Vendors Get Smarter

Anyone who has been paying attention the last couple of years surely has noticed that doing business with the channel is very much en vogue at a growing number of IT vendors.

A slew of vendors have come to grips with a reality that longtime channel observers have known for a quite a while: It makes economic sense to do business through the channel because the infrastructure the channel provides is impossible to replicate by any single vendor.

This realization, which should have been a truism years ago, seems to finally no longer be in question in much of the industry.

It is no surprise, therefore, that market research firm NPD Group, of Port Washington, N.Y., found in a recent study that the number of vendors doing business through the two-tier channel—which encompasses distributors and the solution providers they supply—has increased 30 percent since 2003. Back then, some 600 vendors were working with the channel, but the number has grown to 800.

Other evidence the two-tier channel is gaining ground came in September when Raymond James and Associates, an investment and research firm in St. Petersburg, Fla., revealed that IT distribution grew 6.4 percent in the third quarter.

Raymond James attributed the growth to strong demand for PCs, networking and communications products, and concluded that a greater share of these products are getting into customer sites through the distribution channel.

NPD, meanwhile, has found that certain hardware categories, particularly communications gear and storage systems, have enjoyed significant sales growth in recent months. Hardware, of course, makes up the bulk of the volume that distributors push into the market.

So it’s a good time to be in the channel, as vendor after vendor turns to distributors and solution providers to market their products. This is especially prevalent with vendors seeking inroads into the small and midsize business market. The SMB market is so vast and varied that vendors find they have no real choice to tap those customers outside of working with the solution providers that understand those customers better than anyone else.

“Even if we wanted to be purely direct, economically it would never work for us,” said Kevin Cook, vice president of sales channels and marketing at communications giant Avaya, which has over the past year been tailoring programs for solution providers in the SMB space.

Another big-name vendor that has turned to the channel as part of its SMB strategy is EMC, which in less than a year has recruited some 1,300 solution providers for its Insignia line of products.

Steve Houck, vice president of sales for the Insignia line, said his decision to join the company almost a year ago had a lot to do with EMC’s 100 percent channel strategy for its SMB products.

Houck, formerly of Corel, has been in the channel long enough to understand the significance of that strategy. He knows EMC would have had little or no chance of reaching SMB customers without the channel.

And, judging from NPD’s recent data as well as Raymond James’ conclusions, a lot of other vendors finally understand the importance of working through the channel. Vendors are getting smarter, and this bodes well for solution providers in the coming year.

Pedro Pereira is editor of eWEEK Strategic Partner and contributing editor to The Channel Insider. He can be reached at ppereira@ziffdavis.com.