BYJU PIL­LAI Pres­i­dent & CEO In­flow Tech­nolo­gies

Byju Pil­lai, Pres­i­dent & CEO, In­flow Tech­nolo­gies, spoke to Ram­das S about the com­pany’s plans af­ter it bought back the eq­uity stake of the West­con Group. He also dis­cussed the fu­ture of value-added dis­tri­bu­tion

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You re­cently bought back the eq­uity in­vest­ment of the West­con Group. While other dis­trib­u­tors are known to be try­ing to sell their stakes, you are in­vest­ing back in your busi­ness.

In 2008 West­con in­vested 50 per­cent in In­flow with a plan to buy us out com­pletely over a pe­riod of seven years. Over the last few years they in­creased their share to 54 per­cent. This in­vest­ment made us stronger and paved the way for bring­ing West­con and Com­stor into the coun­try.

How­ever, in the past few quar­ters, Datatec, which owns the West­con Group, has seen some loss in mar­ket share in Europe and North Amer­ica where they gen­er­ate ma­jor rev­enue. This has forced them to re­think their plans for many emerg­ing mar­kets, in­clud­ing In­dia. We, the main stake­hold­ers, di­rec­tors and se­nior em­ploy­ees of In­flow who owned the re­main­ing 46 per­cent felt that it was a great idea to buy back the shares, and we feel we got a fair deal. We are to­tally com­mit­ted to the In­dian and South Asian mar­ket, and have larger plans. West­con In­dia is to­day a di­vi­sion called In­flow So­lu­tions, and the Com­stor busi­ness has moved in with Cisco sign­ing In­flow as a dis­trib­u­tor.

Many other dis­trib­u­tors are known to be ne­go­ti­at­ing for buy-outs. What do you think is a fair val­u­a­tion for an In­dian dis­trib­u­tor?

It will de­pend on many pa­ram­e­ters such as the as­sets owned, the ven­dor re­la­tion­ships, and the growth po­ten­tial of the businesses they are in. I be­lieve a ball-park fig­ure would be 25-30 per­cent of the an­nual turnover for a val­ueadded dis­trib­u­tor (VAD) and maybe 15-20 per­cent for a tra­di­tional dis­trib­u­tor. Other pa­ram­e­ters such as the real num­bers in the bal­ance sheet, bad debts and the qual­ity of the team would also im­pact the val­u­a­tion.

With so many dis­rup­tive tech­nolo­gies the role of a dis­trib­u­tor is of­ten ques­tioned.

I think dis­trib­u­tors are an in­te­gral part of the sup­ply chain and are ir­re­place­able for al­most all IT ven­dors. While some of the busi­ness mod­els such as e-com­merce and cloud com­put­ing are re­defin­ing the way things op­er­ate in the IT in­dus­try, we don’t see them re­duc­ing our value or im­pact­ing us in any way.

Cloud com­put­ing is not re­ally chang­ing any­thing for ei­ther the sys­tems in­te­gra­tor (SI) or dis­trib­u­tor. Pub­lic cloud com­put­ing is still a few years away from mass adop­tion in In­dia be­cause the cost and ben­e­fit of pub­lic clouds does not fit in with our cost equa­tions since we have abun­dant man­power re­sources at rea­son­able cost. If at all I be­lieve cloud will strengthen the role of a dis­trib­u­tor.

Many say that the model fol­lowed by VADs of be­ing project-fo­cused is not scal­able.

To­day, 95 per­cent of our busi­ness is driven through projects where al­most 70 per­cent comes through ven­dor and part­ner ref­er­ences. We can scale these num­bers be­cause we have built strong prac­tices and pro­cesses.

The big­gest chal­lenge is choos­ing the right projects. Many projects, es­pe­cially in the govern­ment sec­tor, have landed in pay­ment de­lays for var­i­ous rea­sons. We are learn­ing on a daily ba­sis and are im­prov­ing our pro­cesses, due dili­gence cri­te­ria and ser­vices ca­pa­bil­i­ties to ad­dress more prospects with less risks.

Is chan­nel hy­giene a big worry this year?

It’s def­i­nitely the big­gest worry for all dis­trib­u­tors. Over past few years some SIs have hit rough patches and some have even ex­ited the mar­ket cre­at­ing bad debts.

Over the past few months we have cre­ated an al­liance among dis­trib­u­tors called Dis­trib­u­tor Fo­rum which shares in­for­ma­tion, and dis­trib­u­tors are work­ing col­lec­tively to en­sure we are all pro­tected from such risks.

Many SIs who have burned their fin­gers by choos­ing the wrong deals have be­come smarter. We feel that in the next cou­ple of years things will im­prove.

What are your fu­ture plans?

We are adding new prac­tices and re­fo­cus­ing on growth ar­eas within our ex­ist­ing businesses. For ex­am­ple, Web ap­pli­ca­tion fire­walls is a niche mar­ket within se­cu­rity which will grow ex­po­nen­tially; there ex­ists sim­i­lar op­por­tu­ni­ties across stor­age man­age­ment, net­work­ing, cloud, soft­ware and other ar­eas.

We are launch­ing a phys­i­cal se­cu­rity and sur­veil­lance prac­tice and are adding ven­dors. We are open to in­or­ganic growth ideas, in­clud­ing ac­quir­ing smaller VADs. We are also open to strate­gic in­vest­ments. We may launch a sep­a­rate ini­tia­tive to sell ser­vices through chan­nels.

“We are adding new prac­tices, and are open to in­or­ganic growth ideas, strate­gic in­vest­ments, and may launch a sep­a­rate ini­tia­tive to sell ser­vices through chan­nels”

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