Niche markets: a moving target

Niche markets: a moving target

While PC vendors gradually migrate their go-to-market strategies to a more direct model, in the networking arena it's almost been the exact opposite. Networking vendors such as Cisco and Cabletron, who had a horrific history of screwing with their partners, have warmly embraced the channel. It's not surprising. While networking used to be the domain of large enterprises, it's now a much broader technology. After all, is there really any point to not having a connected PC these days? And if you're going to the mass market with a reasonably complex technology the only way you can do it is with a channel partner.

As a result, a lot of networking hardware has been commoditised, much to the chagrin of those network integrators and resellers who were making lovely, big margins. However, for the broader channel I would suggest that if you don't have a certain level of networking expertise you're doing both yourself and your customers a disservice.

After all, networking equipment today is becoming much easier to install and get up and running. In fact, some might argue that it is becoming too simple. You only have to look in the catalogues of retailers like Harvey Norman and Harris Technology to see the growing amount of very low-end networking equipment.

As vendors break their backs to make products simpler to use and the average user becomes more computer literate, how long before a simple network is a basic do-it-yourself proposition like a PC?

Will the networking vendors stay loyal to the channel at this point? Not a hope in hell. Cisco has been championing the use of electronic commerce as a way to put you in direct contact with your customers longer than any vendor in the industry. It has one of the most sophisticated electronic commerce sites in the world. 3Com and Nortel aren't that far behind.

Right now, they need the expertise and the value-add that the channel brings. When they no longer have that need, why on earth would they use the channel?

In days gone past, the more commoditised a product became, the more reliant the vendor was on the channel. Those days are over; I think you just have to keep watching the evolution of the networking go-to-market model to see how things will work in the future.

When the technology is at its most complex and only being deployed by large, leading-edge sites, vendors will sell direct with their own sales force and will also try and get an early jump on the professional services market. As the technology becomes more applicable to the broader market, vendors will turn to the channel because they need both the reach and value-add that the channel delivers.

However, I'm tipping that once the technology is so commoditised such that vendors no longer requires resellers' value-add, they will revert to a direct model leveraging the Internet.

At least, that's what I'd be doing if I was MD of a vendor.

The trick for most of the channel then will be to keep reinventing business so that you are sitting just between the very leading edge and the very commoditised. Target a niche, or niches, but be prepared for the fact that those areas of specialisation will always be a moving target.

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