Distribution pick ‘n’ mix

Without the right intentions, channel expansion can be a dangerous game for vendors

Tags: Emitac Distribution LLCHP Middle EastHitachi Global Storage TechnologiesJumbo IT DistributionUnited Arab Emirates
  • E-Mail
Distribution pick ‘n’ mix Vendors are increasingly appointing additional distributors on the premise that they will handle specific products or markets, but such a strategy brings with it a set of risks. (ITP Images)
By  Andrew Seymour Published  June 13, 2010

I doubt whether HGST's disclosure this week that it intends to expand its distribution line-up will fill the hard drive vendor's existing distributors in the region with glee.

The company already has four partners carrying its products in the Middle East, and they certainly couldn't be blamed if the prospect of further competition leads them to question whether there is really enough business for everyone.

The suggestion from HGST is that any additional distributors will be brought in with its external branded business in mind. As the majority of hard drive vendors know only too well at the moment, external storage sales are where the growth is coming from and therefore a solid strategy for the retail channel is imperative.

As HGST looks to increase its overall percentage of non-OEM sales by enlarging its channel business, the company appears open to the strategy of appointing distributors whose job it is to address specific areas of the market.

In doing so it endorses a way of thinking that is becoming ever more common in the regional market: signing distributors with the sole purpose of targeting select product lines or market sectors.

Advocates of this model will argue that it is the most practical approach to addressing a market because it offers the ability to achieve measured results while causing minimal partner conflict. That may well be true, but it also requires the vendor in question to maintain a significant level of control for it to work smoothly.

And by ‘control' I mean the rudimentary steps of managing each relationship and making sure that the distributors are doing what they are meant to be doing - and doing it well. That is not a straightforward task by any means.  

It is all well and good limiting distributors to particular product lines or customer types, but what happens if one of them fails to stick to the plan? How do you actually regulate that?

Equally, if the vendor segments the business too finely there is a risk that the business will not be substantial enough to keep partners interested. Then there is the management side of it to consider. Trying to keep a rein on five or six distribution accounts is going to be a great deal tougher - and a lot more expensive - than, say, three or four.

The one nagging concern with the rise of this trend is that vendors are simply using it as an excuse to increase distribution numbers in an attempt to try and swamp the market with their product and widen the sources of credit available to the second-tier channel.

If that's the case then they should be aware of one thing: distributors are now far more willing to walk away from franchises if the returns are unsatisfactory.

Intentions, it would seem, count for everything these days.

Musical management chairs

HP has begun the process of casting its net in search of a new Middle East managing director to replace John Hoonhout, who ended his tenure with the PC and printing giant just recently.

Hoonhout became the latest of several senior management names associated with HP's regional channel business to exit the stage inside the last six months.

If you remember back to the start of the year, Anil Kumar, the head of HP's Personal Systems Group (PSG) in the Middle East made a sudden exit from the company.

In the months that followed Kumar's departure, the market also witnessed some important management developments on the partner side. Two out of HP's three longest-serving regional distributors have undergone changes at the top, with Amer Khreino leaving Emitac Distribution and Bikas Biswas moving on from Jumbo IT Distribution.

It is no secret that both of those distributors faced tremendous pressure last year and saw their HP businesses shrink - a combination of the depressed market conditions and HP's decision to appoint additional distribution partners during a period when demand was perceived to be sluggish.

At the time, HP argued that its actions were motivated by a desire to expand the market, although sources within the channel have always contended that it was due to the reduced capacity of existing distributors to place new orders as they battled to shift existing stocks.

Without wishing to get sidetracked though, the point is that the decision-making landscape has altered tremendously in just a short space of time and with it you can expect the dynamics of the channel business to change as well.

The market is now waiting to see how quickly HP moves to hire a new regional managing director. When Joseph Hanania left after more than a decade at the helm in 2007, HP felt that the best solution was to fill the position with an internal candidate. At the time, Hoonhout was the company's regional services director.

Will it adopt the same policy this time around? If it does, then there are those that regard sales and operations chief Mohamed Itani as a firm favourite. Itani is currently holding the managing director role in an acting capacity until HP's executive recruitment team makes its decision on the post.

I doubt whether that call will be made until it has at least explored all the viable external possibilities though. Bringing in an outside face with fresh ideas could be just the inspiration HP needs as it embarks on the next phase of its regional growth plan.   

Whatever the verdict, it doesn't detract from the fact that with 700 staff in the Middle East and a huge presence in virtually every regional market, the HP MD position is still the biggest gig in town.

Who's your tip to get the HP Middle East job? Drop me a line on andrew.seymour@itp.com or call +971 (0) 4 210 8320

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code