How disties are beating the squeeze

For an industry built on the basics, the value of value-add remains core.

Telsyte’s Gedda says it is possible for distributors to branch out from just “shipping tin” to be a more integral part of the support processes of resellers and vendors, including for non-physical products, such as cloud services.

Verykios, meanwhile, says that while the model of distribution doesn’t change, the ‘How You Do Distribution’ changes. “We came into the market and broke the model about 10 years ago when we said there’s no such thing as a distinction between value-add and time and place anymore. The distinction is throwing that away and looking a little bit differently at where you add value, and how value is defined.

Is the model for distribution changing? “I don’t know about new models,” says Verykios. “I just know that we can’t predict the future. That kind of thinking has cost people a lot of money.”

The hard heads in the game remain unconvinced of wholesale changes taking place. Dicker, for instance, made his skepticism clear. Asked about the biggest changes he has seen in the distribution business in the last five years, he was succinct. “There has been a big increase in talk about changes.”

It’s all in the cloud

The rise of the cloud and consumer IT products and services have been challenges for the distribution business over the past five years, says Gedda. “It’s important that distributors be agile and, even if they have not been impacted by the cloud, start thinking about how to diversify in the event of demand for physical, warehoused IT equipment falling rapidly.”

And they also need to keep an eye on their resellers who might abandon the multi-tier channel model in favour of more value-added services, he says. 

“Cloud has the potential to shake up the whole vendor-distributor-reseller-customer relationship.” Where once a vendor would ship a server to a distributor, which would then be purchased by a reseller for a customer requirement, the cloud enables vendors to sell direct to the customer and no physical server needs to be sent down the supply chain. 

“Speaking to many in the reseller community, this doesn’t mean they or distributors become irrelevant, it means they must adapt to the cloud model of value-added services. Distributors can focus their attention on service providers [such as cloud providers and telcos] rather than traditional on-premise system integrators, and the SIs can become cloud providers or focus on cloud value-adds like integration, data protection, security and compliance,” says Gedda. 

Peach says that Express Data is into its fifth year of providing cloud-based solutions. “For us, cloud is now less of a revolution and more of an evolution, with the ongoing expectation of regular inflection points along the way where we must shift quickly to seize an opportunity as it arises.”

He describes the imminent availability, from 2 April, of Microsoft’s Office 365 via Express Data as an inflection point. “We have a strong sense of responsibility to ensure our partners benefit from our experience.”

Peach says another change is that vendors and resellers “expect us to do more for less”. 

“We all operate within a high-volume, low-margin business model, and so it is a daily challenge to meet the expanded expectations of our vendor and reseller partners of the value we should provide, while constrained by the legacy of the old ‘pick, pack and ship’ model.”

Verykios says: “We are still a box mover. We are just coming up with more innovative ways to make sure those boxes move faster to more people. It’s about the strategy we use to do this. People want massive efficiencies and cost reductions and revenue-making opportunities. That hasn’t changed.”

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