Dealers of packaged software have been charging excise duty and CST or VAT on the products billed and service tax on the implementation of service of the software. The exemption of excise duty on packaged software and the simultaneous application of service tax has put the dealers in a confused state. Now dealers are questioning whether they should continue with the existing tax structure, or should they stop charging excise duty on license fee or only charge the service tax.

With no clear communication on which tax structure to follow, dealers are looking to bodies like Nasscom for help.

There are various factors that are considered when fixing the tax amount of a packaged software. Firstly, there is the software itself. Secondly, there is the license part of it. Earlier, customized software and its license did not attract any custom duty, which includes CVD. There was the packaged software that attracted a CVD of eight percent and the license did not attract any CVD.

Then there are software that can be downloaded from the Internet, which attracts service tax. This is subject to central taxation. When the software is sold in the state it attracts VAT. There has been confusion over how to define packaged software and also customized software. Then there have been several means and ways of delivering the software itself. One can download it from the Internet or one can get a master software through import and may replicate them locally, and then give it to a third party. Once it is being replicated, it is subject to excise duty.

To understand the situation, Manufacturers Association of Information Technology (MAIT) held a meeting with the ministry of finance.

Sharing information on the discussion Vinnie Mehta, Executive Director, MAIT said, “There have been issues on the valuation process of software. An importer has to pay royalty to the software owner. One issue is whether royalty should be included in the cost of software or not. There are many permutations and combinations of activities that are creating the confusion. Government has said that the value of the software is the license part of it as software as a vertical is largely within the service-oriented sector. Hence, the right to use valued portion will be taxed. Government has announced that packaged software will now attract service tax on the licensing side. But it is still not clear whether four percent of special addition duty will continue. MAIT is seeking clarification that will help us in resolving the litigation and moving forward.”

Service tax was introduced on software transactions during the Union Budget 2008-09. The new tax structure covered the transactions related to packaged software as well, which was counted as material subject to excise duty and VAT.

Give a brief description of your presence in the Indian market?Headquartered in California, Quest Software offers solutions that include application management, database management, windows management and virtualization management. We entered into the Indian market two years back and started selling our products to the Indian enterprise segment. We have our offices in Bangalore and Mumbai and we are planning to open new branches in other cities like Delhi, Chennai, Hyderabad, Kolkata and Pune.

 In India we are essentially operating through the network of our partners and we are in the process of strengthening our position in the market. Our objective for Indian market is to increase out footprint in the country.

We have been present in the APAC region for the last five years and have our presence in all the potential market including Japan, China, Hong Kong, Singapore, New Zealand and India. APAC has been the fastest growing region for us. We have scored 20 percent growth this year. India’s share in the APAC region is 10 percent. This market has yet to be harnessed as it has recently started. We are expecting to grow at a rate of 50 percent from quarter to quarter.

Give a brief of your channel model and further plans.
Besides growing in the large enterprise segment we are aiming to grow at small and medium enterprise level for which we are seeking the support of solution providers and partners who can promote the products at regional level. In July, August and September quarter, our main agenda is to expand our partner portfolio. We are in the process of fine-tuning with the channel community and enhance our focus. We are spending lot of time in talking to the channel partners, we are engaging with them at different levels.

What will be your channel strategies to strengthen your presence?
We have currently three main distributors that include Vistech Information System Pvt Ltd. in Bangalore, Nippon Data Systems in Delhi and Alltech Technologies in Mumbai. We have recently appointed Sonata Software Ltd. and Softcell Technologies Ltd. as another set of distributors. We have second set of partners, who are the system integrators like Wipro, for large projects. Then we have the value added resellers for the small and regional level. CMS, Microland, Datacraft are the new partners. Value added resellers are critical elements of our distribution system as they are the the one who take our solution to the customers of small size at the regional level.

There are already big and established players like SAP, Oracle or Microsoft in the ERP domain. The market is competitive. How are you you geared up to take the competition?

We are not competing with SAP, Microsoft or Oracle. We provide a capability to manage the technology offered by these big players in the business application domain. We provide solution that provides support in the ERP and CRM segment as in how to back up and archive the messages. Our solution is a complete alignment to the products offered by big vendors. It gives further value to the customers through windows management for Microsoft, database management for Oracle and Sybase, Application management for SAP and People Soft and Virtualization management for VM Ware.

 As the core platform becomes larger and larger, it becomes complicated to manage them and hence their automation is important. Quest software plays a major role in providing support to the customers to manage their applications.

But Still, Quest Software as a brand is still not a very popular brand among the channel. What strategies you would be adopting to promote your presence?

There is no silver bullet that can be triggered to popularize our presence. The growth process has to be slow and cumulative. We will be building our presence in India bit by bit as there is no rocket science to expand our presence in the country. The growth will happen over a period of time. We are right now focused to deliver benefit to our customers with the right solution. We don’t believe that brand is a substitute of good products.

The IT market has shown a negative growth. Channel partners and dealers in upcountry market are facing a slow business. What could be the factors that keep them motivated and their spirit high to sustain?
Sentiments of the dealers in the upcountry market will improve when the business in the overall economy improves. Every year the IT industry has been growing positive and this has been the first time when it has showed negative growth. Therefore, this is the time when one should understand the pain points and work on it. This is the time when strong players will survive and will continue to grow and invest in future.

What happened in Lenovo in the last one year? Lenovo faced loss of 226 million USD this year attributable to shareholders. In India also, the performance was not the same as one would have expected. What have been the key factors?

