Decision time for resellers

With difficult market conditions looking certain to prevail well into next year, resellers in the Middle East are invariably turning their attention to the steps they need to take to improve their chances of success, and in some cases survival.

The extent to which the global economic downturn has impacted the regional channel following the turbulence experienced in other sectors has caught some resellers by surprise. But even those that prepared themselves for a considerable degree of upheaval are drastically reviewing their strategies in response to the changing landscape.

The channel community appears to be in unison that greater diligence must be exercised in the present environment, particularly as the IT sector in this region is intrinsically linked to the availability of cash and credit.

It is interesting to hear what advice vendors and distributors are giving to their reseller partners right now. Certainly the messages being directed at the dealer channel are markedly different to the words of wisdom offered 12 months ago. Back then the focus was firmly on how to manage the aggressive growth expectations most companies harboured.

Rather predictably, the term ‘value add’ is springing up a lot, although as I’ve remarked in this column on more than one occasion, that phrase is possibly the most ambiguous in the industry. Certainly all resellers seek to add value in some form or another — a point that remains as important to customer retention during periods of high growth as it does during leaner spells.

Without wishing to go down the value added route too extensively, the consensus from senior channel figures in the region is that now is the time for resellers to play to their strengths, emphasise the significance of their proposition to customers and avoid chasing risky business. Resellers with expertise in niche areas need to exploit their position, argue the experts.

That doesn’t mean they should curb any ambitions to increase scope in other areas, though clearly any such moves would need to be carried out in a measured fashion.

Dexterous cashflow and balance sheet management is also being heralded as an important accessory to making it through 2009 in satisfactory shape. Although this may seem self-evident, it is a far cry from the guidance provided this time last year when vendor executives were adamant that channel success hinged on finding competent technical resources and cultivating staff with effective sales skills.

“There has been talk in the past of resellers using their cash to bet on stock market equities and real estate,” commented one distributor. “Such practices may have been tempting, but are extremely dangerous. It is probably too late for those who have been heavily involved, but no company should be tempted to mix its use of cash and should preserve it in order to reduce its borrowings or support its business focus.”

The game has already changed so dramatically that it now seems those who best understand how to make the most of their financing facilities — and are capable of identifying where costs can be stripped out of the business — occupy a favourable position. That is going to be something that resellers must heed, particularly if they are dependent on end-user verticals that are showing signs of tightening up.

Finally, partners are being urged to remember that even the simplest things can help their business. At least two vendors I have spoken to in the past week said partners commonly fail to maximise the financial benefits of incentive programmes due to submitting claims late or displaying an interest in applying for a scheme after it has expired.

Just showing a bit more efficiency or urgency in managing such situations would lead to some resellers pocketing more cash, rather than leaving it on the table.

While resellers are faced with making some bold decisions to guarantee their health, optimists claim that the emerging nature of the economies in this region and customer appetite for infrastructure mean business will eventually return to more robust levels. If that proves to be the case then the current turmoil should at least leave some resellers better equipped to run a profitable business than before.