Hybrid horror

Exclusive Networks' Barrie Desmond on why vendors who play hokey cokey with the channel are dancing with the devil

There's a mantra that I live by; I might be wrong, but I'm not confused. If only more vendors adopted this approach and had the bottle to make definitive decisions about their channel strategies. Direct, indirect, single tier, two-tier... Make a decision. Just don't faff around with all this hybrid nonsense.

Vendors should either commit to the channel or not. But repeatedly we keep hearing the dreaded term ‘hybrid channel model'. This isn't commitment, this is channel diplomacy which translates as ‘we're not quite sure if the channel will work for us, but we're sticking our toe in the water to see how it goes'.

The hybrid model initially sees the vendor going direct to end users, whilst also appointing their own VARs, but this dilutes the impact of direct sales as the vendor's sales team also have to deal with channel issues. The vendor then puts a VAD in place, but instead of reverting to a simplified, efficient and effective two-tier model, they confuse the issue further by continuing to deal directly at ‘distie level' with their own appointed VARs, offering them ‘distie-level' discounts, thereby disadvantaging those VARs recruited by their VAD.

This is nothing short of channel strategy madness when all three are happening at the same time and is hardly what you would call a strong incentive for the distributor's VARs.

When it's this self-defeating, the only thing a hybrid strategy achieves is an unfocused, suspicious, resentful, demotivated, unskilled and technically incompetent channel presence. Sales guys deliver a confused and contradictory message to the market by going direct, pressurising margins much earlier in the lifecycle. VARs who should be representing the vendor show less commitment, and the directly appointed VARs - who buy at the same discount levels as distributors - have the perception they can undercut any distributor appointed VARs. How the hell can such a conflicting approach be considered a healthy channel strategy?

Ok, that's the rant out of the way. So let's consider why the hybrid channel model continues to proliferate.

There is undoubtedly a worry about loss of control and influence. Some vendors believe that by exclusively adopting a two-tier model, they will be somewhat removed from the deals, customers and dialogue. There may be a degree of truth in this, but in reality they hold the best cards and actually have MORE customer contact, better relationships and, dare I suggest, more control.

There is also an issue with trust. By committing to the channel, vendors need to realise and accept that the cost of sale is higher and early adopter VARs and VADs need to fund this investment with healthier margins. Additionally, the main fear of vendors, especially for new and unknown vendors entering the marketplace, is that their brand and offer will not be adequately evangelised. They simply don't trust and believe that anyone else can/will do it.

This is where value add distribution really does add value. By combining knowledge transfer and enablement in the form of technical training, demand creation and sales lead generation, the VAD acts as a proxy for the vendor and the VAR, with all opportunities being fed back to the vendor's direct touch team, keeping them busy with new and incremental opportunities. Complete harmony!

Ultimately, the warning here is that channel indecision and confusion caused by a hybrid approach creates both tangible and intangible harm. It may even result in the dreaded ‘glass ceiling' effect in terms of the speed of growth or the size a vendor can get to. As we all know, vendors like Dell initially avoided the channel, with no directly appointed VARs or distributor-appointed VARs, and no direct sales force competing with the reseller, undercutting deals and taking value prematurely out of the vendor's technology. At least Dell's strategy was decisive and wasn't confused - even if they changed it later.

Hybrid models limit any enthusiasm for acquiring knowledge, buying demo kit etc. They also work against any idea of evangelism. Why should the channel invest any effort, resources or even emotion in a vendor when there is a hybrid channel model in place that threatens to betray them? If we return to the issue of trust, the reseller knows they could easily get undercut by both the vendor direct team or the directly appointed VAR who can buy much cheaper than they can. So why bother?

So the message is: go through the channel, or don't go through the channel. Make a decision and make a commitment. Whichever route you choose might be right or might be wrong, but at least it won't be confused.

Barrie Desmond is marketing director of pan-European VAD Exclusive Networks Group