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How to move

Evolving the business, and focusing on relationships and relevance mean that the transactional channel will still have a future in the digital world.

Tim Humphreys-Davies, CEO Pinnacle

As we move to the digital enablement of the transactional channel, where the cloud plays a core role, there are questions to be answered about the future opportunities for traditional channel players. Will vendors bypass distributors and resellers to directly target customers? Can distributors and resellers ensure their future sustainability by moving beyond the model of ‘box dropping’? 

The reality is the ‘race to the bottom’ with margin dilution is well underway, add to that rand to dollar exchange rates, competitive factors among market players, the large geographic spread and the security constraints of the South African market and it all means distribution is quite an expensive operation.
 
A further key challenge with distribution is that there’s still a necessary critical mass to achieve to get the required supply chain efficiencies. Part of that critical mass is the need to distribute traditional client or intelligent edge devices, and there’s a lot of opportunity still left. Cloud doesn’t mean the device is dead, it just means that the device form factor might change. IDC numbers average between 300 000 to 400 000 units of laptops and desktops, not counting tablets, being sold in South Africa per quarter. It’s still a vibrant market.

In the next five to ten years, the channel isn’t going to completely move away from the traditional ‘box drop’ approach. However, we do need to change the philosophy and ensure supply chain efficiency while simultaneously adding further businesses and services on top, which will meet particular niches and add value. For example, what’s to stop digitally-enabled distributors leveraging their efficient logistics networks to enter alternative markets? 

To ensure supply chain efficiency, the channel will need to make processes as efficient, fast and seamless as possible to get a product from A to B. This will mean increased automation and digital transformation to reduce manual processes.By refocusing their workforce from these manual tasks, channel companies can add value by providing customers with advice and guidance to help steer them through the increased confusion created as the technology world evolves.
 
In that vein, we’re already seeing distributors devoting more resources to supporting resellers with pre-sales support around multi-vendor enterprise solutions. It’s no longer about the products, but rather meeting the customer need with a solution, which might not come from a single vendor. With so much changing so quickly, in the mutli-vendor, multi-product world, it’s going to be complex and costly for small and medium resellers, which will struggle to stay certified in everything to the appropriate levels. This is where distributors’ pre-sales teams will add value by assisting reseller customers to stay on top of the fast cloud sphere, where new vendors are appearing with new products coming faster than ever before. 
 
There’s potential here for conflict if resellers think distributors are offering competing services and trying to eat their lunch. However, distributors must only offer services in tandem with resellers. There has to be a level of trust and collaboration, and the relationship with the end-customers must ultimately remain with the reseller. This service offering of highly certified skills from distributors should only be for resellers that don’t have the specific certified resources inhouse to procure and on-sell to their end-customers must ultimately remain with the reseller. This service offering of highly certified skills from distributors should only be for resellers that dont have the specified certified resources inhouse to procure and on-sell to their end-customers.
 
Through collaboration the channel can really add value to customers.

Looking beyond the credit management and logistics, the vendor’s reliance on the channel has long been about relationships and relevance. Because of market dynamics, and the scale and efficiencies involved the channel will always be relevant to vendors. And, because of the complexity of IT, customers will always need a trusted advisor to guide them, which means that the channel will always have its place. It just needs to evolve with the technology, vendors and customers to remain relevant. 
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