Stop The Madness

On the vendor side, companies have set up systems guaranteed to turn high-margin products into low-margin sales. The core issue is that as vendors have come to rely on their own direct-sales efforts or national resellers such as CDW to compete with Dell, they have created incentives for IT organizations to squeeze profit out of every deal.

The way end users do that is by setting up a purchasing process that is separate from the IT design and specification process. So once the VAR spends tons of time and dollars setting up a deal, the purchasing department knows it can get better pricing on the individual components by playing local VARs against CDW and all the vendors, including Dell.

Certain vendors and volume distributors such as Tech Data and Ingram Micro aggravate the situation by helping CDW and Dell get better pricing while at the same time telling local VARs to focus on value-added services. But the efforts the distributors bring to bear to help local VARs create those value-added solutions are fledgling at best, and the support VARs get from vendors is nonexistent.

For the local VAR to be successful it has to sell some piece of software or service in addition to hardware, get paid for doing design and specification work, make sure the sale does not get put through the purchasing department, and walk away from business that it knows is only going to wind up reducing margins. But developing software expertise is expensive, getting paid for design and specification work is almost impossible, VARs have little or no control over purchasing departments, and very few have the discipline to walk away from unprofitable business.

The only way any of this will ever be resolved is if the vendors and distributors come together at a high-level summit with local and national VARs to really address all the issues and potential remedies at one time. Remember, local VARs drive demand because they provide face-to-face time with customers. But right now, the inmates are running the asylum, and the next stop for everybody is the poorhouse.

What's your suggested remedy? Michael Vizard can be reached at (516) 562-7477 or via e-mail at [email protected].