Telstra, HPE, Aruba and rhipe open up on channel programs

Demands on disties

On the second day of CRN Pipeline in Melbourne, editorial director Steven Kiernan presented our 2017 Distribution Research, where we analysed the demands that both vendors and resellers have of their disties. To help provide context around the research, Kiernan invited Lee Welch from Ingram Micro to join him on stage in Melbourne, and Dominic O’Hanlon from Rhipe to speak in Sydney.

Steven Kiernan: A large number of distributors might be necessary to service a big market of the top vendors, but when we see a smaller vendor put on a third distie, what’s that about?

Lee Welch: Ingram Micro Sometimes vendors think the more distributors they’ve got the more business they’re going to get, and it’s not necessarily the case. It can go the opposite way in fact, because then that vendor becomes less relevant to the other two distributors because the third vendor is fighting for share.

Margins suffer, revenues go down, and it actually has the opposite effect. Vendors sometimes think it’s the right thing to do, and I sit across the table from them and say, “Look, I’m not doing this for my business’ sake, I’m just letting you know this is not going to work for you”. They tend not to believe you and off they go, and in twelve or eighteen months they’re reviewing their distribution landscape again.

Steven Kiernan: Everyone’s looking for the best price. What’s your perspective on that component of the market where resellers are pushing prices down?

Lee Welch: Distributors run on very slim margins, and you have different margin profiles for different areas of the business. Keyboards and mice, for instance, we don’t make much margin on because the commodity is low-value-add, but when you get into networking, security and cloud, the margins start to climb; we’re investing more in that area.

Ultimately, our success and the success of our partners and their customers is all down to relationships.

We’ve got partners that just drop us on price all the time. That’s fine, but with partners that we’re actually getting deep with, we talk about new vendors, new solutions, we’re providing them with resources, we’re helping them with lead gen. The better the relationship you have got with your vendor and your distributor, the more value that you can actually extract from those people.

Steven Kiernan: Distributors, like channel partners, need to invest and to change their businesses for new models. How has Rhipe reinvested and moved from an existing way of selling such as SPLA and to private cloud into to a new way of selling like for CSPs?

Dominic O’Hanlon: Last year we did over $150 million in revenue and made $4 million in profit. And that was the first year we’d made a profit. So there’s continuous investment. Price pressure and margin pressure is absolutely real. I don’t think I’ve met a distributor that’s out there gouging partners.

If you look at the results for any of our competitors, or anyone that sells hardware, those billion-dollar companies are making nothing.

In the distribution channel, it is very tight in terms of margins. But in our business we had to reinvest very hard. We spent more than $3 million last year just in our platform for CSP. So there’s a lot of investment that goes into 24-7 support, marketing-as-a-service, support-as-a-service, consulting-as-a-service. These are things that you’re not going to make money out of, but they are going to drive the end game greatly in your business.

Steven Kiernan: Another one of the things you’re doing is using your cloud marketplace and using your reach in the channel community to take local startups out to the market. What’s that program like?

Dominic O’Hanlon: I’m passionate about ISVs. We’ve looked at it as a business, and we’ve gone to a lot of our ISV’s and said, “How can we help you get to market?” Some are easier to get to market than others though.

The ones that are quite easy to get to market are those that attach or that can be bundled with an existing product. So, if you’re selling a CSP seat and you want to do an attach to that, they are reasonably easy to sell. The ones that are much harder to sell are where you’ve got to completely educate the market on what the product is.

So what we’ve been doing is going out to ISV communities and running what we call marketing-as-a-service. We get them in a room and do a workshop.

We evaluate which ones we can help get to market. And for the more difficult ones we might say, “Well, this reseller of ours, they specialise in mobility. We should put you in a room, get you together, and see how you can work together”.