Consolidation across the channel

Chris Walsh gives his view on vendor consolidation and the effect on VARs

Walsh: Where does your business fit in an environment of increasing consolidation?

I believe that channel players need to consider the drivers for vendor consolidation as well as its impact on resellers and distributors.

The weakness of the pound means British companies in particular are a value buy.

And mergers or acquisitions can quickly and effectively fill a gap in certain areas. The pace of change in the cloud, for example is such that it could prove near impossible to catch up through organic research and development.

Some smaller specialists may angle for acquisition, creating products specifically to fill gaps in a larger vendor’s offering.

This market consolidation could be seen to restrict resellers, distributors and end users. Vendors with large numbers of products are driving the acquired technology to their central management systems, so users need not cherry-pick individual products.

Consolidation has already led to a degree of channel rationalisation. And larger distributors are mirroring the behaviour of vendors, to take control of rivals and peers or win contracts with the emerging vendors.

Some may argue that buying from a larger single distributor offers a smoother route to market. Others would argue that as more products are absorbed into partner networks, the focus on the recently acquired technology is lost.

However, it also presents an opportunity. I believe that larger, growing distributors will be more concerned with volume than value add. With such a range of products, the opportunity to create higher margins surely diminishes.

Smaller, more dynamic distributors and resellers might be shifting less product, but compensating through higher margins and a reputation for knowledge and experience in their specific market.

Vendor-agnostic players may offer a multitude of similar technologies and allow their client to choose by price or other factors, rather than brand. Smaller, more focused partners may offer more impartial advice.

It reminds me of the automotive industry, where many brands remain, but where there are a small number of manufacturers calling the shots.

The key to survival, in my opinion, is recognising where your business fits in the channel and exploiting that position, whether as a cog or a standalone component.

Chris Walsh is sales director at Arc Technology