Spotlight

Wearing many hats

SES Technologies has boosted its competitive advantage by utilising its strengths in manufacturing and services, says Sushma Naik

We want to emerge as a single-stop IT solutions company by leveraging our unique combination of three components—distribution, service support and manufacturing P K Krishnaprasad CEO SES Technologies

The wafer-thin margins in hardware distribution make moving up the value chain a crucial element in the success or failure of any distributor. SES Technologies, one of the largest players in the IT distribution space, has evolved from dabbling in volume products such as PCs to value-added products such as networking equipment and storage devices.

SES is one of India’s top five distributors with a turnover of Rs 274 crore for fiscal 2003-04. The company has 28 offices with a manufacturing plant in Pondicherry and a network of more than 6,000 channel partners.

From humble beginnings

SES’ journey on the IT distribution route began with two branches—one in Bangalore and the other in Mumbai. The company started as a distributor for Intel, then branched out into related segments such as PCs. “We were initially perceived in the market as Intel-dominant distributors. However, over a period, we have widened the portfolio of our product and service offerings,” says P K Krishnaprasad, CEO of SES. From distributing Intel products, SES has spread its portfolio to include optical media, monitors, hard disks, printers, networking products and storage devices.

The list of alliances has also grown with names such as Lexmark, LG, Intransa, Intel, Allied Telesyn, HP, Kobian, Seagate, IBM, Acer, Enterasys and Maxtor.

SES also realised that it could use its distribution strengths to enter new lines of business such as storage and networking. This led to the creation of a value division. Today, the organisation has two clear product categories—volume and value. The former comprise categories such as peripheral devices and multimedia products, while the value division includes categories such as networking and storage products. While the volume division helps in building turnover, the value division helps in improving the bottomline of the company. Currently, the volume product category provides 80 percent of the revenues, while the rest is contributed by value products.

Training its channel partners is critical, which is why SES invests a significant portion of its turnover towards training sales staff, helping them brush up their communication and presentation skills, and keeping them up to date with technology. SES also conducts surveys regularly among its customers to understand their current systems and expansion plans in order to gauge and assist their IT purchases and decisions.

The company has tried to fuel growth by focussing more on B&C-class cities. “Creating and identifying a market space beyond the main cities is strategic for both vendors and distributors such as us,” says Krishnaprasad.

Manufacturing muscle

SES’ plant in Pondicherry manufactures finished desktop PCs and notebooks for branded PC players such as LG and HCL. As the Pondicherry unit is registered with SSI, SES is in a position to give branded PC players the benefit of sales tax exemption. It has also launched its own PC brand, Javelin, which is targeted at users in B&C-class cities.

The company has a fully-owned subsidiary called Ultima Solutions which acts as its services arm. This division was started based on the experience SES had

with different customers. The company had learned that most customers preferred to interact with a third-party player for servicing their products. Having a services division helps in building domain expertise which translates into higher margins. Ultima has a presence in 18 locations across the country and is headquartered at Mumbai. The company provides Return Material Acceptance and repair activity of IT products, besides providing onsite and logistic support for its OEM partners and product players.

SES has also invested in an ERP system (J D Edwards) for improving efficiencies. As the system is Web-enabled, it helps the company track its products across channel partners. These partners can also track their inventory and post their requests online. This has led to faster turnaround time and allowed SES to identify its most profitable products across different categories.

New growth engines

While SES has grown consistently at around 30 percent, last year it made a conscious decision to focus more on transforming itself from a traditional distributor to a company that has the ability to manufacture, market and maintain IT products. On the manufacturing front, the organisation plans to leverage its ISO-9001 certification by tying up with branded players to manufacture their products. SES is also looking at adding new product lines to complement and leverage its current strengths. In terms of reach and penetration, the company will increase its geographical reach in the northern and eastern region.

While SES already caters to storage solutions such as SAN and NAS, with vendors like Intransa and Tandberg, it is on the look-out for tying up with large vendors in the storage space. Also on the agenda is an increased focus on distributing software products; the company recently made its entry into the software product distribution space by tying up with EtherAct Software Labs, a provider of CAD solutions.

While SES is planning to give more attention to the solutions approach, it will not deviate from its core focus—to distribute, manufacture and provide services. “We want to emerge as a single-stop IT solutions company by leveraging our unique combination of three components—distribution, service support and manufacturing,” explains Krishnaprasad. The SES strategy shows the change IT distributors have to go through if they want to emerge successful.

Clearly, being an IT distributor does not mean that a company is confined to selling boxes any more.

sushma@expresscomputeronline.com