IT and telephony distribution is on the verge of the biggest shake-up in its history. In the short term, resellers should benefit from preferential pricing as distributors vie for loyalty.
In the long term, fears of consolidation loom large. This is not scaremongering. In the US it has been happening for some time.
For converging networks you can also read converging distribution. In the US, Westcon Group has already snapped up two rival distributors, Inacom and CCA Technologies, to form its Voda One convergence division.
In the UK, distributors are only starting to dip their toes in convergence waters, and are realising that it is not that simple. It demands specialist skills on both voice and data networks.
Ultimately it is a change that will have to happen for networking distributors in particular, as customers increasingly demand IP-based voice and data products.
But while change is sometimes feared, it also tends to be slow. Converging networks are not particularly new, but they have yet to fully establish themselves.
While the corporate market drives this demand, vendors are recognising the potential for new business outside their traditional remits. For IT this means voice networks, and for voice this means data.
IP is the key enabler here. For major convergence player Avaya, this merging of technologies is an opportunity.
The company recognised last year that the demand for converged products was increasing so it had to act quickly. It is now trying to push its products into new markets.
This is part of the reasoning behind its decision to support Northamber's convergence division, NV3. Unlike Avaya's long-standing distribution partner Crane, NV3 offers something new and perhaps more dynamic, given its traditional IT distribution history.
Crane is no small animal but its history is rooted in voice, and it is working hard to meet Avaya's demands to recognise new business areas with its convergence products.
Crane is fighting back despite early hiccups, with its data sales team being reintegrated into its main sales team.
But, according to Martin Wicks, Avaya's director of converged systems and applications, the appointment of NV3 was never intended as an affront to Crane. NV3 was supposed to be an additional outlet that would bring new business, not target Crane dealers.
IT distribution is, however, as 'dog eat dog' as any other industry and no one can really blame Northamber and NV3 for getting business where they can.
The appointment of NV3 last summer as an Avaya distributor shook things up in the voice channel.
The likes of Rocom and Crane were not moving in any great haste to defend the high ground and it was perhaps inevitable that someone else would sneak in and make things happen.
Pat Weekes, NV3's managing director, is upbeat about the distributor's chances of forging a good business in convergence.
He explained that the firm is looking to add 30 to 40 key resellers to its books from both the voice and data backgrounds in the next few months.
"Distributors and dealers with an IT background tend to be more aggressive than the voice guys because of the nature of their business," said Weekes.
"The voice dealers, for example, will have been used to better margins but probably have a more costly infrastructure as a result.
"There could well be consolidation in the convergence channel this year, and voice dealers will probably struggle more than the data dealers."
In terms of the current distribution model, Weekes believes that NV3 has the right mix of education and technical ability while managing to keep costs low by not having its own support infrastructure.
"We don't offer after-sales services because we resell Avaya's own support package," explained Weekes. "We concentrate on financing, training, logistics and pre-sales services."
He said that this means NV3 avoids the often costly business of post-sales support, relying on its main supplier, Avaya, to deal with any after-sales problems.
Weekes believes that this saving puts NV3 in a strong position when pitted against rival distributors in the voice space, because it can offer better discounts.
The early success of NV3 also hints at a breakdown in loyalty in voice product distribution.
When it comes down to it, dealers know they cannot afford to be loyal any more, especially when they are faced with eroding margins and changes in product dynamics due to IP.
Loyalty will only really count when there is a level playing field; in such a case dealers will go with a distributor with which they already have a relationship.
It is a harsh truth, and one that has already started to hit home at some of the major voice outlets.
But Crane for one is not to be underestimated. It has the muscle to manoeuvre its way into the convergence space over time, and it will try to sell on total solution rather than force an all-out pricing bun fight.
David George, chief executive of Crane, believes that the company has in fact been leading the way in convergence distribution, but admits that the market for convergence products is now mature.
Coping with this technology is proving "a real challenge", he explained.
"True value-added distribution will flourish in voice-centric convergence as more and more resellers look to work with a distribution partner that can help them develop a true solution sale," said George.
"This can only be achieved by working with a partner that can offer support to help sceptical technology decision-makers with tight budgets to purchase complex solutions.
"Voice-centric distributors have the opportunity to define their value add and take resellers and vendors to new levels of success."
It's all good stuff, but will it work? George believes that resellers will choose to work with voice-centric distributors for different reasons, citing product knowledge, technical support and existing strong relationships.
He also maintains that Crane has close customer knowledge and an "intimacy" that customers want.
"That's where Crane can compete and will win, as competition from broadline distribution in this area is minimal," said George.
"The year 2002 was a tough one and most companies have been forced to think carefully about their business model and their market, whether they are coming from a voice or data background.
"We have undertaken a complete strategic review and identified some key activities to ensure that we are fighting fit for the coming year."
As well as looking at its own overheads, George claims that this self-assessment has also meant a review of Crane's product portfolio.
Two camps have emerged, offering traditional voice products alongside more leading-edge convergence technologies.
In short, this means that Crane is up for a fight, and it has made no secret of its intention to be the number-one convergence distributor, preferably at the expense of the broadline data distributors.
"Many of the products in the convergence space need very focused support and both pre- and post-sales training," said George.
"This means that the broadline data distribution model comes up short, as do the VARs that need specialist support.
"The key to Crane's strategy as a specialist voice-centric distributor is mainly in two areas: support and customer intimacy.
