Menu
Editorial: Going for Gold

Editorial: Going for Gold

As we reveal in this week's page one exclusive, pressure is mounting on all levels of the channel to prove what value they introduce to the supply chain.

Some would argue that distributors do little more than add a handful of points to the end-user buy price for warehouse and banking services. Others would recognise that logistics for the vendor and a line of credit for resellers are just the tip of the iceberg, particularly with the industry maturing to the point where value has to be visible.

Cisco Systems, one of the chief drivers and beneficiaries of the 1990s information technology boom, is looking at ways to make its route to market more efficient. Under pressure from shareholders, which are still not seeing anything near realistic price-to-earnings ratios, despite massive cuts in the stock value, Cisco needs to do something about flat growth.

All sorts of spin will be put on the situation by Cisco, but the bottom line is that it has concluded it needs to lower its prices. One way to do this is to introduce efficiencies into its supply chain. Globalisation is the Holy Grail of efficiency. One planet, one system, no duplication. Economies of scale and all that capitalistic rot.

To this end, a series of negotiations has begun between Cisco and all of its major partners. The desired end result for Cisco is to bring the network vendor's local channel in line with its global model. This will supposedly introduce new efficiencies to the supply chain and eventually lower prices to end users, who will then buy more. Good theory, but how about in practice?

Most players in the channel say the Australian market is unique. But Kip Cole, Cisco's local channel manager, believes this is a load of hogwash. He is sizing up the odds before possibly betting the company's carefully nurtured and extremely loyal supply chain on the notion that markets are the same the world over.

Make no mistake, if Cisco does take on more of its pre-sales support and logistics and then gets it wrong, the consequences may be dire. If it cannot support its Gold Partners as well as distributors such as Express Data, LAN Systems and Tech, then service to the all-precious end user will deteriorate.

Distributors will be offside, Gold Partners will be screaming at all the additional work expected of them, and both will be frustrated with the sporadic supply of goods from a giant machine. Customers will go elsewhere in all the confusion.

To Cisco's credit, it is not going to make any moves without speaking to all the affected parties. "Nothing is set in stone," Cole told me last week. "There is no timeline. We are not there to tell channel partners what to do."

All Cisco has done at this stage is open negotiations and admit there is a desire to shift to the global channel model. The company has been way too clever with its channel partners over the last five or six years to either abandon them or suddenly turn around, wave a big stick and say, "this is the way it's going to be".

From what I can see, Cisco is in no way denying the importance of its channel nor is it trying to do anything underhanded. It genuinely thinks this is the right thing to do for its Gold Partners and customers. However, I can't help but think the final mechanism will be far less attractive for all three tiers of the channel than the blueprint.

Whatever happens, we are one step closer to an open-book style of channel model where each and every player has to clearly demonstrate what value they add and why they deserve to be paid for it.

Let me know whether you think this is a good thing.


Follow Us

Join the newsletter!

Error: Please check your email address.
Show Comments