Liu Jun: For worldwide business we have to look at the market dynamics. In Lenovo, there are two areas where we have our core competencies. We have leading business in global large enterprise segment and we have leading market share in China. In the last one year, because of the market change, most of the market share shift to consumer side globally and after Olympics the china economy has not been too well. We have lot of confidence for the future that we will built our momentum in the market.

 In India, the market share of Lenovo has gone down by 20 percent. So what is going to be the game plan for India. Globally how are you looking at the issue and especially with India?

 Liu Jun: India is the most attractive market for Lenovo. In China, we have already laid our foundation and have established our leadership for several years and now India is the new market for us. Our effort is to achieve large market share in India. In the Think business, we are going to increase our focus and gain on the business. Our main strategy is to get our transactional business model implemented in India. It is the same model that has been successful in China. Globally , we have already established our objective to take over the leadership.

 There are two major things. First we are going to protect our large enterprise market segment in the world and in China. Next, we are going to gain market share in the emerging market. We will focus on the consumer segment because this is an area which is growing much faster and the transaction is also fast.

 What would be your core competencies to accelerate market growth?

Liu Jun: In Lenovo, we possess three core competencies. We have in house innovation capabilities and we are the leader in innovation. Secondly is our capable supply chain and third one is our unique business model for faster selling, especially after we acquired IBM PC business. So we have two different business model internally to meet end to end customer needs for large as well as small enterprises.

So, Lenovo takes a pride in product development capabilities. What are we going to see as far as product development is concerned?

Liu Jun: For the product development in Lenovo, which is a key to be ahead in the competition, we have the process to bring a product to the market in six months from the concept development to the product launch. In the industry, normally, the time range is from six months to 14 months.

Recently, Lenovo announced that it would launch 50 new products this year. What is the strategy behind launching a wide range of products in the period when the market condition is not the best?

Liu Jun:In SMB and consumer segment, customers have different requirements. We will be launching all range of products be it netbook, notebook or All In One to meet various customers’ requirements. We will improve the quality of the product availability for the customers. The reason for launching the wide range of product is that we have to keep a pulse of the customers. We have to understand what customer wants and offer them accordingly.

Recently Adesh Sant of Creations filed an FIR against Pankaj Sharma and Mukesh Jain from Seatel Electronics and Surbhi Electronics respectively alleging that the two threatened and harassed him in his showroom at the night of Jan 13.

According to the FIR, which was registered at the Vaishali Nagar Police Station, a copy of which The DQ Week has, Sant has alleged that Sharma and Jain entered his showroom along with a group of eight to 10 people and threatened and misbehaved with his younger brother and wife.

Sant has further stated in the report that Sharma forced him to put his signature on a blank paper and took 13 cheques from his chequebook on gunpoint.

He has also mentioned in the FIR that Sharma forced him to make a statement on a paper and got it signed by him and his wife that says Creation has to pay a sum of Rs 60 lakh to Seatel Electronics.

“He further took several important documents including the one that contains all the terms and conditions of the company as well as the original document that contained the registration of real estate property purchased by my wife,” Sant stated in the FIR.

Sant further alleged that Sharma took a sum of Rs 11,000 from his wife’s purse and threatened with dire consequences if anybody dared to report the matter to police station.

According to the partners in Jaipur market, it is common knowledge that Sant owe Rs 60 lakh to Sharma. “When the latter started asking for the money, he refused to pay and before Sharma could take any action, he filed an FIR in the station. This way, Sharma is gripped in a false case and his actions to collect the money has become weaker,” said one of the partners on the condition of anonymity.

Market sources also claim that Sharma is not the only one whose money Sant has not returned. There are in fact three or four more companies whose money is stuck with Sant and that his total outstanding in the market would be to a tune of Rs 1 crore.When The DQ Week contacted Sant he refused to comment since the matter is sub-judice. Sharma from Seatel also declined to comment anything on the issue. 

The article first appeared in CIOL
http://www.ciol.com/Channel-News/News-Reports/Jaipur-gets-hits-by-its-first-scam/27109115219/0/ 

Tell us about your current channel strategy.
We are primarily into consumer business. In order to reach out to a large base of customers, we have started using a different approach. Since the last quarter of 2008, we have started focusing on tier-2 and 3 cities and we will continue to do the same this year.
We have organized channel meets in regions like Udaipur, Guwahati, Cochin, Nashik, Ludhiana and others. Around 30-40 channel partners were invited to the meeting, through which we were able to develop relations with them. We will be organizing the channel meet in seven to eight cities every quarter.

Furthermore, we will appoint new sub-distributors in the regions where our current sub-distis are not present.

What kind of feedback and responses have you gathered from these interactions with upcountry markets?
From our inte

Gaurav Kanwal, Symantec

ractions with partners in these regions, we realized that there are several areas for improvement that need to be taken care of before we can increase market presence. For instance upcountry channel partners face prevalent problems of product availability, knowledge of products and accessibility of newer products. As a result of this interaction, we instantly appointed new sub-distributors in these regions. For instance, in Ludhiana and Guwahati we appointed new sub-distributor, right after our meeting with them.

We also realized that partners in small towns need education and training programs about the features of new products. In many cases, they are not able to explain the advantages of certain products to customers. This made us realize that educating the channel is a very important way of increasing the reach to customers. From now on, we will make sure that each of our partners have product literature and brochures.

Has economic slowdown caused a considerable impact on Norton?
Not really. The slowdown has not affected us much. Consumers are still buying PCs and therefore, the flow of business has remained quite stable. Only, people have become a little more budget conscious. Instead of buying an expensive PC, they are managing with a standard model but they are not compromising with data security and this gives us a secured market place. But yes, there are problems at the channel partners or distributors’ level, who may face the liquidity crunch or credit flow.