Everyone knows that providing services is where the money is right now. The distributors certainly know it. LAN Systems has been providing value-added networking services through its resellers for some time and we're now seeing a flood of distributors like Express Data and Ingram Micro adding a range of configuration, build-to-order and value-added services to the channel.
The question is, is this really a good thing for resellers out there today?
The pitch from distributors goes that resellers can supplement their own service offerings with those services now offered by distributors. Distributors with their economies of scale can do many things, especially low-level services, like desktop and server configuration, far cheaper and more efficiently than smaller resellers. Supposedly, the reseller can on-sell this value-add and its time is then freed up to concentrate on its core competencies.
Yet hang on, aren't services supposed to be the reseller's core competency in this day and age?
And are resellers really going to be able to on-sell that value-add? If you're a reseller that has previously focused on higher-level value-add like application development capabilities it's not going to be difficult, using the desktop integration and configuration services offered by distributors, to simply bundle desktop integration as part of your offering.
You can offer that at very little or no margin and in the process cut out the desktop reseller, giving you greater ownership over the customer.
In such a scenario, the desktop reseller has effectively been beaten out in that services deal, not by the developer but by the distributor.
So value-added services from distributors are fantastic if they're offering a service that isn't one of your core competencies. If distributors start to target the same types of services that you make money from, then look out.
Distributors have also proven that they're not too fussy who they offer their services to. In a letter sent to me by Ray Shaw, managing director of Intermedia in Queensland, which we will publish next week, he comments on last week's front page story that "Express Data should be thoroughly flogged for letting an insurance salesman by day sell Express Data gear by night. What ever happened to qualified dealers?!"
Similarly, LAN Systems has looked beyond its traditional reseller base and has talked about selling services to ISPs, accounting companies and even physical security companies.
The people that distributors want to work with are the organisations with the real power; that is, whoever owns the transaction with the reseller. The model which is working and which will continue to work is that of the big services companies like EDS, CSC and IBM GSA. They are not so much technology integrators, because they actually pass on quite a lot of the technical work to other channel companies - they are business integrators. It is the reseller or integrator that can help the customer make sense of the business impact that will be successful in the future. Of course, to do that you need to understand the customer's business.
Have a very hard think about what exactly the value is that you are adding. Think who might possibly be better placed to do it more cheaply or effectively than you. And remember that low-level services are becoming commoditised just as quickly as many products.
Philip Sim is editor-in-chief of Australian Reseller News. Reach him at email@example.com