The changing role of distribution

The steady shift in IT distribution from its traditional focus on hardware products to services and solutions is having a profound effect on the distributor/reseller relationship.

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The changing role of distribution
By  Piers Ford Published  May 1, 2015

As distributors themselves take on more systems integration functions, resellers are also having to adjust their business models to accommodate the growing emphasis on enablement around services, solutions and specialisation in vertical industries.

The result is a swiftly transforming landscape in which distributors are increasingly called upon to play a more project-focused role – not necessarily competing with systems integrators but providing a layer of complementary skills and services that enable their partners to meet customer expectations. Vendors have taken note and are fine-tuning their channel strategies accordingly.

“What we hear from customers on a daily basis is that they want outcome-driven projects, where project definition is guided by the business needs and the outcomes that will achieve specific objectives,” said Tanya Lobo, distribution director, Avaya Global Growth Markets.

“Return on Investment (ROI) on IT projects therefore is no longer looked at in terms of cost advantage only, but how the overall technology infrastructure is supporting business growth and whether these are meeting carefully defined KPIs. In this context, the entire industry is transforming itself to become more relevant.”

According to Lobo, the IT distribution channel in the region is a key influence on this transformation – and is well-prepared; having taken on increasingly necessary project and technical skills during the steady move from box-shifting to value-based models.

“The distribution channel has tremendously evolved and innovated new strategies that drive “value-add” within the channel,” Lobo said. “Today, our distributors are ready for the next wave of transformation, whereby they are actively involved in designing solutions and services in collaboration with a number of partners, in order to deliver true measurable outcomes to end customers. This is an even more challenging transformation that we’re driving across the board and across the region.”

For Mario Veljovic, VP solutions MENA at Global Distribution FZE, this is simply the continuation of a process that has been shaping the distributor/reseller dynamic for the last five years, since the Global Technology Distribution Council (GTDC) predicted the evolution of value-based distribution. This would see distributors morph into wholesalers who embrace VAR business development market segmentation, and sophisticated sales and technical enablement to help partners realise faster and more specific market success.

The result is six key differentiators from the traditional VAD model: partner enablement and development; selling into target markets; analytics-based marketing; technical and sales acumen;  partner practice consulting; developing a knowledge base of expertise; and a comprehensive product portfolio.

“Distributors have always offered dedicated sales and account management as benefits to their customers,” said Veljovic. “But it hasn’t been until recently that they have started working with suppliers and vendors to offer in-depth business and practice development to VARs.

“Distributors are now growing VAR revenue and loyalty by helping them identify new technology and market practices through distributor-facilitated business planning. Distributors are also assisting VARs with business transformation awareness and training as cloud computing continues to encroach on traditional on-premises business models.”

Veljovic said this shift give the distributor a chance to build economy of scale into their strategy, enduring ROI and the effective utilisation of skills. There is also an opportunity to turn industry trends to their advantage.

“The channel is seeing revenues shifting between the various layers,” he said. “Resellers can work increasingly directly with vendors, especially in areas of cloud computing. As such, distributors are turning towards services and solutions to compensate for the loss of revenue and profit.

“Distributors have plenty of opportunities to join the transformation. They can start offering services as simple as rack and stack, advanced delivery services and/or Installation, or even move towards building specific technical expertise in areas, such as VDI, BI/analytics, CCTV/physical security etc.”

Differentiation through specialisation has already paid dividends for distributors in specific fields. Spigraph, for example, has focused on information and document management.

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