Firm rides to partners' rescue on channel stuffing

Channel data management company Zyme claims its product can combat the controversial process and give vendors better insights into their channel business

Tech firm Zyme has urged vendors to take note of the emerging trend of channel data management [CDM] which it claims can eliminate the controversial process of channel stuffing and help vendors get better insights into their indirect businesses.

US-headquartered Zyme has a CDM software-as-a-service product which it offers to vendors so they can keep track of sales into the channel. The firm – which has an EMEA base in Reading – claims the nature of the channel means vendors are struggling to keep track of what is going on in their indirect teams.

"We're working in a space even the analysts haven't heard of or defined yet, called channel data management," said Zyme's EMEA director Danny Rowark. "If you take the example of Apple – Apple have two models when they go to market: they sell through their own Apple Stores, so when you go in and buy an iPhone, they have all the information on how much you paid, what you bought – that's their direct model. Then you have the indirect model where they sell through distributors, resellers and retailers. What we offer is visibility into what's happening in [their] channel.

"They can understand 'what are we selling? What about our partners' performance over the last couple of years? How do we get data back into the field to our sales staff? How are we doing as an organisation?' Traditionally, businesses just don't know how they are doing in the channel."

Rowark said Zyme research shows that just 10 per cent of vendors currently use a CDM solution, but of those that do, 70 per cent use his firm's product. The company has 700 global staff and serves customers around the world.

Big data and analytics are hot topics in the tech industry at the moment, with key vendors such as IBM and Microsoft pushing their own products around the trend.

Rowark said this has helped raise the profile of the importance of CDM. He added that it is not just vendors that can cash in on the trend, and that their reseller partners stand to benefit just as much.

"There are real benefits – the resellers want to get paid and they want to make a margin on it," he said. "They can only get that if the vendor agrees they have sold what they say they've sold. If they can have the data a lot quicker, the reseller can get paid a lot quicker.

"Secondly, if a tier-two reseller is about to do a huge order that the vendor has no knowledge of, how do [they] know if stock is actually going to be available to complete the transaction? Also, if vendors do all this marketing activity in the channel, how do they know if it has been successful or not? With this data, we can prove the ROI. Then they will put more MDF into that area.

"The good thing about analytics is you can analyse all the data and get this great information, but you can only do it if the data is good. We provide that goodness into the data so the vendor can analyse it. You've heard the saying 'garbage in, garbage out' – if you're going to analyse bad data, you're going to get bad results."

Get stuffed

The process known as channel stuffing, in which vendors recognise revenue on sales into the channel, instead of the 'true' sales out to an end user, has been an issue in the channel for some time. In a prominent example, Acer was forced to write off $150m (£97m) of kit for mismanaging its EMEA inventory back in 2011.

Zyme claims its tools can combat this.

Rowark said: "What we're encouraging now is for vendors to look at the sales-out model where you actually recognise the revenue once the sale has been made. It avoids channel stuffing.

"Our owner formed the company because the SEC 10 years ago were wary of what was going on in the channel [in terms of] channel stuffing and organisations recognising revenue when they shouldn't. He formed the company because it was a great opportunity. The ripple effect of that is that not only does it support regulation and compliance, it supports the supply chain, it supports salespeople, it supports marketing and channel operations – every aspect of the channel model."

He insisted that it is in vendors' interests to work with a company such as Zyme.

"If you think about channel stuffing, the implications of being caught outweigh any negativity about working with a company like Zyme," he said.

Distie Entatech's commercial director Dave Stevinson said vendors have cleaned up their act on channel stuffing but was optimistic about the prospects for CDM.

"[Channel stuffing] is less of an issue than it ever has been before but it is probably more prevelant around quarter end and year end," he said. "Vendors go into it with their eyes wide open. [Channel data management] is definitely something I would seriously consider - we have a multitude of BI [business information] and analytics tools and we build our own too. It's my background - there is incredible demand for it."