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The channel is the solution

The channel is the solution

It's no secret any longer that the "value" in value-added reseller has seeped out of products and into services. The "added" has been discounted to the point of break-even. Likewise, reselling has become a commodity game at best, rendering the term "reseller" moot.

Whether you call it bifurcation or segmentation or natural selection, the truth is that the channel is forever changed. There are now two separate camps: those firms that ship and those that sell. You can count the number of companies that profitably do both on one hand - maybe two, but the number is declining. Logistics in the "new enterprise" (meaning those companies, both large and small, that are characterised by the depth and breadth of their IT investments) is a treacherous game.

It's pick, pack, and ship, all while ensuring availability and the best price. It may ultimately mean building it yourself without possessing the size and scale of "Big D" (aka Dell Computer). Picture all of this against a backdrop of industry consolidation, shrinking cooperation, constricting margins, tightening policies on returns and evaluations, and reductions on vendor-backed sales and training support. This is indeed a dead-end business. Can I offer an alternative? Head for the SI hills.

The solution is the channel. The logistics piece of the pie will be gobbled up by firms made to oversee inventory and supply-chain management - and that have scale (and thus can afford the risks of title-taking and large credit lines). Take that to mean consolidation in the ranks of distributors. But the opportunity to specialise in solutions is strong and growing. (You know it's a fat and happy market if Michael Milken and Larry Ellison are sizing up the space and starting to gobble up integration shops.)Wave of opportunityBut not to worry - this area is growing faster than the rate of technology, because the number of companies requiring end-to-end technology solutions in the new enterprise is multiplied by both the number of "mission-critical technologies" and the increases in outsourcing by those companies. It's an enormous wave of opportunity that actually can't be satiated in the foreseeable future.

In the "new SI channel", vendors, customers, and integrators come together to meet customers' needs. Solutions integrators perform as general contractors that handle everything from product allocation to software development. Furthermore, these SIs are able to leverage vendor and customer resources to ensure that products are built on time, on budget, and to customers' objectives. What's required is a more open channel, where resources are more easily tapped and turned into assets. In this scenario the vendor and the customer are actively involved in solutions design, implementation, deployment, and servicing down the road, but the control of that solution is in the hands of the SI.

Looking at the market from both the customers' and the channel's perspectives, the SI is tapped to develop and manage the project for the enterprise customer. Several vendors recognise a need to develop an integration strategy, while others are perilously stuck in their direct-sales model and legacy dealer/VAR program that is as obsolete as the 386 box on that reseller's desk. Those that succeed will be the ones that address the needs of the SI channel and effectively meet those needs.


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