Management clinic: Know your value proposition and survive

Management clinic: Know your value proposition and survive

Conversations are being whispered in the corridors of power in Sydney. The hardware vendors are wrestling with the issue: to disintermediate or not? The truth is that most of the top-tier manufacturers are envious of Dell's growth and stock price - they want to emulate the model. But to do so will require drastic changes to their organisations and most aren't prepared to make these changes - yet.

So, for awhile at least, in the Australian market we will have hybrid models. The first segment that will be disintermediated is the enterprise space. Here, the manufacturers have solid sales coverage and the infrastructure to do fulfilment direct. The question is, will resellers in the Australian market survive?

At Pelorus International, we have been preaching for years the need for resellers to transition out of a hardware model and toward one that focuses on service. If you plan to stay in the enterprise market segment, it will be critical to be able to articulate to vendors why they should partner with you. Have you decided what you offer the vendor? Can you articulate your value proposition? In our work with hardware and software manufacturers, we have identified the following key values vendors seek from their resellersCoverage. Are you able to provide geographic coverage in a market that the vendor has chosen not to cover directly? For example, a Victorian reseller working in the mid-market. The implication here is that your organisation will generate demand. Vendors will not be incurring the expense of demand generation simply to hand the lead to the reseller.

If the vendor spends money generating demand, with e-commerce, they can fulfil the demand directly. The days of vendors paying for demand generation and paying resellers margin are diminishing. Question: is your organisation capable of demand generation? Do you have salespeople capable of hunting? Or, have you bred salespeople who like to farm and wait for the leads to be generated elsewhere?

Expertise. Do you have expertise in a solution or vertical segment that doesn't exist within the vendor's organisation? That is, what is your experience in local government? Your ability to deploy collaboration software in financial services?

Solution completion. Can you provide a critical value-added component of the solution for the end user. For example, implementing a software component such as Lotus Notes, or Oracle Tools?

Deployment. Are you capable of developing the expertise to help the vendor deploy its solution for the end user?

Outsourcing. Do you have the capabilities to enter the outsourcing market and provide a total outsourced solution?

Fulfilment. Last but certainly not least, vendors are currently scaling back the margin they pay on fulfilment-only partners. In the enterprise space, vendors will begin to experiment with hybrid models in order to claw back margin, or respond to customer demands for a direct relationship.

Can you survive? The truth is, if you have moved out of a fulfilment-only model, and are adding value, either through solution completion, expertise, deployment or outsourcing, your marketplace looks brighter than ever.

IS managers are outsourcing IT projects to the reseller channel. They need to source additional expertise, which doesn't exist in their own companies. The resellers can often deliver these services faster than the customer and resellers can often deliver the service for less than the customer could using internal resources.

You can survive - and grow and prosper. Get clear on your value proposition, and ask your vendor to get clear with its. Once you've agreed on how you will engage, go out to your markets with your JOINT value proposition.

Carol Johnson is principal consultant for channels and alliance practice Pelorus International. Reach them at:

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