Customer buying patterns have altered the definition of mission-critical for the channel - Avnet Australia and New Zealand vice president and general manager, Darren Adams, explains the impact to ARN.
Forming a key part of the common business vernacular, the concept of core vs. context is taking on new meaning in the channel today.
It’s the leading question on the lips of every vendor, distributor and reseller - does this process create a differentiation that wins customers?
If it does, it’s core. If it doesn’t, it’s context.
“Perhaps ten years ago, everything was core,” Avnet Australia and New Zealand vice president and general manager, Darren Adams, said.
In speaking as a channel veteran of over 30 years, Adams believes that as resellers become closer to the end-user, the realisation that certain offerings are no longer central to making money is starting to dawn.
As the clichéd tsunami of technology crashes down on the Australian market, there is a growing consensus in the channel that partners must be operating on the lucrative side of such delineation to ride the crest of the wave.
“Resellers must move to outsourcing the contextual aspects of their business and instead focus on what is core,” Adams advised.
“As an example, for a large systems integrator, having a network operation centre is core to what they do. But for a mid-tier SI or ISV, it’s probably not so they might seek to outsource that element of the element.
“If you look at the cost of doing business, the price of goods used to be $1 million at 20 points of margin, creating $200,000. But today, the price of those goods might be $500,000, and a reseller might only make five points and come away with $25,000.”
Collectively, Adams believes resellers are succumbing to “incredible pressure” through diminishing margins, forcing a change of tack in terms of customer delivery.
“Resellers have no choice but to trim the fat,” he explained. “Long gone are the days of throwing solutions into a bundle and not worrying, resellers can’t do this anymore.”
Change for the reseller naturally triggers a chain reaction in distribution, as market mechanics transform and industry gears shift.
“Our job is to go under the covers and understand why it’s different,” Adams said. “Today some traditional resellers are starting to look and act like a distributor in some respects, in terms of licensing and how the renewals aspect of the business.
“Some parts of the channel almost have an operational feel to it, yet ten years ago, operational efficiency was really the domain of the distributor.
“There are resellers in the market that make a lower return than a distributor makes, yet ten years ago that would never happen.”
For Adams, the forces of the market are combining to form a new approach, based on distributors being non-traditional in the way it thinks and operates.
“Today we might be partnering, tomorrow we might be competing or complementing, and that calls for the channel to work together in a high-integrity model,” he said. “Sometimes it’s wise to move outside of your swim lanes a little where it makes sense to do so.”
Defined by an ability to “think outside of the box”, Avnet is adopting such a mentality to its core reseller base, viewing its partner community through a modern-day lens.
“We’ve learned that our resellers are not all equal,” Adams explained. “We have the big players who provide lots of revenue and are valued highly, but we also need to look after and service our ISVs, SIs and MSPs.
“In raw dollar terms they may actually be smaller, but they are crucially important in allowing us to bring specific solutions to market.”
Underpinning Avnet’s deepened reseller play, the distributor - which recently entered into an agreement to be acquired by Tech Data for $US2.6 billion - has also reacted to the increasing end-user appetite for new and emerging technologies, through the launch of six dedicated business units.
Spanning cloud, cognitive computing, data analytics, the Internet of Things (IOT), mobility, security and enterprise networking, the distributor is now offering a solutions specialist approach in Australia, designed to accelerate growth in software-driven technologies.
Billed as the primary growth driver of the ICT industry during the next decade, 3rd Platform solutions will be responsible for a 75 per cent increase in worldwide technology spend, which IDC expects to rise to $US5.3 trillion by 2020.
Through its seismic scale, the 3rd Platform stands to reach trillions of IP-addressable "things" - devices, monitors, and sensors - and billions of users through millions of new applications and services with a potentially global user base and unlimited hardware resources.
Yet as Adams explained, the 3rd Platform is not just a technology revolution; it's also a customer revolution.
“This demonstrates our strategic future,” he said. “They represent the key pillars of our go-to-market strategy and reflect the changing requirements of the end-user.”
With over 450 solution specialists on board globally, at a local level, the launch has been complemented by an internal company restructure, which sees Adrian Chu, Winston Wong and Paul Oxley commence director roles covering Customer Solutions, Next-Generation and Data Centre Solutions respectively.
“We’re setting ourselves up for success and see our vendors as an important part of that,” Adams added. “If you don’t have a strong portfolio it’s hard to be successful in distribution, and there’s a blend between aligning with vendors and technologies.”
Going forward, Adams expects to see further vendor activity from Avnet within the next twelve months, cementing the distributor’s move into next-generation technologies.
“When you look at what’s hot in the market and where customers are heading, the next-generation area is crucial,” he added.
“Our traditional plays around servers, storage, networking and data centre continue to be strong and ahead of market figures, but we’ll also continue investing in this new market in the coming months.”
In representing both Dell and EMC - now Dell Technologies - Adams acknowledges that distribution strategies can be dictated by market activity, as mergers and acquisitions connect and split vendors in equal measure.
Looking down from a high-level helicopter, the channel is changing as vendors fight for relevance and supremacy, prompting distributors to stay close to patterns emerging both locally and globally.
“Balance and nimble,” Adams explained. “They are the two key words that will define distribution today. Balance in the sense that it’s never quite as bad or quite as good as it seems and being nimble in how you operate. Be clear on your strategy but be prepared to change it.”
Alluding to the “fail fast” approach of many an expanding business, Adams accepts that previously, the company “sometimes hung onto an idea” that was struggling, instead of cutting loose and starting over.
“It’s almost child-like to hang onto an idea these days,” he observed. “You have to be prepared to say this isn’t working, move on and chase the next idea and try to make that work.”
This article originally appeared in the September issue of ARN magazine - to subscribe, please click here