Singing from the same channel song sheet

The Three Tenors

The literal sprawl of the channel can create complexity, lost efficiency and ever diminishing margins for those participating in this service value chain. However, it need not be this way. The three tenors - vendor, distributor and reseller - really can work as one to produce harmony and performance that results in greater customer choice and satisfaction. Easy to say but often challenging to execute, this performance potential is dependent on each artist performing their role consistently and with clarity of intention. Each must be clear about their own identity and role if they are to function at the optimum level that delivers the greatest value to customers.

Consolidation will continue, however, customers will remain the benefactor. The best partnerships do share a common mission - to earn the right to serve and support customers and ultimately to retain those customers with an eye towards the lifetime value and profitability of those relationships. Vendor, distributor, reseller - they must remain focused and coordinated around the very reason for their existence - customer choice, customer delight and customer retention. None of these distinguished players is really in business to serve one another exclusively or in isolation of the ultimate audience - the customer. It is true that vendors over time have struggled with the temptation of short term gain by selling direct to customers. However, vendors who are committed to long term customer relationships, local care and support for those relationships and want to offer the richest portfolio of value added services know the role of the distributor and reseller is priceless. Customers want choice. They also want to believe in the value chain that sells, services and supports them. When they determine that value chain is present with a trio of tenors bringing collective value and service to their environment, the three stakeholders will find themselves in a prime position to perform and earn the customer's confidence.

At Novell, we are firmly committed to our partners and channels from the top of the organization to the person on the front line working with our distributors and resellers. We start by listening to our collective customers. We listen to what our partners require to be successful. We're clear about what we require to perform our role effectively. Then and only then do we tee up a value proposition for customers that leverages the best of our distributor and reseller relationships. The future of the channel is dependent on the ability of each participant in the value chain to listen to the customer and frame solutions and offerings that clearly articulate value driven choices for our customers. The ability to work as one starts with a clear understanding of what our respective role and identity is in the value chain. Do you know the role you play? Ask your fellow tenors the same. Our customer "audience" is waiting to be served.

Posted by Dan Veitkus, Vice President, Partners and Channels, Novell EMEA | 06 Jul 2009

The goals of vendors, resellers and distributors

Vendors, resellers and distributors do share the same goal, which is ultimately to make a profit. The current economic climate has led to an increased relationship with vendors and partners, and in turn increased the number of opportunities. At the moment, there aren't many opportunities to be had, so by working closely we can focus on potential wins and maximise the bottom line.

The strong relationships we have with existing partners has allowed us to maximise opportunities.

Our partnership channel has always been focused on building long-term relationships for a better chance of winning business and retaining the clients in these troublesome times. With our current partner channel, we are seeing an increased amount of sales activity.

Vendors, resellers and distributors work better together by taking advantage of improved communication and transparency, offering greater margins and using a consultative sales approach. It's a mutually beneficial relationship.

ControlCircle has had success with the white labelling of the technical support delivered by our Network Operations Centre (NOC) and also the white labelling of our support and monitoring portal. This allows partners to use their own branding and create a bespoke offering that caters to their exact needs. We have listened to our partners and what they've said. We've encouraged continuous 360 degree feedback to ensure that we are delivering the right message and satisfying their clients' needs.

Posted by Jason Vaughn-Phillips, Channel Director at ControlCircle | 03 Jul 2009

How Online Services are Changing Traditional Channel Relationships

The traditional reseller model is evolving, particularly within the managed services space, thanks to the growth of online services. Many service providers such as Claranet are providing remote hosted applications, and are finding that as trust grows in the reliability of delivering the same IT services, at the same standards, over the Internet, the pace of uptake of these services is increasing. As a result, this is reshaping the relationships between vendors, resellers and distributors, how they interact with each other and the customer. End customers also have their part to play, increasingly consuming technology as application services with lowered risk and entry cost, than via the traditional in-house project route. This has changed the focus from the availability of the separate parts of the solution (Application, Hardware, LAN & WAN) to one where customers are placing more value on an SLA which covers the application performance - no matter what?s happening at the backend.

