At a recent industry lunch hosted by ARN, Avnet's Darryl Tucker made an obvious but fundamental point about business: "We are all in this to make a quid." When there's little or no money to be made in a particular product range or technology, interest cools pretty quickly.
In the local notebook market, the past couple of years has seen some market consolidation driven by cut-throat pricing. While the US and major European markets might be able to support 10 brands, the numbers simply didn't add up in Australia. An entry-level price war was waged - largely between Acer, Dell and HP - and vendors that didn't have a broad set of products were faced with two options - concentrate on specific segments or get out of the local notebook market all together.
Thankfully, notebook prices seem to have stabilised a little of late and vendors are focused on helping their resellers to raise their average price by upselling customers onto machines with better specifications.
But as one price war fizzles out, another comes over the horizon. Next up in the Australian market looks likely to be printers (see page 1). With as many as 15 badges trying to get a piece of the entry-level inkjet action, the only likely result is a price squeeze. Once again, it becomes survival of the fittest and those with a broad product set are best placed to ride out the storm. Others will be forced to reevaluate their go-to-market strategies.
The sooner this is sorted out, the better it will be for all concerned because price wars do nobody any favours. For too many vendors, read the same for too many distributors. It never fails to amaze me that some vendors with a mature channel feel the need to have eight distributors servicing the Australian market. This is hardly a good way to get them focused on your products.
At the start of last year, IBM announced major changes to its software distribution and introduced specialisations. The idea was to improve the knowledge base within distribution, which in turn would mean better support for resellers. Unfortunately, best intentions have not translated into great success.
The problem, it seems to me, is that the IBM software distribution model has become too fragmented and complicated. Resellers that sell a number of the IBM software brands have been forced to buy them from different sources, and some distributors have lost their motivation as a result of the realignment.
So what is the right number of distributors in the Australian market? In a recent online poll conducted by ARN, 38 per cent of resellers said they typically single source while more than half compare the price offered by a couple of distributors. Only nine per cent said they shopped around to get as many quotes as possible.
In my opinion, two distributors is enough for any vendor in Australia with the exception of Microsoft and a handful of major hardware brands. Rule number one when building a channel model should always be keep it simple wherever possible. Doing business is difficult enough without unnecessary complication.