Opportunities for niche players

The Australian IT channel continues to excite and surprise me, primarily because of the resilience that it has to current macro economic conditions. Business partner organisations, and distributors in particular, are taking advantage of current market conditions to establish, or in some cases re-establish, their customer value propositions. The Australian mid market defies the odds and currently shows growth of around 5% CAGR. In short, these are indeed interesting times to be working in the Australian IT channel.

A phenomenon that continues to be prevalent is that of consolidation, and not just in the vendor community (i.e., the recent announcement of HP and EDS). Over the last five years, we have seen consolidation occurring in the channel; business partner organisations are merging and distributors are looking for strategic acquisitions that will extend their presences either geographically or from a product perspective.

For example, the coming together of two of the power houses in volume distribution when Ingram Micro acquired Tech Pacific, or more recently, and closer to home for us at Avnet, was our recent acquisition of ChannelWorx to increase our presence into the networking and security market. Will this trend continue?

Quite simply, it is a sign of the times, and if pressed for an answer I would say that it is somewhat inevitable. Larger global distribution organisations will continue to look for acquisition opportunities in the market to take advantage of emerging technologies so that they can stay ahead of the curve, and so they can adequately service the needs of their business partner customers, who are in the marketplace driving these new technologies and IT solutions. In parallel to that, there also remains an opportunity for niche distribution organisations to create a play for market segments that may not necessarily be covered by the larger players.

In today’s complex and dynamic business environment, delivering the ideal combination of technology products and services to meet customer business needs is more challenging than ever. Sometimes the correct answer to solve a business problem comes from a packaged product. Sometimes it requires a solution that marries multiple products with services together. Increasingly, developing and delivering the right solution – for an individual customer or for an entire market segment – requires the entire channel to work together collaboratively.

By combining knowledge of the customer’s needs with technology available from a multitude of suppliers, good distribution firms will make it easier for business partners to create and deliver solutions that solve customers business problems. The end result is overall growth for business partners, accelerated time to market, expanded capabilities and a competitive edge in
the marketplace.

Drilling down further, there are certain solution segments that are driving and fuelling growth in the current Australian market. One such segment is the storage and virtualisation arena. In nearly every business today there is a growing need to save energy, floor space and reduce the complexity and expense of managing IT infrastructures. End user customers are looking to business partners for help in realizing the maximum value from their technology investments, as well as reducing the cost and complexity of adding new IT services. The quest for leaner IT infrastructures has led to explosive growth in virtualisation and consolidation solutions.

At Avnet, our newly created Storage and Virtualisation Solutions practice helps business partners bring complete virtualisation and consolidation solutions to market quickly and cost effectively.
How do you determine which solution is best for customers?

Given the rise in compliance issues (both internal and external), how then do business partners wade through the numerous options that are currently made available to them in the world of storage solutions? How does a business partner take the time to ensure that they are recommending a solution that is right for their customer? Where do business partners go to find independent information that does not have supplier bias attached to it?

Quite simply, there is no real answer. Whichever way one turns, there are many options, and the solutions on offer these days are all pretty much identical on the surface.

Business partners need a trusted advisor to help them understand the market. For example, what is happening in storage and virtualisation technologies, how big is the market and how can I as a business partner take advantage of this market?

The answer should really not come as a surprise to many reading this article. In reality what I am advocating is a return to a ‘consultative solutions” selling approach, coupled with an overarching strategy that is aimed at solving end user business problems as opposed to positioning IT products that may or may not solve the business problem.

Solutions Distribution as opposed to Volume

Business partners operating in the storage and virtualisation markets need to focus on their customers, and in particular the business needs of their customers. In the traditional Volume Distribution model, business partners would know what products and/or services that their customers required and they would therefore order from their Volume Distribution partner. This is typically referred to as the “brought” methodology, whereas a Solutions Distribution partner will recommend a series of ‘solutions’ that fit together to solve an end user business problem. Then, based on close collaboration with the business partner, the Solutions Distributor will be in a position to put forward a collection of products and services (sometimes a combination of different supplier sets), that solve the end user’s problem. Often these solutions will be a variety of complex technologies, services, financing and high-touch consulting options. Another key factor of solutions distribution is that these organisations will identify the high growth, high return markets and invest their own capital and resources into these markets so as to remove the upfront costs that usually inhibit business partners from expanding their business.

In the Australian marketplace today the adoption of storage and virtualisation is growing at an extremely fast rate. With the rise of these technology solutions comes the threat of unstructured IT environments, and the challenge of ensuring that these environments are secure and that they conform to current compliance standards. With this expanding marketplace, it is paramount that business partners are able to be in a position to not only capitalise on the growth, but to be able to grow their business in a manner that does endure sunk costs that may be unrecoverable. That is why the rise of solutions distribution will become more important as new and emerging markets begin to take hold in the Australian market.

Solutions distribution will, over time, become the industry standard for business partners looking to operate in industries in which their core skills do not currently reside. By creating an indispensable relationship between a business partner and a solutions distributor, the success for business partners operating in new markets will become accelerated, and at the same time their customers will have effective solutions that are designed to address their business challenges.