Resellers must secure their margins

With markets becoming more competitive, reseller profits are being squeezed.

Along with providing training and consultancy, vendors have traditionally played a key role in protecting resellers' profits.

In return, value-added resellers (Vars) have provided vendors with new routes to market and helped them to reach new customers.

The antivirus (AV) industry is a good example of the profitability of such partnerships. However, this symbiotic relationship could be under threat.

With the AV market becoming more competitive, reseller margins are being squeezed, and someone has to lose out.

All too often it is the channel that bears the brunt of the problems facing IT. With vendors preferring to develop products and take them to market themselves, the role of the reseller is in jeopardy.

Resellers would argue that they add value and provide vital customer support, and for this they deserve their share of the profit. Times are hard, however, and shareholders are worried about profit and market share.

The need to deliver products to customers as cheaply as possible is hurting resellers' operations, and in some cases vendors are attempting to offer lower prices than rivals by removing the channel altogether.

And this seems to put customers in a pretty good position. With vendors driving down prices, IT budgets are going further and shareholders are pleased.

But, in reality, will anyone benefit from this shake-up? Companies will benefit only in the short term. AV protection is ongoing, necessitating frequent updates and knowledgeable support.

Facing increasing demand for cheap software, vendors will neglect long-term commitment in favour of short-term gain, and the customer will suffer.

Vendors will find themselves in an impossible situation and will be forced either to reduce the quality of their products and services to cope with bargain-fuelled customer demand, or instigate steep price rises.

Either way, the short-term savings made by customers will be cancelled out.

Resellers' approach towards their customers is key. Educating companies on the inevitable impact of the price war is vital to convincing them that it is worth making a long-term investment rather than opting for short-term savings.

Vars must realise that their profits are not a priority to anyone else. They must take responsibility for securing them.

David Stanley is general manager UK at Sophos Anti-Virus.