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Editorial: David and Goliath

Editorial: David and Goliath

Conversations with many of the country's leading distributors during the past week have provided a fascinating overview of how the face of distribution in Australia, and indeed globally, is changing. There can be no doubt that it is a tough game to play at the moment and there are no signs that this is going to change. Efficiency is king and has been for some time.

But the trend among multinational vendors to reduce the number of distribution partners they work with has raised the bar again. From a vendor's perspective, it makes perfect sense and is a fair reflection of alterations to the way the market operates. Selling IT is no longer a simple matter of order fulfilment - end-users are more knowledgeable and demand for new technologies must now be generated.

In the vast majority of cases this is done through the channel, which means resellers must be able to sell business outcomes and solutions rather than relying on the new bells and whistles built into latest models.

A key part of that shift for the vendor community is establishing more meaningful and structured relationships with fewer distributors. These partners must be able to educate dealers on the key differentiators of any given vendor's technologies.

While this is all well and good for manufacturers, it leaves distributors of all sizes with something of a dilemma - partnering with too few manufacturers leaves them exposed if one of the major contracts is terminated, but signing up with too many leaves them open to accusations that they are not providing enough focus.

Even the really big players have found this out to their cost. Companies such as Tech Pacific and Ingram Micro have enough capacity in their operations to hedge their bets with several leading vendors in all of the categories they carry and, if a relationship does go sour, they can plough surplus resources into competitor products that are proving more successful for them. But no matter how casually they shrug off agency terminations, you can bet your bottom dollar that they would rather have retained the business of major partners such as Cisco, Computer Associates and Veritas.

At the other end of the scale, the natural assumption is that the little guy's situation is even more precarious in the new world order. After all, a niche distributor usually has neither the necessary infrastructure to spread its risks across manufacturers so effectively nor the clout to gain the attention of major brands. For a long time, this has meant forming tighter relationships with small, specialised vendors that are often looking to break into this market.

But hang on a minute, isn't this exactly the shape the market as a whole is starting to take? And, as such, does this not level the playing field rather than deepening the divide? While smaller distributors cannot offer national coverage to their vendors, they must have an edge over their bigger competitors when it comes to demonstrating brand loyalty. The size of a distributor's business, it seems to me, is likely to be less of an advantage in future than it has been in the past.


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