GTDC Vendor Summit 2010

October 5, 2010 at 4:37 pm Leave a comment

There’s More than One Way to Skin a Cat: Views on the Role of Distribution for 2011


Beth Vanni – Director, Market Intelligence

There they sat: four smart, experienced and confident channel executives.  So much the same and yet so different. The event?  The “Rising Stars” vendor panel at the Global Technology Distributor Council’s annual N. American Vendor Summit.  The Rising Star awards are given to those companies who experienced the largest year over year sales out growth through distribution (July 1 ’90 through June 30 ’10).   The event was well attended and all four vendor executives were quite intent on appearing both positive and supportive of their distributor partners in the room as well as intriguing and smart to their vendor peers.  Which they were/are.  But, what an amazing difference in terms of their company’s basic needs and expectations of their broadline and technical distributors in the coming year.

Each one of these execs are 20+ year industry veterans – some with more direct sales experience, some with more international management and some with deeper distribution-specific experience.  The one thing they have in common, however, was how clearly they articulated the A-B-C’s of distribution – the core principles that make every vendor/distributor relationship work best.  Namely, getting and keeping the distributor profitable; reducing their operating expense, minimizing slow-moving inventory and maximizing their return on working capital.   They all know they’re not going to get past square one with creative distribution partner-development and solution-selling services until they address this fundamental financial consideration.  In that way, there’s really only ONE way to skin a (distribution) cat.

Other fundamental things these channel execs all agreed on?

     

  1. Align the incentives to the functions you need most. Focus –  offer incentives and margins in line with what services you need and where you want your distributors to invest.  Don’t treat them all the same.
  2. Pick your distributors carefully and have a mutual planQuality of relationship is more important than quantity of relationships.
  3. The relationship drives the business.  Get to know your distributor(s) at all levels, and keep them involved and informed at all levels.
  4.  

And that’s where the similarities stopped.

Admittedly, these men were representing companies with products which run the gambit of volume to value: Lenovo, VMware, Hitachi GST and Riverbed.  The panel was a mix of discussion around how these vendors had achieved such high growth through distribution in the past year, combined with a discussion of their expectations for innovation and investment in the future. As you might expect, Lenovo and Hitachi’s volume laptops, desktops, and storage devices demand the highest levels of operational excellence:  breaking bulk, just-in-time delivery, razor-thin margin management, drop-shipment of custom configurations, etc.   Riverbed required mostly sales coverage, partner recruitment and training around their WAN Optimization technology from their distributors.  And, VMWare, the virtualization software darling, was mostly interested in the rate with which distribution helped them get their partners through their new technology competency program.

Each company shared very different expectation for what constitutes real, tangible value from their distributors in the coming year – even during this tightly managed and ROI-crazy economic environment. To Hitachi,  Avnet/Bell’s help with efficient supply chain management and decreasing their DSO is critical.   For Lenovo, getting “reverse logistics” working effectively is very compelling – the ability to take 100 (or even 50) basis points out of their cost structure by picking up goods at their manufacturing facility.  For Riverbed, Arrow and Avnet working as their field channel management team is crucial – profiling, recruiting and truly developing their newer channel recruits.  And VMware’s continued push for virtualization infrastructure dominance requires its distributors (Ingram, Arrow, Avnet) to continue to push partners with developing services and upselling software around renewals.  That’s a lot of different ways to skin a cat.

Value is clearly in the eye of the beholder – even during these cloud-crazy, distributors-become-obsolete heyday.  Efficiency and scale will remain the watchwords of any good distributor/vendor partnership this coming year.  But beyond that, the financial and services make-up of these relationships will be as diverse as any time in our industry’s history.

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