinced that such a trick would pay off in this region. Putting more processes online is fair enough, but it is equally important that the staff that previously performed those functions are afforded the opportunity to manage their time more effectively. At the end of the day, resellers still want account managers and a point of contact. Anybody who misjudges the role that human interaction plays in this market is taking a significant risk.

As many areas of the market slowly graduate from a purely transactional to a solutions-based environment, I believe we will see more companies in the distribution sector enhance their online offerings. But that balancing act with the traditional methods of doing business in the channel must always be kept in mind.

eSys and the US$100m mystery

The fourth calendar quarter is one that components distributor eSys is unlikely to forget for a while. In a turbulent three-month spell, the company has dramatically separated from major vendor partner Seagate, protested at several allegations made against it in the vendor’s SEC subsequent filing, and then displayed a show of solidarity with Samsung by extending an existing hard drive agreement to cover multiple territories.

Now comes the news that eSys has just received a US$100m “strategic investment” from Teledata Informatics, an India-based enterprise software and solutions provider that specialises in marine software among other things. Very interesting.

After its spat with Seagate, many competitors in the distribution sector were quick to privately question how eSys would recover from such a blow. Tongues will now be wagging that the investment from Teledata is designed to steady a ship that has been sailing through choppy waters, although eSys has always maintained that it is far too large and vendor-diverse for its fortunes to hinge on one manufacturer.

That said, there is no getting away from the fact that it purchased more than US$460m worth of Seagate drives in the vendor’s last financial year. Now, let’s assume that eSys made a very modest 2% margin on the drives it bought from Seagate. Based on that equation, eSys would have been making US$470m in revenues off the back of distributing Seagate drives. eSys claims to make sales of US$2 billion a year which would have meant, hypothetically, that Seagate accounted for roughly 23% of its revenue. That’s a big hit for anyone to take.

At the time of writing, precise details on the nature of Teledata’s investment are scarce to say the least, although sources at eSys insist more information will be made available in the coming days. In a statement announcing the investment, eSys chariman Vikas Goel kept his cards close to his chest by saying that the capital is to be used to “continue our growth”.

Teledata’s communications have been restrained too, aside from a rather opaque announcement to the Bombay Stock Exchange that simply read: “Teledata Informatics Ltd has signed a MOU with eSys Technologies Pte Ltd Singapore towards subscribing to the share capital of the company.”

Until we get more details it is difficult to comprehend why a software and services company – with a raft of assets that include ocean vessels and wind power plants — would wish to plough such a huge investment into a wholesaler of PC components. The appointment of Mr Goel to a seat on the Teledata board of directors is also intriguing especially as the company has still not disclosed how much of a stake in eSys it has received for its US$100m investment.

We are waiting with much interest, to say the least, to see what the current chapter of the eSys story brings during the course of the next week.

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