The death of distribution?

Aug 27, 2012 10:52 AM
Filed under Services

Westcon MD David Henderson looks at the plight of the model.

What is a distributor’s purpose today? Or more bluntly, is there a reason for a distributor to exist at all? Any business worth its salt must ask these kinds of fundamental questions. Renewal, even survival, depends on it.

This is especially true today in the age of cloud and virtualisation when moving boxes is no longer enough.

If you take time to listen to the channel, you’ll quickly find the traditional distributor model really does have big question marks around it. What you will hear is that while getting the right products delivered on time and at the right price is still critical to a distributor’s purpose, if that isn’t combined with a genuinely smart and adaptable array of services, no-one is going to be happy.

Winston Churchill said the empires of the future would be the empires of the mind. What we are seeing in the channel is the realisation of this.

Just as virtualisation and cloud have moved central processes into the ether and rationalised physical IT infrastructure in new and dynamic ways, the distributor has to dig deep, truly engage with vendors and resellers where they live, and learn what gaps it needs to fill to make them fully competitive – crucially, we’re not talking about the physical gaps, we’re talking about the mind gaps.

Distributors can’t be bystanders to the change in our technology landscape. They must be the guides, they must be enablers, they must be the managers of how best to distribute the mental resources that can amplify the physical ones.

Here’s what that means. In re-imagining ourselves for the next three to five years, we sought to learn from our partners in the channel. What we learned is that because the distributor sits between the vendor and the reseller, it possesses a range of resources that it must share with the channel. Traditionally, distributors haven’t seen themselves as possessing these resources, but they do, and must share them.

Let’s call it the rise of the “thinking distributor”. The thinking distributor recognises that in the wake of the GFC resellers are facing a credit squeeze. A distributor often has access to financial resources that a reseller does not. So why not provide the reseller with 90-day trading terms and extended credit limits? Without the constant drumbeat of payments coming due, resellers are freed to focus on businesses. 

Resellers also report big amounts of pre-allocated marketing funds go unused because they lack the time and/or expertise to use them. Most distributors have that marketing expertise and – here’s that “thinking” theme again – expertise is a resource, just as valuable as a physical one. In this case, a distributor’s marketing expertise can be combined with in-house marketing personnel who the distributor can assign, almost outsource, to those resellers.  

By sharing its expertise, the distributor enables its resellers to do what they couldn’t do on their own: build and execute marketing plans that can deepen their relationships with vendors and their end users.

The distie who listens

Again, listen to the channel and resellers will tell you they lack engineering resources that could enhance their value to their end users but that they can’t afford to change this on their own.

With this in mind, let’s take a look at engineer-led network assessments. Resellers acknowledge that these assessments allow them to strengthen their relationships with their end users and can typically lead to sales opportunities.  

However, the assessments are prohibitively expensive. This is a place where a distributor with engineering resources can readily step in. By providing an engineering resource at a competitive cost, the distributor empowers the reseller to offer a service that would otherwise not be offered. It also helps the vendor effectively “scale up” its engineering resources – thus serving both ends of the channel.

Listening to the channel and responding is what the distributor needs to do now. Guaranteed quote turnaround is one answer. A whole article on the new role of the distributor could be devoted to the emerging face of channel customer service, how the channel now needs genuine individual champions and a rethinking of the reseller ratios and deployment of account managers and relationship managers.

And here’s a final wrinkle in the distributor angle. Recently legislation was passed that governs reverse logistics. Why is it significant? Because now a reseller must show it is not only able to install the IT, it must be able to uninstall it – and all of this involves keeping the appropriate records.

This kind of requirement changes a reseller’s cost model since it means the reseller needs to prove and then monitor this capability. Again, another opportunity for the distributor to step in and put a tick in this required box instead of a cross. The distributor that is really doing its job abhors the question “you’re just the middle guy, what do you do?” Why? Because that kind of distributor can answer: I can directly impact your balance sheet.

In other words, if you are a distributor and think what you are doing today is what you will be doing in five years, the truth is almost certainly different. Distributors as we know them today will die – the writing is on the wall – but take heart, the channel will grow and it will grow fast, as the “thinking distributor” rises to fill the gaps.

 
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Copyright © CRN Australia. All rights reserved.

The death of distribution?
 
This article appeared in the September issue of CRN.

 
 
 
 
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CRN Magazine looks in-depth at the emerging issues and developments for the channel, and provides insight, analysis and strategic information to help resellers better run their businesses.