Channel Strategies for the CIOBy Yuval Shavit, Features Writer
Within the channel, distributors are wholesalers of software and hardware that act as intermediaries between vendors and value-added resellers (VARs) or system integrators (SIs). Also known as "disties," distributors
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handle procurement and
payment between VARs and vendors and are usually the only way in which a vendor will distribute its
products to the channel. A distributor's customer base consists of a vendor's resellers and SIs,
which are often referred to as its channel.
Much of a channel distributor's role is in handling the basic logistics of transactions, such as getting a unit (whether hardware or a box of software) physically to the reseller. Distributors have warehouses across the country and work on economies of scale to deliver products more efficiently than vendors would be able to if they handled each sale directly with a reseller or SI. Distributors often complement these procurement services with other services, such as training or, increasingly, hosting network operations centers (NOCs).
Distributors are often used by vendors that do not have the means to build out a channel program by themselves. Although they can play a small role -- for instance, handling only payment and procurement -- they frequently take a more proactive approach by educating resellers about new products from the vendors. This can include presales training, road shows, and demos for resellers held on behalf of vendors. Distributors also provide services around the procurement process, such as contract negotiation, marketing for resellers and SIs, and warrantees.
In the channel, distributors are an integral part of the chain between vendors and end customers, which is essentially: vendor to distributor, distributor to reseller or SI, reseller or SI to end customer. Several experts said they expect distributors' roles to stay important even with the rise of managed service providers (MSPs) and Software as a Service (SaaS). Although distributors' models may change a bit to adjust to these new technology delivery methods, their essential function will remain as providers of greater efficiency and scale between vendors and resellers.
As managed services become more widespread, many distributors are extending their model by offering NOCs that MSPs can use for the back end to their managed services. These NOC services can be useful for small MSPs that lack the resources or scale either to build a NOC or to run one 24/7. And while SaaS allows customers to interact more directly with vendors, SIs that help integrate those SaaS products into a customer's existing infrastructure could still use distributors to handle payments with a greater economy of scale.
This was first published in October 2007