Resellers' wish list

CRN brought together a group of leading resellers to find out what they want their suppliers to do better in 2004. Simon Meredith reports.

CRN

brought together a group of leading resellers to find out what they want their suppliers to do better in 2004.

Taking part in the debate:

Paul Barlow - managing director of Equanet
Tony Davis - managing director of Elcom
Gordon Davies - commercial director at Compusys
Paul Edgeley - managing director of Lynx Technology
Shaun Frohlich - chairman of Teksys
Phil Mitchell - managing director of IntraLAN
Hugh Scantlebury - managing director of Foundation Systems
Danny Williams - marketing solutions director at Telindus
Steve Wood - managing director of Parity ICT
Richard Young - chief executive, Prior Analytics

What have suppliers done well and not so well over the past 12 months?

Wood: Starting with the basics, just the simple thing of having stock in the channel. That's a major issue and vendors don't seem to have been able to get that right.

Davies: It has been a problem throughout the whole year, and much of it is down to distributors trying to cut costs by holding less stock. They keep telling us they are getting less support from the vendors, and so it becomes an issue and means lead times and projects are extended.

It just increases the burden on our purchasing department. They have to spread their wings further to make sure all bases are covered. It has been an ongoing problem.

Wood: Both vendors and distributors are being more cautious.

Davies: The worst thing is that they have learned the art of lying. Anything they tell you today you just can't believe. It has just got worse and worse and worse. You have these conversations with vendors, and privately they will just shrug their shoulders and say, "We don't know what's going on," but publicly they will just say anything to get you off their back.

Young: When we are trying to order stock it is taking time to arrive, and effectively we have to order in advance to make sure we are getting stock on time for projects, and that has an effect on our cashflow. Also, at the end of the quarter or year, they are pushing us to place orders. It's channel stuffing.

Williams: We need a level playing field. That was on our wish list last year and it seems to me that a lot of the vendors that we deal with are just that: they are vendors with a quarterly target, and there is a disconnection between what we are trying to achieve on behalf of and with our customers and what they are trying to achieve.

Are you worried about the grey market or is it just that you want the same terms and conditions for every reseller?

Williams: We want the same terms and conditions, not so much with the contract but in terms of the way that they seem to be able to give away extra discounts to some resellers.

Edgeley: We have been very strict in sticking to just four or five key vendors. Our business is a solutions provision business, and hardware is part of the solution sell. Some of the issues around product do affect us but they are only a part of it.

Davis: There are only about four or five companies making computers these days. Dell and HP have 30 per cent and everyone fights for the rest, and in the channel HP has got 50 per cent of the business.

Davies: The issue there is that they have now become honest and they are saying, "Yes, we will shift tin, but we are also after some of the services integration business." Now they are making some enemies at the very high end of the channel.

Williams: We are all trying to deliver solutions to our customers and that invariably involves not just the product but the consulting, the integration, the training and the services. We have a 50/50 mix and that means we still have a $300m product business and we need to protect that.

Because we have seen a degradation in product margins, we have to do the best we cn out of services. So when vendors start to go into a customer advocacy business, that makes it harder for us.

Davies: I think the desperation is such now that the big guns are firing at each other so often and with such desperation to achieve their numbers that almost anything goes. You just have to accept that and position yourself correctly to make sure that you keep the relationship with the customer.

Frohlich: We've all got the ultimate choice as to who we partner with and whether they are a threat or an opportunity. We have to make our decisions. They will reap what they sow.

Davies: Absolutely. The message over the past 12 months has been that the gloves are off. It's whatever it takes now. You do whatever you want and you take the consequences. I think that's true across almost every route through the channel.

Frohlich: But we are still selling millions of pounds' worth of their kit, and the value that they bring is customers who want to buy their kit here and now. It's easy to overlook that.

Edgeley: We have spent the past three years trying to get vendors to recognise our capabilities. But at the top level there is not much scrapping going on. It's the boys on the street that make the difference, and we need to have them recognising what we can do and calling us into work with them. You can say what you like at the top end of the business but the guy on the street is still where it's at.

Frohlich: But you've invested ahead of the curve and you're getting that return.

Davies: We have done exactly the same but it has taken years of us shouting at them.

Barlow: They can attack whatever market they like. What do we want this year? We want communication and consultation, rather than another spin on a new marketing or accreditation scheme.

Wood: Vendor communications tend to be very corporate-oriented and on a quarterly basis they will target a particular area. They need to put some resources into developing longer-term relationships.

Davies: They are getting better but they have still got this modus operandi of 'one size fits all', and it just doesn't work.

Frohlich: But how many thousands of potential customers have they got out there?

Barlow: You can't have 'one size fits all' but you can at least have it country-based.