This shift to online services is opening the field to a new type of reseller model that is more collaborative and marks a shift in the traditional distributor-reseller route to market. For example, these services are changing the primary means of end point technology delivery, and offer the ability for resellers to nurture an ongoing relationship with the customer and enjoy repeat business rather than just occasional sales spikes - thus creating more value in the channel itself. Claranet believes some resellers are 'leaving money on the table' and is working closely to service-enable more progressive resellers to seize the managed services opportunity.

Ultimately, the channel is built upon trust and collaboration in order to provide a value-added service to the customer. And even in today's competitive environment, it is only the short-sighted vendor who would cut out the reseller, rather than work through the channel, to poach deals directly. So although the goal - of making profit - hasn't changed, the traditional channel model is certainly evolving and it is the more agile and innovative business that seeks new ways to generate revenue, and adapts to new reseller opportunities, that will ultimately prevail.

Posted by Simon Bearne, Head of Channel at Claranet | 19 Jun 2009

Vendors must invest in their channel partners

In the current economic climate it's vital businesses exploit all their routes to market, and the channel is a key part of this and one not to be taken for granted.

Vendors must ensure they are investing in their channel partners, it cannot be one way. It's important to have a programme in place which rewards resellers and incentivises them to get that sale.

Resellers should be thought of as an extension of the company and should benefit from training like any sales person would. The lines of communication between vendor and reseller should be kept open at all times - particularly times like these.

The channel should be considered a trusted advisor and training is the cornerstone of this. I would tell resellers to gain as many skills as they can over the next 12 months, as this expertise will become their competitive differentiator.

Posted by Jason Ellis, Symantec EMEA Channel VP | 15 Jun 2009

Different ways of sharing the same goals

On the whole, I believe that vendors, resellers and distributors do share the same overall objective which is to increase profitability by maximising sales and minimising costs. However, each may have different ways in which they hope to achieve this: vendors generally want to sell product, distributors supply product and potentially services and resellers are increasingly trying to sell more services to add value to product sales.

To work well together, each party should have a clear business plan that maps into the plans of the other parties involved. The plan should detail how each party will ?go to market? and who will be providing what value to the relationship. By having clear expectations, each party can judge both their and the other?s performance against a benchmark and look to improve as the relationship develops.

Distribution has an important part to play by acting as the ?oil in the engine? and making it easier for partners to do business. This could be through reducing costs for vendors and resellers by providing ?value-added? services such as marketing or technical support, credit, logistics or purely by brokering business relationships. Some vendors hoping to grow their market at the low end, such as Check Point for example, are increasingly leaning on their distribution partners to work with those resellers that they do not have a direct account management relationship with. It's all about being flexible and adaptable and being ready to work together to find a solution that works.

Posted by David Ellis, director of e-security, training and professional services at Computerlinks | 11 Jun 2009

Customer ownership is divisive

A reseller's goal is to provide the best solution they can for their customers. They want end users to come to them as trusted partners.

Manufacturers' goals are to sell their product, regardless of whether it is the correct solution for the customer. If a reseller sells vendor A rather than vendor B, they can end up at war with vendor B.

It is amazing how quickly distributors and vendors think it is their customer, rather than the reseller's. Vendors often feel: "We are Rolls Royce and the customer wants a Rolls Royce car."

Distributors sit in the middle and try to placate everyone but are normally closer to the vendors.

Posted by Jess Thompson-Hughes, managing director, React Technologies | 10 Jun 2009

Channel issues become business issues

The channel is an interesting dynamic and lines are forever blurring - it certainly gives real meaning to the idea of 'grey area'. However, in the current economic climate, and considering the business issues that the channel are facing, vendors, resellers and distributors can no longer afford to work separately or think about their own priorities. The 'channel issues' seem to be dissolving within the current climate - only to resurface as 'business issues'. Any particular issue is therefore no longer a channel issue - but rather a business issue. On the flipside, this also means that it is no longer a channel opportunity - but a business one. The secret lies in the working together.

