Australian resellers are growing to accept vendors’ direct online models, with 11 per cent refusing to work with brands which bypass the channel, while the majority recognise that profitability lies within services.
That figure comes from a survey of 122 local resellers conducted by Affiniti, a digital marketing firm which provides a free monthly service to resellers; it compiles a vendor-sponsored newsletter on behalf of channel businesses which is distributes to prospects and clients.
The firm found that 26 per cent of resellers are not bothered by vendors going direct, claiming that these companies are unable to provide the same quality of services and support, therefore leaving space in the market for greater value-add.
“IT vendors providing direct procurement services has never been an issues for us,” Network Pro account manager, Eliot Woods, said. “They are not able to provide the after sales support that we can offer, and our customers value the services we provide.”
“Our focus has never been on making high margins from procurement, but providing support and managed services as part of a larger solution.
Similarly, Next Century IT Solutions partner, Markus Hugenschmidt, said small and medium-sized IT companies must profile with service delivery and not price because the latter is unfeasible.
“The issue can be illustrated with Hosted Exchange,” he said. “The market price set by Telstra and other large providers is around the $10 mark. Wholesale price is $9. Which makes sort of sense when the Microsoft SPLA licence component is nearly $5 already. However, with a $1 per mailbox margin, and a client expecting everything to be included in the hosted offering, there is literally no money in it unless you have massive scale.”
While about a quarter are unfased, a further 41 accept direct vendor sales so long as pricing controls are in place and product sold at an RRP to allow resellers to offer a lower price point to enable the bundling of services and support.
Meanwhile, 15 per cent object to the concept, but accept its occurrence.
I Know IT chief executive officer (CEO), James Vickery, said, “Businesses have always had the option to buy products from retailers rather than consultants.”
“Hardware margins have been diminishing for many years now. The value is in piecing technology together, not in the components themselves.”