Is there still value in distribution services?

Distribution services now go beyond product supply and financing to training in new technologies, managed services and more.

Once upon a time, distributors offered resellers ample inventory, timely product availability and financing to make deals happen -- all very important functions.

While those traditional distribution services staples remain on offer, today's major distributors provide a wide array of value-added services. Distributors assist resellers with marketing and business development, technology training and access to business partners. They also offer resellers and solution providers a leg up into emerging markets such as managed services.

The list of distribution services can be quite long, with two dozen or more distinct lines not uncommon. But what services actually appeal to resellers? Do they value the distributor's bedrock offerings or newer services? Interviews with channel executives reveal that opinions on distribution's benefits vary a great deal.

For RedLine Solutions Inc., a Santa Clara, Calif.-based reseller and integrator, the benefits of distribution cut to the very core of its existence.

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Company president Todd Baggett credits distribution for helping companies like his break into the barcode and radio frequency (RF) systems space. Distributors such as ScanSource Inc., an automatic identification and data capture specialist, "opened up the market to small, entrepreneurial" firms, he said.

Baggett said barcode/RF vendors such as Zebra Technologies and Symbol Technologies (now part of Motorola) required companies to generate $500,000 and above in product sales to qualify as direct partners -- totals a startup couldn't demonstrate. The arrival of distributors, however, meant smaller firms could play in the market and obtain aggressive volume pricing to compete.

"That model didn't exist 15 years ago," Baggett said.

Value-added distribution services

But since the mid-1990s, many distributors aimed to offer more than price and availability.

"Distributors, as a whole, have made an effort to expand their value-add to their customers," Baggett said.

Pete Busam, vice president and chief operating officer at Decisive Business Solutions Inc., a Pennsauken, N.J., integrator, said he still takes advantage of distributor pricing to compete a bit more aggressively, but also finds a big play for distribution services. The company, for example, has been involved in Ingram Micro Inc.'s Ingram Micro Services Network (IMSN) for two years.

A service provider participating in IMSN may tap other providers in the network to support customers beyond its geographic reach. Conversely, the service provider may have business come its way through the network.

"We have customers expanding into other geographies and we can still service them," Busam said. "IMSN allows us to have a central place to send or receive work."

Busam also identified product training as a distributor plus. Synnex Corp., he said, has distinguished itself for bringing manufacturers and service providers together for training.

Distributors can also put manufacturer's newly released products in the hands of resellers and integrators. Baggett said his company obtained a Motorola MC7090 mobile data terminal when it first came out. He said distributors offer such demo kits for top partners, which lets reseller sales people show and sell the product right away.

VARs also cited marketing and demand generation as a distributor value-add. Diamond Lauffin, founder of The Lauffin Group Inc., a channel sales consultant, noted that distributors can help smaller integrators that lack big marketing budgets.

"A distributor can be a direct resource extension to those smaller or more market-specific integrators," he said.

Baggett said distributors can help with mailers and telemarketing. RedLine Solutions is working with a distributor on event planning for an October trade show. In that case, the distributor's support covers everything from booth layout and graphics to marketing the event.

Distributors in recent years have provided resellers with a gateway to emerging service lines.

Busam said he leveraged Ingram Micro's Seismic offering to get into managed services "without spending an arm and a leg to ramp up."

Seismic lets resellers sell remote monitoring and management services, online backup and restore, and print monitoring and management, according to Ingram Micro. Resellers can also provide hosted applications such as Microsoft Exchange Server.

Distributors can save resellers the time and effort involved in evaluating managed services platforms, added Dave Dadian, CEO of Powersolution.com, a company that offers Web development, computer network and managed services in Ho-Ho-Kus, N.J. He recalled his company's lengthy evaluation of platforms in 2006, which impacted revenue that year.

Dadian said large distributors "are going to be vetting out the vendors … to make sure the smaller solution providers aren't going to have the same growing pains and frustrations as guys like myself who went out on our own."

"If people want to test the waters of what managed services can do, that is a fantastic benefit," he added.

On the other hand, resellers should consider how their clients may react to having another party involved in providing managed services, Dadian said.

Distribution services direction: Contracting or expanding?

Dadian noted that, from the Powersolutions.com perspective, distributors' traditional product availability advantage remains their No. 1 benefit.

Some observers suggested that core benefit -- along with a willingness to extend credit to resellers -- is becoming the distributors' main focus.

John Matze, vice president of business development at Hifn Inc., said most distributors "are just stocking goods … and basically allowing the VARs to use them as a bank." Hifn, based in Los Gatos, Calif., offers storage and network security products.

In Matze's view, distributors' value-add is declining. He noted, for instance, that distributors used to have more technical people on hand to answer reseller questions. He said some smaller distributors continue to offer that service, but observed that the larger ones now seek tighter relations with manufacturers to take over those questions.

Janet Schijns, president and CEO of channel consultancy The JS Group, cited a contrary trend among distributors: too many value-added services. She said distributors are struggling to clearly define the value they bring to customers and have taken a "more is better" approach to rolling out services.

"If you look at what they offer, it's a laundry list, and probably 95% [of the services] aren't used with any regularity by any partner," she said.

She said distributors should develop a better understanding of their partners' business plans, so they don't end up guessing on the kinds of distribution services they want.

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