Key Questions Emerge from Distribution's Evolution

March 25, 2008

By Tim Curran

More than 30 years ago when the IT distribution industry began to take shape, the needs were very different. Pick, pack and ship was the mantra. Warehouse shelves were stuffed with stuff. The supply chain links clasped tighter with each year that passed.

Promotional incentives came and went at a dizzying pace. Restrictions forced solution providers to choose primary and secondary sources for certain products. Changing distributors could only be done during designated periods.

As open sourcing became prevalent, the landscape started to change. The so-called “aggregator” model faded into extinction. E-business roots took hold. Services evolved. Instead of moving boxes, distributors provided solutions – and more than just product-based solutions. They created partner ecosystems, vertical market programs, demand-generation activities, advanced technical support options, managed services programs, unique credit offerings and much more.

In short, distributors became a different type of channel partner, with deeper resources and considerably stronger partnerships.

The world changed – and so did distributors.

Then, in the late 90s, the IT distribution model came under intense pressure from what was presumed to be the future: the direct model.

The truth is that the direct model was never really anything new. Distributors essentially came into existence because direct selling was insufficient for reaching and effectively serving mass markets. Times haven’t changed all that much when you think of it from this perspective.

Distributors are more specialized nowadays. They possess greater market and solution knowledge. Systems are vastly more sophisticated. And, most importantly, they’re amply equipped to serve the channel. The direct model still exists, of course, but the obsession about it has moved on, just as distribution has moved on from the days when logistics and inventory management largely defined success.

Sure, getting product to the right place at the right time remains crucial. Today’s profile of IT distributors, however, goes well beyond this fundamental capability. Distributors now help solution providers and vendors win, not just fulfill, more business. The roles and core competencies are more strategic, the methodologies and practices more advanced, and the focus areas more targeted.

So what should solution providers expect from IT distributors, and what should they do to maximize related partnerships? To answer that question, here are five questions to ask:

1)    Do I have the right distributor for my business needs?

Solutions are a conviction as much as the right selection of dependable products and services. Are you getting a complete partnership with your distributor, one that addresses end-to-end business requirements? You may benefit by better defining your current and long-term objectives. How well a distributor helps you address those objectives should be a key determining factor. Evaluate how well your overall needs are met. Explore other sources as necessary, but set reasonable expectations. Distributors obviously serve thousands of customers every day and can’t be all things to all customers.

2)    Have I taken the time to understand existing and new distributor service offerings?

Not all distributors are created equal. In fact, the differences are typically far greater in many ways than the similarities. Even though open sourcing has changed the landscape and you’ll find that the basics of pick, pack and ship no longer distinguish one very much from the other, each distributor has its own business objectives, cost structure, geographic coverage and service investments. Some services will be more important to you than others, and obviously it makes sense to do business where the vital offerings are provided to you most effectively. Ask questions. What new services and enhancements are planned? Find out how your distributor(s) can assist you beyond what meets the eye. The answers may surprise you.

3)    Price matters, but how much?

This goes hand-in-hand with the service offering criteria. Everyone wants a great deal, but that doesn’t mean just getting the best price. Market and technology expertise, configuration services, technical support, credit, shipping and handling, and many other factors come into play. It’s not just about saving on product purchases. It’s the total partnership — the results, the value you and your company derive day-in and day-out in doing business with a distributor. How well do they support you before and after the sale? The partner that’s always there for you when you need them can be priceless.

4)    Do I have the right e-business connections ?

Big efficiency gains can be game-changing for any solution provider. Executing the transaction should be secondary on a day-by-day basis, but how you do business with distributors online needs to be an important up-front consideration. Do your research. What tools and resources are available and working well? Can you seamlessly link your own systems with product information and technical specifications that the distributor makes available? Find the best, most efficient online approaches for seamless purchasing, order tracking, refresh, returns, etc. Small differences in e-functionality can mean major operational advantages.

5)    Am I leveraging distributor partner ecosystems?

Solution provider communities and programs are now enabled by distributors on a widespread basis. Just about all have events and initiatives that bring solution providers together around technology, emerging business development opportunities and best-practice sharing relative to all aspects of channel business models. Vendors are highly supportive and engaged. These member organizations are thriving and providing meaningful benefit to everyone from senior executives to system engineers as well as sales and support representatives. Get involved, leverage the opportunities. It’s a pivotal aspect of the future of distribution.

These are just some of the questions you can ask yourself and explore with your distribution partners. The answers to your most important questions will ultimately help you make the best choices for your business. One of the biggest mistakes you can make is taking your distribution relationships for granted ― or overlooking the strategic value they can bring.

(Tim Curran is CEO of the Global Technology Distribution Council (GTDC).)