Shimla channel partners grapple with business challenges

By Sandhya Malhotra - 23 November, 2012

Channel partners in the capital of Himachal Pradesh, Shimla, have been grappling with several external and internal business challenges. Majority of the IT partners are predominantly banking upon home users, but going by the increase in online buying, partners fear to loose their home clientele in the coming times. The impact of online buying is apparent, since this year Diwali sales saw a drop of 50%.

Concerned on the present unfavorable scenario in Shimla, Anil Sharma, general secretary of Shimla IT Dealers Association Society (SIDAS) and owner of Ace Infotech said, "This is high time for Shimla IT partners to work in isolation. Our association will be working towards taking up important issues which are posing threats to the growth our business. We have to come out with solutions to safeguard our business for the long run. We have started getting heat from online buying. Looking at the trend, our association will create an online portal where we can gear up for this threat."

Another big threat that the Shimla partners have been facing for the past many years is the burden of freight charges; each partner has to pay Rs 300 per box on freight, which means 1-2% of their revenue is spent on buying the material, which as a result, is making the goods expensive as compared to the neighboring cities like Chandigarh.

Jayant, president, SIDAS and Rupin Rekhi of Satellite Computers are annoyed over the freight charges imposed by the national distributors for delivering the materials. According to them, materials worth Rs 1 lakh, including taxes, amount to Rs 75 as the freight charge, and anything above Rs 1 lakh costs the resellers something in the range of Rs 300 as the freight charge. Venting his anger, Jayant said, "We do not understand the logic behind their freight charges. Distributors like Ingram, Savex, Compuage among others charge amounts, which are totally unacceptable. In return, we deliver the goods to our customers for free."

Apart from the external trade issue, the most disturbing factor for the IT partners is the step mother treatment on the hands of the state government. Unlike other hilly states such as J&K, where the government is the biggest buyer of the IT, in Shimla, the government is posing a major roadblock for the development of the local IT partners, as the government departments fulfill their IT needs by HP State Electronics Development Corporation Ltd (HPSEDC). The main objectives and functions of this corporation include promotion of computerization in the state (particularly in the state government departments and its undertakings), development of software packages, procurement and supply of computer hardware, software and other related electronic products, office automation and medical equipments at reasonable rates. This government machinery is a biggest competitor to the entire HP partners.

"Since government being the largest IT buyer, unfortunately we do not have any role to play in the segment as HPSEDC directly procures the material from the IT companies. We expected the new government in HP to look into this matter, which has been discussed at several forums, but there is still no headway," said Sharma.

Moving forward, the association is planning to take up the VAT issue with the upcoming government soon. After the J&K government waived off VAT on IT products, the association is seeking participation from Himachal partners to come forward and form a joint action committee so that they can also do away with VAT in HP.

Besides other teething problems such as lack of a service support center, collection points, logistics and real estate are the daunting challenges for the Shimla IT channel partners.

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