Channel debates value of services-based distribution

Channel debates value of services-based distribution

Prominent channel players have knocked heads over the value of services-based distribution, with one claiming it eats the lunch of resellers.

Leading Solutions NSW manager, Roy Pater, argued distributors in the services game were taking business away from the channel they served. He made the comments at a recent HP ProCurve event.

"Should a distributor be providing services? I think categorically the answer is no. That's not their sphere," he said. "They are facilitators. They are there to keep us honest." Key services distributors should be providing included demonstration kit and showrooms, product access and credit facilities, Pater argued.

"To assist with the pre-sales process makes sense as it's all part of facilitation. But when it comes to actual delivery, that's the clear distinction between the reseller and distributor or vendor," he said. "And if you have a look at where there is channel conflict: it's whenever a vendor or distributor starts to deliver services. Not being specific is what muddies the waters."

Data#3 managing director, John Grant, argued value added distribution could also level the playing field in the reseller community. This contradicted the push by integrators to differentiate.

"It gives a smaller organisation the ability to compete on the same level as the bigger players who make the investment," he said. "From a customer point of view, if they can create a competitive situation, they think they will get a better price. Having a reseller working with a distributor's skills in the mix means everyone will get squeezed on price."

Other resellers are also skeptical about services based distribution. Principal consultant at voice and data integrator Milnsbridge, Adrian Weir, said the success of a services relationship depended on trust.

"If you need those sorts of services [from a vendor], it's very much a trust issue. And the same thing goes with when you're a reseller who sees a distributor that's higher up in the value chain. They have a competitive advantage," he said. "I would always look at a partner who is operating in the same space as I am."

However, managing director of Uptime Distribution, Tony Geagea, compared working with a fellow integrator to going on a date with the ex-boyfriend in tow. Uptime provides a range of value-added services to resellers, including training, 24/7 support, end-user lead generation, pre-sales consulting, scoping and advice, onsite engineering and demo facilities.

Geagea said value-added distribution allowed resellers to bridge into new areas of expertise. This was particularly critical when vendors did not have a local footprint or technical team.

"At the end of the day it comes down to the level of expertise you have in-house. Do you really want to take that risk with a larger client that has been loyal for many years?" he asked. "As long as there's a flexible model in place for the reseller to grow their expertise in-house and take that responsibility back, then it's a low-risk option that makes business sense. It allows them to build a new department in their organisation and stay competitive." Although it doesn't use third-party distribution services, Regal IT managing director, Mark Gluckman, said technical and support skills at a wholesale level were a low risk way for resellers to gain technical know-how.

"Vendors only know their own products - as an integrator, we have to know how it all fits together. If distributors offer high value services and escalation there, it's brilliant," he said. Firewall Systems marketing director, Nick Verykios, said the popularity of its servicebased business was in the figures: 13 per cent of its revenue comes from ancillary services sold through the reseller.

"If you look at some of the services we do - advanced hardware replacement for example: the vendor's don't do it, the resellers can't do it, but if they don't have it, they won't get the sale," he said.

Verykios admitted controversy could arise when a less-skilled reseller teamed with a service-based distributor is up against an integrator who has invested significantly in a vendor's technology.

"It comes down to the vendor's ability to have a good channel program which will protect the reseller when they have invested in their technology," he said. "Any reseller who has invested should have a major advantage through deal registration or training for instance." Verykios said service-based distributors also needed to avoid dealing directly with the end user.

"Resellers have the prime contract and are absolutely responsible for transactions," he said. "In order to win these transactions with complex technologies however, they can't possibly service every customer request with inhouse expertise. They should be smart enough to come to us."

Matrix CNI sales manager, Jacques Saupin, agreed value-added distribution relationships could only work if rules of engagement were firmly established.

"If the vendor and distributor are clear about exactly where they stand and what their model is then we can respect them on that," he said. But Leading Solutions' Pater was critical of how value-added distributors made money off services.

"The moment you put services into a distributor, they'll be abused. Distributors are box shifters. The sales mindset is shift as much volume as you can."

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