A survey of the top 500 companies in Australia has found that corporates prefer to buy direct from vendors, rather than deal with the confusion caused by an indirect and direct channel strategy.
East and Partners, the research company that produced the Canberra Report, a document that exposed a litany of inconsistencies in the Federal Government's IT outsourcing scheme, has found that IT vendors are not performing to the expectation of the 500 leading corporations the company surveyed in Australia.
Of great concern to the IT channel is that the study found that corporate end users were more satisfied with their dealings with direct-selling vendors than with those who sold through the channel.
"The vendors with the best ratings are not those with a pure channel mix," said Paul Dowling, principal analyst for East and Partners. "Direct vendors generally scored better. Primarily this is because the entity end users sees themselves working with is clear-cut."
Dowling said vendors with a strong channel mix of direct and indirect sales are not satisfying customers because the customer is often confused about who they are doing business with.
"There is often in-fighting between the two as to who owns the customer, then there is the passing of the buck when there are problems," he said.
The research has struck a chord with Braham Shnider, CEO of channel strategy consulting firm Channel Enablers, who was not surprised that so many customers were dissatisfied with channel companies. However, he said this was the fault of vendors that failed to clearly define their partnering strategies. Most vendors with channel strategies are "inconsistently applying" them, he said.
"Vendors need to have a clear and articulated strategy, which also outlines the benefits of such a model to the customer," Shnider said. "In order to satisfy the customer's needs, the roles and responsibilities of the vendor and the channel partner need to be clearly defined so that the customer knows what value each is bringing to the table.
"Most vendors in Australia don't do this and that is where channel conflict comes from. If vendors did make this clear there would be a larger percentage of satisfied indirect customers."
Shnider also said the onus was on the vendor to set up demarcation lines between vendors and channels and that channel partners need to align themselves with vendors that have clear strategies.
"It is not the role of the channel to define what those roles and responsibilities are," he said. "Vendors lose sight of that. This rush for quarterly numbers and to keep their jobs is blinding their judgements. In recent times, many of these inefficiencies have been masked by incredible growth."
According to the research, very few end users named channel partners in their top 10 strategic suppliers, even though some of them purchased over 80 per cent of their IT budget through the channel.
"Users still see themselves as having a relationship with the product principal even though they source through the channel," Dowling said.
The solution, according to Dowling, is to sort out the vendor-channel relationship from the get-go.
"A lot of the responsibility should lie with the vendor," he said. "They have to sort out what they want more -- to achieve economies of scale by using the channel, or to own the customer. Many end users sign a deal with a channel partner, only to watch the vendor come in after the fact and try to get in on the deal. The vendor and the partner compete with each other, and the end user gets confused over who they are dealing with."
Dowling said there were a few examples of vendors with a direct and channel mix that scored well with end users. NEC for example, rated across the board as the third-best vendor. Dowling said NEC works a two-market model, but is very clear with its customers and partners as to the nature of its relationships.
"Basically, they've said they don't want to have their cake and eat it too," he said. "Whether it's direct or channel, the end user needs to know. It is better to sell direct than to have a muddled face in the market."