One of the clear economic and business dangers in the current recession for software companies and the channel, is companies' spending on new product licenses. But, the recession also presents an opportunity to drive change within an organisation and put a greater focus on the services business. This is a vital opportunity for the channel, as service and maintenance revenue represents 40-50 per cent of the total revenue for most high tech companies. Recurring revenue streams from maintenance contract renewals is therefore one way of bucking this trend and finding innovative ways of getting the most out of current IT infrastructures. If this is done correctly - and by working together - the channel can be protected, but also protect its own clients, from market changes and fluctuations and enable them to drive predictable revenues and profits, improving the ROI for their customers and partners in a simple but effective manner. Also, looking at the value behind commodity revenue streams, this is both value for the channel and the vendor.

ServiceSource annually talks to 400,000 technology buyers, closing over a million support and maintenance transactions. On behalf of OEM clients, the company manages the channel relationship with 40,000 distributors and resellers, enabling them to increase their service revenue.

ServiceSource adds value to the channel specifically by being focused on what they do best and managing service renewals, while the channel can benefit through things like data quality and a proactive approach to drive more revenues. It's more about expanding the pie - rather than taking a share of the existing pie.

Posted by Crosbie Burns, executive vice president, Worldwide Field Operations at ServiceSource | 09 Jun 2009

Vendors need to provide 100 per cent channel integrity and 100 per cent channel focus

The traditional channel model has not changed significantly but has needed occasional refinement to keep in step with the demands of the marketplace.

It is important for vendors to have a clear strategy and be able to communicate this throughout the channel. If vendor and partner share the same goals and ambitions then this can be aligned to each other's strategy.

Finally, vendors need to give the partner what they most want on a more consistent basis, namely:
- A competitive product to sell with add-on services that provides a competitive edge and differentiation
- Consistent sales, marketing, and customer support
- A plethora of surrounding programs that can drive additional revenue through the channel
- And most of all, increased margins

The bottom line is the vendor/partner model will continue to evolve as business adapts to change. Now, more than ever, vendors need to provide 100 per cent channel integrity and 100 per cent channel focus.

Posted by Kevin Roberts, Regional Director Northern Europe and South Africa, Optenet | 09 Jun 2009

Both need to address end user needs more directly

Resellers may be looking at solutions and distribution is often looking at pushing out boxes. But I don't think it's a conflict of interest - it just needs to align physically and that's the reseller's job, to align their boxes.
There perhaps needs to be more face to face contact. Vendors need to go and see how they are working. They [vendors] sometimes fail to grasp what the end user needs and rely too much on Gartner reports and all those kinds of things. Especially when you're talking about SME customers.

Posted by Scott Grimsby and Scott Molvin (co-directors), Links Business Solutions | 08 Jun 2009

Working together

These are challenging times but I believe we all - vendor, distributor and partner - still have our unique part to play. Ultimately this interdependence is positive and it's in all our interests to work together to build business. Harmony can be maintained but it's all about playing to our strengths; we recognise the value resellers have and build our business model to support them in driving sales; similarly we work with specialist vendors in our market, as this is where we believe the biggest growth opportunities will come from and where we can add most value to our partners with dedicated support, training, tools and skills.

Alex Teh, Commercial Director, Vigil Software

Posted by Alex Teh, Commercial Director, Vigil Software | 08 Jun 2009

Keeping the waters clear in the channel

In my view a channel focused go to market model works well; the end customer is always going to need to be sold to and the channel provides a way for a large manufacturer to give that local touch and feel whilst avoiding high overhead costs. However, it's important that the organization's goals are aligned with that of its partners.

Keeping your goals aligned is where things can get complicated but it is important to work together with resellers as they can add the necessary reach and value through extensive market knowledge to compliment market leading products. If the relationship works, vendors can concentrate efforts and resources on designing and developing market leading products.

