Now more than ever

Since Gitex it seems that a host of new partnerships have been signed, with vendors signing up VARs and VADs all over the place. Virtually all of the major hardware vendors have signed new deals, very often with the focus on one simple element—value-add.

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By  Mark Sutton Published  November 24, 2001

Since Gitex it seems that a host of new partnerships have been signed, with vendors signing up VARs and VADs all over the place. Virtually all of the major hardware vendors have signed new deals, very often with the focus on one simple element—value-add.

The new agreements are rarely about coverage—more and more the vendors are claiming that they neither want nor need hundreds of new partners across the Middle East—but are about how the partner will bring value to the deal.

The value-added concept is not new, but the volume of new VARs and VADs that are being appointed points to new developments in channel business in the region.

The first is that the channel here is maturing. Agency agreements no longer rule the markets; the box-shifting, trader mentality is still there, but those companies that just want to sell in volume are finding it increasingly difficult. The vendors have spread their authorised operations out to those territories that were once served by the grey market and the masses of re-exporters in Dubai, leaving little room for traders to compete, and forcing them to look further afield for markets.

As vendors have gone on opening local offices in countries, and put in place more responsive channel management, so their demands on the channel have changed. While there are some partners that have moved ahead of time to build value, mostly the channel has been dragged along by the vendors demands to improve services.

The demands of the vendors may have seemed irrelevant to some—margins on the trading business have been in decline for a long time, but given a good market niche, there are still volumes to be done out there. But, for all but the most commoditised lines of business, the vendors are tightening control of their distribution—the message now is ‘add value, or we won’t do business with you’. The recent focus on VADs shows that the vendors are looking to really shake up the channel, not just with a few specialist, expert resellers, but from the top down.

Vendors are asking for a lot from the channel: investment in training, dedicated staff, support infrastructure, improved RMA processing, restriction of business to one or two vertical segments.

Of course, there are rebates, joint marketing schemes, preferential pricing, dedicated account managers, better access to regional or global support and stocks to be had in return for meeting the standards set by the vendors, but many smaller resellers must wonder how they can ever measure up to these standards, and how they can do business without key vendors. Measuring up to the new channel model is a daunting task.

But for all the impetus to add value or else, the vendors cannot escape from one overriding factor—they need the channel now more than ever.

Many partners in the region report that business has not been drastically affected so far by the economic downturn. Multinational vendors however, are hurting. Worldwide staff cuts have hit this region as deeply as they have hit elsewhere, marketing budgets are constrained, CRM schemes are under review to find cheaper alternatives, investment in serious numbers of bodies on the ground is out of the question.

For the foreseeable future vendors cannot afford to invest in their own operations. When vendors tell the channel that they must add value, they must improve the levels of service, their expertise, the overall delivery of the product to the end customer, what they are really saying is ‘you have to add value—because we can’t afford to do it ourselves.’

Without being able to put a lot of staff into the region, something that only the vendors the size of Microsoft, IBM and a few others have been able to afford to do in the first place, the channel provides the vendors only means to market. Without the channel, the region will simply become closed off to them. While the channel needs the big name brands, there are always alternatives—but the vendors need their partners. Something to bear in mind when those partnership agreements come up for renewal.

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