The Hybrid Model Is Done, or Is It?

It’s tempting to say that the issue of whether you should mix a reselling and distribution model is settled, in light of solution provider Agilysys’ planned divestment of its distribution business.

Agilysys was the last of the hybrid dinosaurs—companies with mixed models that touched the user directly while supplying competitors of its direct business. By divesting itself of its distribution arm, Keylink Systems Group, for which Arrow Electronics of Melville, N.Y. is paying $485 million, Agilysys is sharpening its focus on the direct end-user business.

But even though Agilysys, of Boca Raton, Fla., is following the path carved by so many others that came before by abandoning the hybrid reselling/distribution model, the model persists.

Bell Microproducts, a storage and networking solutions distributor in San Jose, Calif., disclosed in October that it was acquiring an interest in solution provider ProSys Information Systems, of Atlanta.

Bell, which is seeking to diversify also by getting into security, made a curious move with its ProSys investment.

The hybrid model has a long, less-than-illustrious history. Channel empires rose and crumbled as a result of the model, which captured the imagination of some channel movers and shakers over the years.

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It has been largely discredited. Only Agilysys and Avnet, a distributor based in Tempe, Ariz., held out this long with a mixed model. Fourteen months ago, Avnet sold its Hewlett-Packard-focused user business to Logicalis, of Bloomfield Hills, Mich., to focus solely on distribution.

It is a credit to the management of both Agilysys and Avnet that they managed to hold out.

The hybrid distribution/reseller model lost luster through the 1990s as it became increasingly clear that trying to sell to users while supplying other companies that sell to users, such as VARs and integrators, does not work in most cases. VARs and integrators typically don’t want suppliers that also compete with them.

In 2000, one of the highest-profile hybrid companies, MicroAge, which had operated a distribution arm as Pinacor, filed for Chapter 11 bankruptcy. The MicroAge brand has survived, however.

Founder Jeffrey McKeever reinvented the company after the bankruptcy proceedings as a services-focused solution provider.

Other MicroAge-like experiments fizzled along the way. Among them were Intelligent Electronics, which sold its distribution business to Ingram Micro, of Santa Ana, Calif., and ComputerLand, which divested itself of a franchise business and morphed into a company called Vanstar.

The franchise business was sold to then-distributor Merisel, which agreed to a rather unorthodox arrangement to source product for the franchises from Vanstar.

Vanstar no longer exists. And Merisel, once the largest publicly held IT distributor, now exists as a supplier of digital imaging solutions to customers in New York, Los Angeles and Atlanta.

The channel is littered with remains and memories of many other hybrid businesses that didn’t make it or were absorbed by other companies. Their histories have carved a tortuous path to where the channel has arrived today—a place where, by and large, models are better defined.

It is safe to conclude that distribution and reselling don’t mix under the same model. We’ll have to see if Bell Microproducts proves that premise wrong.

Pedro Pereira is editor of eWEEK Strategic Partner. He can be reached at ppereira@ziffdavis.com.