Within the telecoms sector in particular, there is a reliance on distribution to transfer the supply of products to the market. In order for this channel focused go-to-market-model to succeed, each part of the chain needs to clearly understand their set role ? covering everything from product handling, communication, account management to marketing. Without clear definition of roles from the outset the relationships can be a constant battle. Another problematic issue is trust, particularly between the manufacturer and distributor, as each side wants a piece of the customer, in particular a detailed understanding of their business needs and challenges.

To sail through the complexities of the channel it requires a co-operative but cautious work ethic. Relationships should be about trust, a common goal and most importantly an understanding of what everyone?s goals are throughout the chain. With understanding and common ground will come success; preventing future problems and ensuring a smooth relationship.

With economic pressures dynamics of channel relationships are having to change in order to be leaner and meaner.

Posted by leon mangan, Channel Sales Director, Siemens Enterprise Communications | 08 Jun 2009

Yes, but things could improve

To a large extent if we didn't, the system wouldn't work. Having finance in place and stuff like that, more negotiable terms and more use of local reseller groups like Brigantia would make things even better though.

Posted by David Whitby, director, PJR MICRO | 08 Jun 2009

Small is also beautiful

I don't think vendors think too much about smaller resellers. The focus is often on larger resellers. I think smaller resellers need more designated account managers. More talking and communication links are needed.

Posted by Paul O'Brien (MD), Craig Davies (retail supervisor) and Tom Daniels (IT consultant), of Think About | 08 Jun 2009

Servicing the services

They can definitely work better together. There are sometimes mixed messages. We think that communication from vendors is sometimes confusing. Especially since we all sell less kit than ever now; it's all about wrap-around services.

Posted by Adam Harris (MD) and Mark Lambert (IT), Bear IT | 08 Jun 2009

More good than otherwise

I think they do share the same goals. I work for a distributor; I think we are all on the same page. If not, there are problems. Part of the role of a distributor is to see that we are relevant to resellers.

Posted by Frank Sutton, head of UK and Ireland channel, Consolidated IT | 08 Jun 2009

A profitable proposition will align vendor and channel goals

As a vendor, our focus is very simple - make our proposition more profitable than anything else the partner does. The following are key to achieving this goal and if a vendor can deliver against them, both the channel and the vendor will be truly aligned.

Proposition: A compelling and unique sales proposition with a demonstrably short and easy to justify return on investment that is relevant to the vast majority of a partner?s customers. Selling something new to existing customers that leverages existing skills is the most cost effective sale for a partner.

Marketing: Drive down the cost of lead generation though co-ordinated marketing campaigns and contribute to the cost of delivery. Whether this contribution is reducing the unit cost of personalised collateral, managing both production and physical dispatch, paying for the postage or a venue for a seminar or workshop, the outcome is the same - every lead costs the partner less.

Sales: It is all about the cost of sale. This is based on the sales conversion rate, the time taken to move from first touch to close and the margin per unit sale. A sales person will always migrate to the easiest commission, provided that they have a strong and sustained pipeline being generated - and confidence that new customers become strong advocates for the solution.

Implementation and consulting: The ability to successfully execute the implementation within the budgeted days, at good day rates, yet leave the door open for sales of both software licenses and consulting services.

Support: Justify the support renewals by adding quantifiable value through functionality enhancements - not by the number of support calls received.

Relationship: High quality communication across every aspect of the business, using virtual communication where possible so that every employee of a partner has access to what they need 24x7 without the need to talk to someone. That leaves the time to make all one to one communication more focused and more valuable for all.

Posted by Neil Robertson, CEO, Compleat Software | 05 Jun 2009

Distributors have key role to play in maintaining channel harmony

From a distribution perspective, successful channel relationships are
forged on recognising the strengths, weaknesses, aims and ambitions of
your vendors and resellers. Everyone wants to be profitable - so in
that sense everyone has the same goal - but beyond this, you could be
faced with any number of different scenarios. Some vendors want to push
out into new geographic or vertical markets, others desire a highly
targeted approach; some resellers look to take on as many different
complementary product lines as they can, others carve out a market for
themselves and are happy just to sit tight.

