Breaking with tradition

If there is one thing that ensures the IT channel can never afford to rest on its laurels it's that the rules of the game rarely stay unchanged. Players slow off the mark, or simply incapable of adapting to a shift in market conditions, are at grave risk of getting trampled and left behind in the channel rat race.

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By  Andrew Seymour Published  September 2, 2007

If there is one thing that ensures the IT channel can never afford to rest on its laurels it's that the rules of the game rarely stay unchanged. Players slow off the mark, or simply incapable of adapting to a shift in market conditions, are at grave risk of getting trampled and left behind in the channel rat race.

The bond between vendors and partners is undoubtedly one of the most influential factors when it comes to defining a successful channel strategy. If both parties understand the terms of engagement then what follows should be fairly rudimentary. The vendor creates demand and pushes product into the distributor, who in turn fulfills that demand - ideally generating a bit more themself - before selling it to the next tier of customer to complete their part of the bargain.

It's all rather quite simple really, or it would be were it not for the fact that the foundations on which the relationship is built are perpetually underpinned - undermined even - by the individual agenda of each party. For evidence of this, look no further than the Saudi channel, which is beginning to display all the hallmarks of a market maturing extremely fast.

One enduring legacy of the Saudi market is that vendors and distributors have struck exclusivity agreements with one another, creating a situation where certain distributors have gained reputations for being nothing more than a front for certain vendors. The distributor imports from abroad, sells to both a sub-distribution and dealer network, and generally acts as the sole point of contact for the brand it represents.

There are numerous advantages to this model, particularly in emerging markets where vendors finding their feet want to maintain a high level of direct control over who they work with or alternatively have no desire to manage multiple distribution sources.

On the whole though, it's a model that contains its fair share of limitations as far as I'm concerned. Not only does it reduce channel breadth, but it eliminates the element of competition that any business needs to sustain a healthy trading environment.

It is clear that an increasing number of vendors are coming round to this way of thinking in Saudi too - spurred on in most cases by the need to obtain coverage in the various sub-regions of the Kingdom. If you have a sole distribution partner that is highly efficient in Riyadh, but doesn't offer you an awful lot of reach in Khobar then is an exclusive partner model really the right one for you? Probably not.

There is a growing consensus that to penetrate the market in the most productive way, you need to carve it up regionally and assign dedicated distributors. The impact of this on the distribution community is dramatically re-defining the structure of the market. Distributors themselves are going on the offensive by looking to sign new brands and increase the breadth of their portfolio. Certain distributors are even starting to admit that being seen as the exclusive distributor of a particular brand works against them, because competing vendors of the brand it represents are reluctant to strike up a relationship.

On the other hand, some brands, especially in the PC space, are deliberately targeting Saudi distributors that their competitors use in a bid to improve their market share. Either way, we're confronted by a situation where everybody's suddenly talking to everybody.

Whereas vendors and distributors once felt putting all their eggs in one basket was the right thing to do, there is now a prevailing belief that a multibrand model offers greater results for all concerned.

Ultimately this can only be viewed as a positive development for the reseller channel because the additional level of competition it creates will force distributors to become more professional in their approach and develop a broader range of services. The net result of this is a channel structure which is far more defined and transparent - and one that doesn't leave distributors as exposed when vendors go changing their strategies.

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