The Internet has infiltrated every corner of the industry. Every vendor, every reseller, now has to be on it or providing services that allow the customers to get on it - preferably both. It is already an integral part of the channel and an important medium for the delivery of information from vendor to dealer to customer.
The Internet is opening up wider markets to everyone that uses it as a means of advertising and marketing, or even delivering, their services.
In the future, we might be looking at other services being supplied via the Net - support and training, for example, and delivery of software.
So, is the Internet a threat to the reseller or an opportunity? On the one hand, the Internet might make it much more feasible for vendors to market and sell products and services directly to users. On the other, the elimination of paper, and uncertainty about availability and pricing, reduces costs and might relieve dealers of some of the more laborious aspects of making a sale and supporting a user.
Potentially, the Internet also increases the prospect of more competition.
Companies will try to extend their reach into markets by using the Internet.
Against this, one can argue that resellers, too, can expand their own reach and that, in any case, the concept of browsing around Net storefronts for computer equipment is all very well in theory, but, as yet, far from reality.
Business relationships between resellers and vendors, and between resellers and distributors, might also be affected. Dealers may find it easier to order direct from the vendor and distributors may become less significant: as suppliers of basic office software, they are certain to play less of a role. But distributors with very efficient stock-control systems may become even more vital to the reseller, acting as the engine room for all shipment of products. If they do become highly efficient stock and shipment businesses, will that constitute a threat to the dealer?
Perhaps all this is taking the concept too far, though. The Internet has already become an additional string to the channel's communications network bow. But it has not visibly increased direct sales or cut anyone out of the supply chain. After the clamour has subsided, we might find the Net has had very little effect on the channel and has simply added a new dimension to it.
Vendors believe the Net will help a great deal with channel communications and save everyone time and money. 'It will improve business for dealers,' says Vincent Smith, marketing manager at the IBM PC Company. 'We are going to use it to provide our dealers with a greater level of information and support because we have direct contact with only a handful and this is an easier way to deliver the information.'
Instead of waiting for products, brochures and information that is out of date almost as soon as its printed, vendors can keep the channel bang up-to-date through Web sites. To a large extent, they are already doing this.
Improved communications is a major benefit for the channel. But the most important effect of the Internet is that it opening up new opportunities, if resellers are prepared to take them. By providing services that will allow business and industry to exploit the Internet, resellers can carve out new markets and even new identities for themselves. Selling Internet services opens up a wide range of new possibilities for those prepared to make the commitment.
Jinty Weldon, director of database solutions at market research firm Romtec, has just completed a project examining the state of channels across Europe and the Net's impact on them. She believes the Internet will affect the channel, but will not change it dramatically.
She says there will be positive and negative effects. 'There is a potentially negative impact in that some software vendors will use it as a distribution route, but how much of a threat it is depends on how well the Internet is managed as a channel by the vendors.'
Software will be distributed electronically, but vendors will need to manage the relationships between themselves, resellers and users carefully to avoid conflict, not only in the area of ordering and supply, but in support and maintenance.
It is easy to assume, adds Weldon, that it matters very little anyway, as software revenues are shrinking for dealers. But she says substantial amounts of software business still goes through the channel and the prospect of electronic distribution is a real threat. Software vendors admit there will be a day when electronic distribution via the Internet will be possible, but deny that there is any prospect of cutting dealers out.
Tom Schuster, MD of Novell UK, says many products are bound to be delivered electronically in the future. 'But that won't decrease the role of the reseller. It just separates the unit of value from the unit of work. In the end, the reseller is going to have to tell them how to get the product.' What resellers will sell in the future is not the product but the right to use it. So, even though the product might get to the user via the Net, it won't affect the reseller's profit opportunity.
David Smith, channel sales and marketing manager at Microsoft, says concern is natural, but there is no way the company will abandon the channel.
Yet the Internet will mean changes in the way the channel works. When the day comes that software is delivered through the Net, distributors and resellers will have to work out their respective roles in providing that service. Smith sees a day when the channel provides a 'pick-and-mix' type service for users.
'You could see a world in which the distributor has the right to reproduce the software and provide it in a way that meets the customer's needs.
By the time this is feasible, the channel will have evolved into services.
It's about installing, supporting, training and maintaining the software, as well as selling.'
Weldon believes publishers will prove good to their word. 'Vendors and distributors have to be careful and learn some lessons from the earlier focus on selling direct. A lot of vendors underestimated the value of the channel and got their fingers burned by going direct,' she says.
Rather than reducing the potential for resellers, Weldon suggests the Internet could have the opposite effect. 'I think it will potentially broaden the markets geographically and extend the range to which people can communicate. The most basic part of the business is delivering the product - where it is shipped from is irrelevant. What is important is the whole communications side of the decision-making process.' There is both an opportunity and a warning here for resellers: they might be able to supply products over a wider area, but if they don't, someone else will.
Yet as IBM's Smith points out, the impact of direct electronic selling is likely to be felt by other direct sellers. 'You will probably see a migration from buying off the printed page to buying off the electronic page.'
Furthermore, Weldon says the need for consultancy and advice won't disappear.
The trick will be charging for that aspect of the service when the product can be sourced almost anywhere and almost instantly.
This is assuming users will continue to rely on advice of resellers or consultants. Won't some users be confident enough to use the Net for search and selection as well? It's possible that some will, says Weldon.
'It depends on the type of user you are. It would not be a good idea for the novice perhaps, but more sophisticated users might have the confidence to do it themselves.'