"These factors, combined with the best channel and manufacturer partners, mean that Crane will continue to meet the demands of an evolving channel."
However, like Weekes, Clive Hailstone, general manager of networking and enterprise solutions at Computer 2000, believes that it is the voice distributors which have the most to do to maintain their status.
"Consolidation is continuing in distribution and the convergence of voice and data is just one of many factors that are driving that consolidation," he explained.
"I don't think it is a major driver as far as the IT sector is concerned, but it is certainly something that the comms distributors need to be concerned about."
Hailstone's reason for this is that the voice distributors' traditional market is being squeezed and shifted towards a more data-centric world.
"Increasingly, soft PBXs are being put into organisations or equipment that is capable of slotting into an IP-based converged network of the future," he said.
"In other words, it is the IT industry - companies like Cisco - that are driving the move towards putting voice over the data network, rather than the comms business pulling data onto the voice network.
"IP is the key. Distributors that have traditionally operated in the voice market need to recognise or accept that, eventually, they will be subsumed by the larger organisations with a broader range of offerings that span the whole range of enterprise networking needs."
The tit for tat between voice and data distributors is inevitable. There is a lot of business at stake here, but there is no clear indication of how things are going to shape up.
Perhaps the motivation is not the desire to win, but the desire not to lose. Talk of consolidation won't go away, but few are prepared to stick their necks out.
Mario Dimascio, EMEA sales director for voice products at 3Com, said: "Our position is clear, but it's not clear what is going to happen. Undoubtedly there will be changes, maybe consolidation in the distribution channel, but no one is sure."
3Com has invested in 28 direct-touch support staff who will help resellers identify and manage customer requirements. This is part of what Dimascio sees as a growing need for channel support.
In fact, one of the most important factors to emerge from this is the need for increased channel support.
Both vendors and distributors are recognising that they have a major role to play in educating resellers about the benefits of converged networks as well as the technical know-how.
After-sales support is also important given the complexity of the products, and this is where vendors and distributors are mindful of the make-up of their reseller bases.
Voice dealers account for about a quarter of 3Com's channel, but Dimascio pointed out that the numbers are changing all the time.
Its single voice distributor, Westcon, has already seen some changes, and Dimascio believes that it will have to sit this out to see how it develops.
Ahal Besorai, chief executive of Inclarity, suggested that the voice market will witness a tremendous change in direction.
"With the convergence of voice and data, and recent leaps forward in IP telephony, the traditional PBX market will be in serious decline in as little as two to four years from now," he warned.
"IP telephony is now ripe to provide high-quality, reliable calls, with the most advanced calling features available in the market and free on-net calls.
"The most cost-effective approach to IP telephony is a hosted IP Centrex solution, where the solution infrastructure is owned and hosted by a telco, saving companies the high hardware costs of a traditional PBX.
"Offering competitive calling costs, with normal number ranges for IP phones and the provisioning of broadband connections with enough bandwidth to ensure call-quality and reliability, it is likely that IP Centrex providers will push traditional PBX suppliers entirely out of business."
A scenario such as this would, of course, have serious ramifications for traditional voice distributors that have not taken on board any changes in product portfolios.
The key here is that many voice distributors believe that they have already taken steps towards convergence, and none more so than Crane.
"In our opinion, 'convergence' distribution has been established for the past year with Crane leading the way," said a bullish George.
"There are some really exciting new products coming to the UK market through Crane in the next few months, so resellers will be able to reap the benefits of IP market growth.
"However, with well-established industry standards in data and proprietary standards in voice, the voice skills are clearly harder to gain. Voice skills will be in high demand, and Crane is in a prime position to meet this."
George's point here is often used as a reason for potential consolidation among resellers, not distributors.
Weekes believes that reseller consolidation will happen, especially among voice dealers that over the years have been used to healthy and stable margins from long sales cycles and lengthy PBX maintenance contracts.
Of course, this is a generalisation. Mike Alison, managing director of voice dealer Mayflower Communications, is aware of the changes going on and realises the need to change with the times.
"Convergence is key to the market today," he insisted. "Voice and data systems are inseparable now to many businesses, and this trend will continue.
"For example, the Avaya IP Office range extends to the SME facilities that were previously available only in systems beyond many SMEs' reach.
"Of course this will affect how we look at products we buy through the distribution channel, particularly with regard to support both pre- and post-sale."
Internally, Mayflower has had to re-train staff to get up to speed on knowledge that was "previously the domain of the data supplier". He admitted that distributors have a major role to play.
The main thing is that after initial wavering, most vendors have recognised the importance of the channel in convergence.
You only have to look at how the likes of Avaya, Alcatel, Mitel and BT have moved away from direct selling to embracing a third-party sales model to realise that. But how distributors will shape up in this developing market is still difficult to predict.
The key message is to expect some changes, perhaps acquisitions or mergers, and in the short term some preferential pricing. For resellers at least, that has to make convergence a good thing.
3Com (01442) 438 000
Avaya (01483) 308 000
Computer 2000 (0870) 060 3344
Crane (01444) 230 004
Inclarity (0845) 698 0800
Mayflower (01277) 630 444
NV3 (020) 8401 7800
Rocom (01937) 847 777
Security firm set to become part of acquisitive Shearwater Group
Distributor merges three northern sites into one new hub in Warrington
Activist investor puts forward five director candidates as turmoil continues at security giant
Nima Green asks what is driving public cloud uptake in Germany