David triumphs over Goliath

David triumphs over Goliath


Last week saw a triumphant win for our local IT industry - and a new twist in what has been seen as a battle of David and Goliath.

Playing the role of David are companies such as LAN Systems, local IT distributors that are continually reinventing themselves and their channel strategies to give resellers a competitive edge. They protect their market against Goliath - played by large American distributors who enter the market by acquiring other local "Davids" (home-grown IT distributors).

And last week, at ChannelWorld '99, Goliath actually endorsed David's IT channel strategies for the local market.

During a keynote on IT distribution strategies, John Kinney from Ingram Micro acknowledged the importance of channel services as an integral part of the offerings of the IT distributor, now and in the future. Obviously, LAN Systems couldn't agree more. For some time now LAN Systems has formally positioned itself as a channel services manager, focused on delivering the services our channel partners need to give them a competitive edge in the marketplace.

Distributors have been talking about "value-adding" for years - but here we're talking about more than technical services. Business-oriented services such as finance, marketing, consulting, customer care and support are just examples of the extra value LAN Systems can provide.

While we have been espousing our vision on the role of IT distributors as channel services managers, the Goliaths in the industry have remained fixed on the idea that the market only has space for classic time-and-place distributors, with logistics management being the only true value they provide. Their opinion is that resellers should invest in the other value-adding services themselves, and the distributor's role is to ensure low price points and to take care of logistics. In my opinion, those days are gone.

Partnerships are now an essential part of the IT industry, particularly given increasing globalisation, skills shortages and technology complexities. Organisations such as resellers, integrators, ISPs, and telcos can partner with a channel services partner which can provide them with key services and capabilities more cost-effectively than their own organisations. And, it seems, Ingram Micro now agrees. The services-based strategy described by Mr Kinney is exactly what LAN Systems is already doing.

In terms of pricing, LAN Systems believes the key for resellers is to manage everything at the transaction level, basing price as a percentage of the productivity and profit gains achieved by their customers after implementing new networking or telecommunications initiatives. This method is used in several other industries where companies are paid according to whether the promised benefits did or didn't eventuate.

So why shouldn't it be adopted by the IT industry? Why shouldn't IT resellers be measured and accordingly remunerated on their customers' performance? LAN Systems has facilitated this model and as a result we have built a firm reputation for ourselves in helping our reseller partners to better manage their transactions. We back them sufficiently with services that take price out of the equation. We want our reseller partners to stay around. But investing in services they will never be able to gain effective economies in will ensure they don't. Well, at least our customers will sleep well on our "watch" tonight.

Ingram Micro entered the Australian market through purchasing a local component distributor and a local time-and-place distributor. Essentially, Goliath provides little more than logistics management at this time. However, by its own admission it is now embracing a philosophy of channel management. Needless to say, we'll be watching with interest to see whether Ingram can successfully transform itself to adopt the channel services management strategy.

The important outcome in all of this is Ingram's endorsement of the channel management strategy which is a great win for the Australian IT industry. Through some entrepreneurial skills and ingenuity, combined with a thorough understanding of the needs and business issues faced by our channel partners, an Australian company has emerged as a leader in developing and executing this strategy.

Yours sincerely,

Nick Verykios, chief operating officer,

LAN Systems

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