Dave Kerrell, Internet marketing manager at Digital, does not think users will take to shopping for IT products on the Net. 'People like to deal with people. Merchandising over the Net is not really taking off in the UK because people don't have Internet communications in the home, so you end up with a very small market.'
Microsoft's Smith says his firm's research has shown smaller business in particular has a very strong urge to buy locally. He does not see the Internet changing this attitude, so dealers will not lose out. These views are backed up - for the time being - by recent research from Motorola which claimed 42 per cent of people had no access to a PC for Internet connection and that 25 per cent would not be interested anyway.
The Motorola research also found that more than half the population would be happy to buy certain services online given the opportunity, compared with the 46 per cent that turned their noses up at the idea. As Kerrell points out, the chances are most users, being familiar with the technology, would not be put off, so the prospect of online ordering is strong.
It is likely that this will permeate the entire channel. Already many vendors offer online ordering, and distributors and resellers are also developing these services. Ingram Micro, for example, plans to give its customers access to its Caps system. Elcom has its own service and Tplc has a close alliance with Infobank.
Ordering and, to a limited degree, supply of product through the Internet, is inevitable. Dealers must ensure they can provide such services. But there is little evidence to suggest similar measures will be undertaken with regard to support and other services.
Some Web sites provide a lot of technical information - there are support forums on the Net for many suppliers, and there is nothing to show they diminish the need for reseller support. One reseller comments: 'It's a good way of finding out what's available, but not for nitty gritty information.
If I wanted specific information I'd almost certainly find out who I needed to speak to and then ring them up because there is always something the Web site won't tell you.'
Romtec's research found resellers were using Web sites extensively, not only as sources of information, but to pull down utilities and patches.
The dealer is tending to do this rather than the user since, in most cases, it is a technical problem that is being addressed.
Weldon believes dealers will increasingly use the Internet for information and as a support resource. It is, she says, already a very important information channel for the dealer community. In time, it will become just another layer of communications for the channel. MS' Smith agrees. 'It's going to allow the creation of a very slick and effective communications medium,' he says.
The Internet will alter the role of the reseller, but not in a really dramatic fashion. Vendors and distributors are committed to the channel and users need the close attention provided by the reseller community.
A more profound impact on the channel will come from the creation of new types of dealer business. Dealers that specialise in Internet services are springing up all over the UK, and there is demand for plenty more.
Kerrell says Digital has about 20 specialist Internet Vars on its books, but there are nowhere near enough to meet the demand for services from users. Finding companies with the right skills is a problem.
'At the moment we are very keen to work with specialists because there is a lot of interest and not enough people supplying the products. There are people who will talk to you but whether they are real experts of not is another matter,' he says.
Romtec's research found that 17 per cent of resellers are providing some kind of Internet service at present. This number will rise, but getting in and cutting the ice is not easy, says Kerrell. 'It's a complex area, there are so many different aspects to it.' He says finding your way around security issues, Web management, firewalls, mail routing and network integration, is not easy. He claims to have heard several resellers say they are getting in, only to withdraw from their aggressive position rather sheepishly a few weeks later.
David Smith agrees, but says dealers only need to have exceptional skills for the really advanced Net systems. 'You have to be pretty specialised to build a Web site that is truly interactive. I think there will be a mix of people out there.'
Early entrants into the market will lead the way, but eventually the Internet will become an integral part of computing and thus of every dealer's business. In the first wave of appointments Microsoft intends to recruit only about 100 resellers to handle the Merchant Server product. At another level, all resellers will be involved with the Internet, Smith adds.
Microsoft is training resellers appointed for the sale of NT 4 in the Internet Information Server as a matter of course. The firm is building browser capabilities into Office 97 and intends to enable all its OSs for TCP/IP and HTML. Eventually, says Smith, everything on the PC will be done through a browser-type interface - even the local hard disk will look like a Web site.
Most mainstream dealers are already providing Internet services, and with the support of vendors such as Novell, Microsoft and IBM they are learning about the Internet and intranets fast.
Schuster says the growth of the Internet in corporate firms is pulling information services departments into the equation and they, in turn, have been turning to their usual supplier. Most dealers, he says, are already geared up to meet their needs. 'It's not just about providing the Web site and design, it's about taking a Lan and giving it TCP/IP and giving them access to data. Most resellers are already intranet-ready, and they are getting tooled up pretty quickly.'
The Internet has already added a further dimension to communications in the channel. This will mature over the next year and give the channel rapid access to unprecedented amounts of information. It will also develop as medium for ordering products and this will help everyone - manufacturers, distributors and dealers - to be more efficient.
In time, the Net will change the dealer's position with the customer in terms of delivery of software - but that is changing anyway. Licensing and electronic distribution were coming, the Internet will only make it easier and more accessible to everyone. There may be more competition as a result, but it is unlikely to do more than affect the development of the off-the-page market.
The most important effect of the Internet on the channel will be the creation and extension of opportunities. Businesses of all shapes and sizes will want to set up Web sites, messaging systems, intranets, electronic shop-fronts and all of this will need to be integrated with the existing IT infrastructure.
Eventually, the Net will become just another part of what the IT industry offers the user, but it has opened up new and fertile ground, which has yet to be explored in full. For the next few years, resellers will benefit by guiding users into this uncharted territory and helping them to establish new frontiers.
HPE CEO talks up RedPixie acquisition and indicates DRAM crisis is over on Q2 results call
Reseller expecting to beat expectations this financial year
Data storage vendor announces former Commvault executive as European channel director
Chinese parent reportedly looking to reduce debt after mega acquisition spree