The distribution transformation
The role of distributors in the voice and data channel is constantly shifting in these turbulent times
Metamorphosis: distributors must move with the times
The role of distributors in the voice and data channel is constantly shifting in these turbulent times
Voice and data channel players have asserted that the role of the distributor is in flux and those working in the communications space need to be adaptable to survive.
Even high-volume distribution giants are keen to stress their value-add credentials and move away from the box-shifting stereotype. But many in the distribution space say there is still a stark contrast between the raisons d’être of broadline distributors and smaller, niche players.
David Galton-Fenzi, group sales director of distributor Zycko UK, claimed monoliths subsisting on margins of four per cent or less had to ensure their back-office systems were watertight. “This is fulfilment distribution,” he added.
“They are not employed by the manufacturer to generate demand. Their main purpose is stock, credit and logistics. They are basically facilitating day-to-day business.”
Galton-Fenzi claimed he would not enjoy working for a high-volume, low-margin organisation and added: “We deliver new technologies into different regions. That requires different skills, such as training, marketing, professional services, lead generation. We lower the cost of investment to the reseller.”
Driving demand
Scott Dobson, managing director of distributor Vcomm, was another to claim he preferred a more value-added model, but argued there is still a need for both ways of doing business.
“There are commodity OEM distributors out there, but that has never been my cup of tea,” he said. “If I wanted to sell lots of stuff cheaply I would not have set up Vcomm. But there is room for both, I am sure.”
Nick Roullier, managing director of integrator Datapoint and former Avaya UK chief, offered a differing view, claiming the onus of market-building still fell on vendors.
“With the exception of a few incubator-type organisations, distribution taps into a market, it does not really make a market,” he said. “For most distributors there has to be the market and that market is created by the vendors.”
Roullier said that Datapoint worked primarily with Westcon and stated that banking and logistics were the two areas his company wanted distribution to assist with.
“Westcon gives us global reach and it understands local taxation,” he added.
Samuel Williams, European general manager of vendor Zeacom, claimed it was incumbent on distribution to stoke demand in local markets for smaller manufacturers.
“With Microsoft entering the telecommunications market and the possible fragmentation of the market in general, a distributor’s role will become more important,” he said.
“Credit and logistics may not be enough to differentiate anymore.”
Jess Thompson-Hughes, managing director of React Distribution, claimed smaller, niche distributors offered a leg-up to fledgling vendors.
“The value-add when you are introducing a new technology is that the manufacturer may have no presence or logistics in-country,” he said. “We will do all that for them and for free, whereas most established distributors would tell them to get lost.”
The role of the distributor
Thompson-Hughes added that there would always be vendors that treated the channel fairly and others that were more disdainful.
“Some vendors are more arrogant than others but some really embrace the value-add,” he added.
Barrie Desmond, director of distributor VADition, claimed his goal when setting up the company had been to create a distributor that lowered risk but maintained margin.
“We have built a business which does not have to carry high volumes of stock but can provide an equally good service,” he said.
“Our proposition is risk management and, because we do not carry massive overheads, there is more margin for us and our partners.”
The role of the distributor and its long-term validity has been the subject of much speculation. Galton-Fenzi claimed three years ago people had their doubts about the necessity of distribution.
He added that a two-tier model had been “proven to be the best” but cautioned: “If broadliners cannot start showing value, they have to find ways of making more than two or three per cent margin.”
Roullier agreed that the two-tier model would continue to dominate. “Distribution does very much have a role in this market. From the vendor perspective, it is about taking away complexity and offering value,” he said.
Desmond claimed that the emergence of software-as-a-service would change the way in which the channel did business. He compared it with the effect of the internet on the music industry and warned that VARs and distributors need to safeguard against “becoming the Zavvis of the channel”.
“Something radical must happen and, in many respects, the move towards cloud computing models is a big threat to distributors,” he said.
“We need to anticipate it, because, unless we find a way of being able to offer resellers the ability to deliver an offering as an on-demand service, we will be in trouble.”