‘Shape up or die’: volume disties cautioned
CME Channel conference pundits sound warning to regional volume players
The role of value-added distribution (VAD) was a key topic of debate at the third Channel Middle East Channel Conference held at the Oberoi Centre, Dubai.
An expert panel argued that while volume broadline distributors will not exit from the IT distribution landscape in the region, they must adapt to the changing business environment if they are to develop sustainability and stay relevant to the vendors and reseller partners they serve.
The panelists told conference delegates that unless volume distributors can embrace change and innovate in a market where margins and profits on traditional PC hardware have continued to be eroded, they will find surviving in the broadline distribution sector extremely hard.
Mohammad Mobasseri, CEO at EMT Distribution, said it's no secret that volume distributors are going through a tough time as profits and margins on traditional IT kit have continued to be sequeezed. Mobasseri said it's for this reason that broadline distributors need to adapt and come up with new innovative ways of doing business or they risk exiting the market. "With the role of a distributor evolving, it is imperative that all those involved in the supply chain do more to help bridge the vendors with the solution providers," he said.
Mobasseri explained that being a VAD is not easy as it encompasses offering a range of services and solutions in addition to the vendor products that a distributor takes to market. "Is the VAD sector under threat from broadline distributors," he asked? "Absolutely not, because value-adding is about identifying an opportunity where a company can make a difference to the partner at every stage of the sales cycle. In turn, this aids channel partners to deliver and implement solutions at end-user level with confidence."
Mobasseri pointed out that being a VAD requires a company to have the right products and technology, services and solutions offerings complemented with proof of concept (PoC) and training programmes for reseller partners. "Our experience as a VAD is that the business model delves deeper into understanding the projects that reseller partners are involved in and helping them with all the necessary skills to integrate and deliver holistic solutions and support to their end-user clients," he remarked.
Nehul Goradia, vice president, Channel and Alliances, Optimus Technology and Telecom, told delegates that VADs should enable channel partners for the future, by helping them to identify emerging opportunities and preparing them on how to harvest those prospects. "For as long as there is a need for a hardware box (server or desktop PC) volume distributors will still a role to play. "What distinguishes VADs from broadline distribution is the level of expertise and skills VADs need to have in order for them to deliver end-to-end enterprise solutions," he said.
Goradia said while volume distributors are more concerned with the top line with low profits. "Sales in the VAD space are longer but the profits and margins are much higher with opportunities for reseller partners to earn recurring revenues broadened," he said.
He pointed out that as the channel continues to evolve with various routes to market appealing to the vendor community, it's imperative for broadline distributors to focus on their strengths and continue to bridge that gap between the vendor and reseller. "Failing to embrace change will have dire consequences for some volume players as the IT market will continue to be highly commoditised going forward," he said.
While the volume distribution landscape is still thriving, the emergence of multiple channels (online and power retail) has given prominence to these routes to be used by many IT vendors in the region, leading to additional competition and further margin erosion on traditional PC hardware.
"There is no doubt that vendors in the Middle East are working with some of the big retail chain stores because of their reach and the volumes they are churning," said Goradia. "This will only increase as the retail segment continues to mature."