The Indian IT Market is expected to generate $110 billion in 2012, with a CAGR of 14.8 percent from 2007 through 2012. The hardware market will be presenting a huge business opportunity with computing hardware and telecom equipment together reaching almost $43 billion by 2012.

As the Indian IT market is poised for an unprecedented growth, there is a huge opportunity for the IT channels (Distributors, VARs, etc) in India. As a highly channel-driven market in all IT segments, major vendors in India will continue to focus on indirect sales and invest in training, certification, partner enablement, and increased recruitment to effectively reach beyond tier one cities.

Channel fulfillment is going to be further encouraged in India specially to support customers in tier three and tier four cities in India. Small business and consumer segments will lead this march in smaller cities which are not in the top 20. We estimate that demand for nearly 35 percent of all PCs sold today are from the top 20 to 100 cities, and this percentage is growing much faster than the demand from the 20 largest cities. Gartner expects similar shifts in other IT categories, though at a different pace.

As IT vendors attempt to further penetrate and cover the Indian market, channel structure will face the following challenges:

Solution providers would need to hire more technical talent within partner businesses, especially seasoned and experienced engineers as they aspire to deliver strategic technology solutions like blades, virtualization, etc.

To foster innovation beyond the “we do it cheaper” approach to IT services

The need to help SMB customers leverage technology for better growth

The challenge to scale up quickly and monetize a competitive advantage

There are various types of channel companies in India that require different approaches by vendors trying to improve channel relationships and coverage models in this market. There are the large global multinational SIs and big application development and maintenance service companies that have been successful in penetrating local enterprises and the international market.

For the smaller value-added reseller, solution provider or SI based in a region/city focused on segments such as education and SMB, soon there will be a need to move beyond simply selling hardware and software to generate revenue and profit and get more proficient on integration and consulting services to stay competitive. These providers must focus on the “value” they provide, above and beyond winning on price alone, and they must do so with the influx of retailers, such as Aditya Birla Retail, which has rolled out 500 stores across India in the past year, and US-based Staples, which has opened 11 stores. Staples is providing an alternative buying channel for SMBs and institutional customers and is one of the only pan-Indian delivery systems for office products.

Along with the traditional supply models, delivering technology in alternative ways, such as SaaS, may increase usage for SMB customers in the coming months. This would further bring a unique set of opportunities for solution providers, essentially around services.

Lastly, as the global economic crisis has started affecting the consumer sentiments in India, this brings a unique opportunity for Indian channel partners. As a majority of large enterprises like banks, etc, have started project deferrals or delays due to their cost containment strategy, the IT vendors are looking at alternate greener pastures like small and medium businesses.

Channel partners with their local relationships in the mid-market opportunities are in a much better position to negotiate business terms around technical skills, pricing flexibility, etc, in today’s business scenario as IT vendors are willing to invest for strong run rate business in the upcoming quarters.