When you look at the market today, you could easily make the case that, in certain sectors, it has become a near monopoly or at least an oligopoly. But the full picture is not quite that simple, of course.
There are competitors in all sectors, and because they are so big and successful, every move that these companies make tends to be scrutinised and pulled apart in detail. If they make a mistake, or are seen to be treating anyone unfairly, everyone gets to know about it.
However, by and large, all of these companies are doing a decent job. If you are in the channel, you might not feel that good about Dell’s success. But remember, it is only a PC manufacturer. Dell doesn’t deliver complete solutions to end-users, and lots of resellers already resell Dell products anyway. Yes, even Dell is finding that it needs the channel.
This level of dependency such companies have on the channel is growing all the time. The UK has almost four million small businesses, and they have stepped up their use of technology. This is increasing the strain on the IT industry, which is already highly competitive and working on wafer-thin margins.
Channel players will generate their income from the delivery of services and from the initial and recurring commission fees they receive on the products and online services that customers buy, not from straight margins on products. Their turnovers will be lower, but their profits will be higher.
Distributors, sub-distributors and local resellers will provide the supporting infrastructure to ensure that end-users can get hold of the products and services they need. Without them, vendors simply will not be able to function as profitable entities.
But crucially, these changes will also lower the barriers for entry. Just as the Ofcom code of conduct stipulates that ISPs must make it as easy as possible for
customers to switch from one service to another, end-users will expect to be able to switch from one VoIP service to another, and from one data backup or managed security service to another.
Likewise, if channel partners decide that a particular vendor’s service is no longer reliable, or does not deliver the desired performance, they will be able to switch their allegiance at any time. And end-users who continue to depend on their local supplier or retailer for support and service will go with these partners.
John Carter is managing director of DMSL.
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