Opening doors for VADs

The value-added distribution (VAD) model is not new to the regional channel.

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Opening doors for VADs Mohammad Mobasseri, CEO at EMT Distribution.
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By  Manda Banda Published  March 20, 2014

The value-added distribution (VAD) model is not new to the regional channel. Majority of IT distributors in the Middle East have been offering value add services to their channel partners. With the rapid pace of transformation in IT, VADs have been compelled to dig deeper in their quest to not only remain pertinent to the market, but to help their partners in creating and opening up new business opportunities.

With the rapid pace of change in the IT industry, the role a distributor is expected to play has shifted beyond the traditional logistics, stock handling and supply chain management to adding value and IP at every stage of the sales cycle and even offering credit and financing schemes. IT Distributors in the market realise that to remain pertinent to the vendor and reseller partners they serve, they have to do more than just act as middlemen in the IT supply chain. It’s this changing role of distribution that has been ripping up the traditional box pushing model, compelling distributors in the market to adapt to the new reality and help their channel partners to adjust to these market changes.

According to a recent report from research firm IDC, more organisations in the Middle East region are looking to work with specialised IT service providers to manage their IT infrastructure. IDC said that managed and data centre services, in particular, have gained significant traction in countries like the UAE and KSA both over recent years.

“This region has traditionally not been very pro outsourcing,” said Saurabh Verma, programme manager for IT services at IDC Middle East, Africa, and Turkey.

“However, prevailing macroeconomic conditions, changing customer priorities, dynamic market conditions, and a variety of other factors have created a strong value proposition for a services-oriented IT industry. Organisations are being pushed to reduce their operating expenses and increase efficiency at the same time, and many are finding it very difficult to improve their processes with in-house IT resources. In addition, intensifying competition and increasingly demanding customers are driving them to outsource their ‘peripheral’ activities and focus more on their core business.”

This reality has brought the VAD model in the spotlight in the region and that’s where distributors come in. Today, distributors are expected to take a lead in not only acting as the logistics engine for their solution provider partners, but also help them to transition into the high margin value space by urging their solution provider partners to develop services-oriented reseller businesses that can earn them recurring revenue.

Mohammad Mobasseri, CEO at EMT Distribution, agreed and said the VAD sector in the Middle East region has over the years gone through rapid transformation with distributors increasingly taking on roles that were previously domains of systems integrators (SIs) and solution providers.

Mobasseri said what is clear is that the VAD model is stronger now than volume distribution in the region. “In my view the VAD model will remain strong for some time because vendors that targeted the SME and enterprise segment with direct go-to-market models but failed, have turned to VADs to develop their presence with indirect models,” he noted.

Mobasseri said with the increasingly reliance by both vendors and channel partners on distribution, VADs need to focus more on the value addition part in order to remain in the market. “The value adding has to be more on how they can influence elements of the tradition distribution functions with that of reseller roles to help partners earn decent margins and push their businesses up the channel ranks,” he said.

He said it is crucial that VADs evolve their business models and adapt to the changing business environment to ensure that they don’t leave their partners behind playing catch up. “In any business you have to adapt with the changes to be able to survive. In IT, there are more changes and challenges because of the rapid pace at which new technologies are introduced in the market, hence adapting to the market is an ongoing process,” he said. “To help us reach out to our partners, EMT is focusing on cloud-based solutions to be able to fulfil what the channel is demanding now. By not adapting to the changing business landscape VADs cannot survive.”

There is no doubt that the regional VAD segment is facing up to some challenges in terms of developing sustainable business models that meet the expectations and demands of vendors and reseller partners in the Middle East.

K.S. Parag, managing director at Dubai-based emerging technology solutions VAD, FVC Inc, said it’s very important that the VAD and vendor have a strong alignment and this means that they have all the best resources available for partners to leverage for local projects and business development.

Parag said distributors need to invest in the right resources in terms of training and certification, which can in turn, be shared and passed on to channel partners, ensuring the final customer gets the qualified expertise they deserve.

“As the market continues to evolve with the changing needs of the region, the VAD is constantly under pressure to ensure that they deliver on the expectations of the vendors they represent and the partners that rely on them,” he said.

He explained that the ideal situation is a strong alignment of messages and goals between vendor, VAD and reseller partner, ensuring there are no miscommunications.

Parag pointed out that FVC has worked proactively in aligning with vendor strategy and ensured the partner eco system has been empowoered with the right certification levels. “Working on a strong alignment ensures growth of the vendor’s business with certified and skilful partners,” he said.

Parag added that currently, FVC is seeing two types of players in the market: the broad line distributors that are now expanding to add a VAD division and developing that side of the business, and the small distributors/SIs getting into the VAD business in key niche segments like storage or security.

Like FVC, StorIT Distribution established its business with a clear focus on value-addition and hasn’t moved away from that philosophy.

Suren Vedantham, group managing director, StorIT Distribution, said the fact that the company has never ventured or even tried to walk into the volume distribution domain clearly demonstrates the vision it has since its inception 12 years ago. “From the onset, we wanted to build an entity that could bring great value to the regional IT Channel in the technology space with expertise in innovative solutions and emerging trends as the main forte,” he said.

Vedantham observed that in the past couple of years, the term “VAD” has been overused, more for marketing mileage than as an attribute of business that generates real value, to the extent of making it sound hackneyed.

Nevertheless, Vedantham said there is a concerted effort by a segment of distribution partners in the region to up the ante in this area to stay competitive and relevant to the fast changing business environment. He added that there are some very sound and established volume distributors that continue to do a great job by keeping up with the technology trends and succeeding in serving their clients without falling prey to the VAD tag for the sake of looking fashionable.

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