Equally, some partners lack UK brand awareness, while others don't have
the logistical capabilities to match their ambitions. For distributors
to be successful, they must underpin the channel by supporting all of
these different goals - recognising that different approaches are
required for different partners, that flexibility is key, and that
harmony within the channel will be achieved by aligning the right
vendors with the right resellers, and vice versa, so that everyone's
objectives can be met.

Posted by Nick Preston, sales director at CCI Distribution | 05 Jun 2009

Different vendors, different agendas

It depends on the carrier. I think in our case, yes, we share the same goals as our resellers. Our stated intent is that we do not want to compete with our partners and the only way we serve the SME market is through the channel. But other carriers do not understand the wholesale market.

Posted by Ian Thomas, director of partner services, Cable&Wireless | 04 Jun 2009

The channel is truly unique

Every reseller or distributor was founded on the same principle; their founders believed that they had a business model which could add real value to its customers. Over the years and decades, vendors have stripped this value away with too many pricing models and programs designed to drive simple volume.

The channel has developed a very sophisticated and mature volume model upon which it can grow. If vendors truly believe in the value of the channel, they must invest in programs to support and grow value orientated businesses as well as supporting and maintaining volumes. The temptation can be great for vendors to 'select' the business transacted via the channel, focusing too much on the transaction and not enough on the crucial added value.

The channel is made up of many businesses offering unique solutions and adding real value to their customers. Distributors have tremendously slick operational models offering a real breadth of value added services to resellers and beyond to end users. Resellers themselves offer unique, in situ practices, reaching diverse audiences and encompassing a wide range of IT. There aren?t many vendors with that scope, reach and diversity. Vendors need to value this and be prepared to invest in its growth.

Posted by Gary Fowle, Channel & Marketing Director, Fujitsu. | 04 Jun 2009

We're all in it together because the channel works well for us all

Most (smart) vendors will agree that the channel is a sensible route to market that simplifies the process for the vendor considerably, that?s why vendors seek out quality value add resellers. It?s always a surprise to find that there are vendors, sometimes well known big brands, who profess a 100% channel strategy then are rumoured to go and poach the most lucrative accounts for themselves.

Obviously it's one way of doing business, but degrades the ability to build trusting, high value relationships with the expert resellers who could be doing a far greater volume of work than most vendors want to take on. It's killing the goose that lays the golden eggs, pure and simple.

Resellers, distributors and vendors should have the same goals- develop a good relationship, make sure aims are complimentary and support your partners as they are supporting your business.

Like any business relationship the dynamics change over time, but from the vendor's point of view it boils down to a simple choice- you want to sell direct or you want to use VAR expertise. A mix can only work when one is honest, upfront and clear - no relationship works well without this, in business or elsewhere!

You have to continually assess different and innovative channel opportunities to keep your route to market fresh and stay ahead of the pack.

Posted by David Spate, Sales and Marketing Director, EMEA Disk Solutions, Overland Storage (EMEA) | 03 Jun 2009

Can margin be fairly shared between participant channel parties?

I believe in principle that all parties want the same thing, certainly from a strategic perspective.

The problem however is sales people within the different parts of the channel don't focus on the corporate strategy of channel collaboration rather they focus on what can they do to meet their targets (disregarding channel relationships and ultimately driving the end user prices down and squeezing out the margin for all concerned).

The company who comes up with a channel strategy that truly focuses on getting product to the end user whilst sharing the margin fairly between all participant channel parties will be very successful indeed.

Posted by Robert May, managing director, ramsac limited | 03 Jun 2009

Even more important with the shift towards managed services.

It's always been important for the channel to work together and with many resellers now moving towards a managed services model, close co-operation will become even more important as MSPs will rely heavily on supplier solutions. As hosted services become more prevalent, the lines between the 'value' channel and the fulfillment channel will become more defined. The former will certainly be a better place to be as existing in the latter will depend largely on volume and having an efficient, low-cost operation. Any resellers that wants to provide managed services will want and need to be very much in the value channel and it may be time for them to start thiniking about how they make sure that they are. The move to managed and hosted services will take time but momentum will soon gather - they can't afford to get left behind.