Davies: Tier-one brands become anonymous if you do your job properly because you'll get invited to do business with the customer again. And if you get it right the first time they are more likely to trust you the next.

Frohlich: One thing that should be on the list is this: here we are in the age of IT and we still don't use our own IT with our partners at all well. That is just baffling. We don't have access to portals, we can't see product information properly, and in this day and age, when it is so hard to earn a crust, you can't be sure you are going to get hold of the product.

I mean, how hard do we need to make it for ourselves? We've got external problems - the state of the market, the customer's fear factor of not knowing what to invest in and so on. We've got policy problems caused by our own in-fighting. And that's all fixable.

Young: It applies across the whole business. You call up the [vendor] help desk and can get passed around all over the place. There is no hand-over and it all gets bogged down.

Scantlebury: They don't communicate with each other very well internally.

Williams: The communications need to be collaborative as well. They seem to hide themselves, come up with the answer and then give it to us, rather than engage with us and involve us in it.

Davis: The process needs to be two-way.

Davies: We need them to stop designing channel programmes where the channel has no input.

Frohlich: But we are all different, and that's a problem for them.

Davies: But the bottom line is what they are paid on. They don't pass the 'who gives a damn' test because they are not paid on it. You speak to their marketing departments - they just don't care. They are not measured on it and until they change that internally it is going to be very difficult.

Frohlich: People will only pursue something that is on their measurement, so if I can work out where my measurement and theirs match up, that's fantastic. It is absolutely reliable. You can get indignant or you can get around it.

Given what we've said about the pressure everyone is under in the market, do we expect them to be loyal anymore?

Barlow: We'd like them to be loyal. If you have to invest in accreditations and you're selling some of their kit, granted they create some of the demand for it, but it should be a two-way relationship. And for that each party has to be loyal to the other.

Scantlebury: It has to be geographic as well. Loyalty is a very personal thing, and if some vice-president in the US can change policy on a sixpence, loyalty just goes out of the window, so it might be a bit much to ask.

Young: Loyalty works very well when the sales are going through.

Mitchell: Relationships have changed from what they were three years ago. They were much more crisp, and now they are less defined because there are so many games going on out there.

Frohlich: But as a consumer, has your loyalty been enhanced in the past 12 months? Consumers are driving a lot of the change because we want to shop on the internet and get the cheapest. I think loyalty in the business environment is slowly evaporating.

A long-term strategy that is demonstrable and predictable is, to my mind, logical and might engender long-term, enduring partnerships. Loyalty feels soft to me. I think the world's changing.

Davies: It will change because we will change. There is a finite revenue pot and you have to be adaptive. Vendors - and this must happen - have got to keep raising the bar so the barriers to entry for newer channel players stop. It costs us seven times more to win new business as it does to get business out of an old account, and I think vendors have woken up to that now. I still believe it is going to get tougher.

Scantlebury: Where you've built loyalty and the customer trusts you is where you have done a good job. Now that's what I expect from my vendor as well.

Frohlich: What about higher barriers to entry? I want that bar to be right up there.

Davies: I do as well, and that means credit has to get tighter, pricing has to level out and the vendors have to realise that if they do a cheap deal with someone because they like them, ultimately it reflects on them as well, not just us.

Williams: That goes back to the situation where someone has invested in a partnership and somebody else comes in to really sell the vendor's service and is really just a sales shell.

Davis: Another issue is where you get disaffected employees going off and starting their own businesses. Previously the vendors were quite precious about letting people use their logos and authorisation. Now it's much easier.

Mitchell: We'd be threatened if the bar was raised too far. If, in exchange for the bar being raised, we got better communications and more accessibility and dialogue, it would be worth it.

Davies: If there is no investment on our behalf there is no point. There is no value.

Frohlich: Maybe what we are talking about is having a bar, rather than raising one, and it would be nice to see them investing time in driving people to resellers that do have accreditations.

Wood: Customers are not very impressed by accreditation. It is the services that we provide that make all the difference.

Davies: We only invest in partnerships where we can see a quantifiable value.

What about disties specifically?

Davis: Distributors do a reasonable job under the circumstances because they are caught between a rock and a hard place, trying to keep us happy while the vendors are messing them around.

Is further consolidation in distribution a concern?

Davies: The sooner it happens the better. It will put people who are not properly capitalised under pressure, and they will have to either get their business sorted out or get out. Credit insurance will be tightened, and I'm all for it. We're open with our suppliers. The ones that try to hide deserve what they get, and for those of us who try to run our business properly, the quicker that change happens, the better.

What else should be on the list?

Davies: Don't waste our time with events with no business angle. If we go somewhere for four days and take a couple of people with us, there is a cost to that, and there should be some value in it.

Frohlich: We need to hear something new - some new messages.