Posted by Maria Baxter, MD, Cyclone Technology Ltd | 03 Jun 2009

Race for results

Vendors, distributors and resellers all want the same thing - and that is results. What is in question is how are those results achieved.

There is a position to be played by distribution but it is true that resellers do not always want to recognise that position. Distributors are under huge pressure to add value to their proposition, so working closely with resellers and understanding their needs is a pre-requisite if they want to be successful.

Equally vendors need to work closely with distributors and demonstrate trust and loyalty to their distribution network. Achieving some of the growth targets put forward by vendors can be extremely challenging, but if vendors take time to understand the distributors local market and work with the distributor on specific issues and opportunities both parties would benefit.

There is no doubt that the route to market, whatever your business, is changing as margins are squeezed. However, unless both resellers and vendors change their strategies on basics such as inventory, technical support, repairs, helpdesk, credit, logistics, spare parts, custom models and so on - then there will always be a place for the distributor.

Posted by Andrea Percival, director, Maxa Technologies | 03 Jun 2009

Manufacturers may end up going direct to customers

The net has really changed the landscape for the vendor, distributor, retailer supply chain and relationships. Distributors are having to add even more value to manufacturers such as the ability to obtain deals that would otherwise not be available direct from manufacturer to retailer. E-Commerce and an M2R, (manufacturer - to - retailer) portal, as I've christened it, can facilitate direct distribution from manufacturer to retailer, and so the competition has heightened.

Additionally, as smaller retailers force their prices even lower, manufacturers are being forced to consider more carefully who they distribute to and in some cases are opting to deal with established retailers and end customers directly. Despite recent speculation of green shots of recovery in the economy, many struggling smaller retailers are likely to continuing offering knock down prices in an attempt to maintain sales, and the strategy, I predict that manufacturers will become more choosy and go with more established, reputable retailers with a bricks and mortar presence.

Search engines and price comparison tools have made it much easier for consumers to compare products, and in an economic downturn, they will be even more price sensitive. When less reputable retailers lower their prices to just above the wholesale price, this not only diminishes the value of the brand, but also places stress on the manufacturer and other retailers. I've seen a marked rise in manufacturers wishing to sell directly to customers as well as maintaining the relationships with quality retailers.

Good smaller bricks and mortar retailers are still valuable, as long as they are not competing ridiculously low prices for products, particularly online. Consistently low prices may cause manufacturers to work with only more established retail brands who have both a web channel and a store channel. If the manufacturer is not already online, they may wish to cash in on the internet market, by setting up their own e-commerce channel.

Posted by Deborah Collier, MD, Echo E-Business | 03 Jun 2009

Vendors can help by levelling the playing field

The bottom line is that vendors, distributors and VARs all want to do more business. As a vendor, it's our job to give our channel partners a structure that will help them to sell more. And we also need to recognise the investments our partners make in skilling up their staff, building solutions and supporting customers.

That's why our partner programme is geared to recognising partners' value-add and skills contribution, and not just raw numbers. We set targets for partners, with margin accelerators if those targets are exceeded. This levels the playing field, giving both small specialist VARs and larger partners equal opportunities that don't rely purely on volume. Distributors have access to rebates for nurturing new partners.

We also give higher margins and early access to new solutions if partners demonstrate a high level of customer experience and commercial alignment with us.

Posted by Nick Lowe, regional director for Northern Europe | 02 Jun 2009

Channel needs to be more aligned

Agendas have not been aligned enough but the pressure to align is now imperative to meet the business environment challenges head on.

In fairness I believe that many vendors have reacted well in changing their programs and make them more predictable.

Now we need to become even more aligned from manufacturer to distributor to reseller, and address how we can use IT to solve end users business issues.

Posted by Andy Gass, managing director, Computer 2000 | 01 Jun 2009