How Online Distribution Will Affect You

In the current bestseller Who Moved My Cheese?, Spencer Johnson, M.D., provides a whimsical anecdote about coping with change, featuring Sniff, Scurry, Hem and Haw, four mice in their quest for, well, cheese. The clear victors are Sniff, who sniffed out change early, and Scurry, who mobilized into action, while Hem and Haw did just that.

In the last few years, the information technology channel has undergone one of the greatest upheavals in its dynamic history. "Go-direct" is the term of the day. Vendors are changing terms and conditions for business. Business models are shifting, and many technology solution providers are reeling from this climate of change found throughout the industry.

However, in the technology channel, we have the same opportunities to sniff out change and scurry into action because, like the tale of the four mice, the cheese is plentiful for those willing to embrace the transition of our industry.

Changes in the market climate are resulting in even greater opportunities to grow our businesses. While these changes may be painful in the short-term, they bring distributors and technology solution providers the power to eliminate processes that have prevented the realization of the full value of our services. In the past, we have relied on product margin to compensate for numerous levels of support associated with deploying product solutions. But product margins are shrinking since customers can source products more efficiently and only pay for the services they perceive as having the most value.

Changes in the Channel--Linear vs. Non-Linear Distribution

According to Charles Smulders of Gartner Group's Dataquest, "The distribution landscape is evolving from a linear to a non-linear model. This evolution is one of the greatest changes the distribution market has seen, and the implications for vendors and resellers of such a transition are profound."

In a 1999 report, Dataquest describes the linear vs. non-linear distribution model as a change from the traditional one- or two-tier symmetrical distribution model--in which orders are taken up the supply chain and products travel down the chain--to a model in which the customer has numerous points of entry. In the non-linear model, order taking and product-fulfillment are asymmetrical processes. For instance, the order taker does not necessarily deliver the product. "The Web is the great enabler of this process and the driving force," the report says.

As a result, we are seeing the unbundling of services such as order management, fulfillment and technical support, with a great opportunity to capitalize on providing more services for all levels of the IT supply chain. For example, in Dataquest's non-linear model for distribution, a technology solution provider may not just take an order, but could be paid more to install or to service and support a product. "What role a company plays is dependent on its ability to add value to the end user experience," the report notes.

The New Channel Model

Ingram Micro is dedicated to transforming the value proposition for technology distribution and is working to help our technology solution providers add value to the end-user experience.

A key example is the recent launch of PartnershipAmerica.com. This online destination serves as an infomediary to connect technology solution providers with the vast government and education technology market. It is an exciting initiative for Ingram Micro.

The site supports our strategic objective to lead the channel with go-to-market models that can compete in the new economy. It enables smaller government and education solution provider customers to easily deploy an e-commerce strategy to access the huge buying potential of the public sector through their own eStores on PartnershipAmerica.com.

These eProviders handle the site's transactions, as well as provide real-time online quotes that can be reviewed, ranked and accepted online by the government and education buyer. The site launched with 20 eStores using technology provided and pioneered by Ingram Micro.

In addition, PartnershipAmerica.com employs services designed to drive traffic to the site and eStores. Special features include advanced request for quote (RFQ) and product/price comparison systems, online or personal assistance from best-in-class technology solution providers, and product reviews and other decision-making content designed to educate buyers on products to meet their specific technology needs. Through its eStores, PartnershipAmerica.com offers the industry's broadest product variety and unsurpassed order fulfillment and accuracy from Ingram Micro, delivering a complete purchase experience for the government and education customer.

For Ingram Micro, PartnershipAmerica.com provides a new fee-for-service revenue stream that is above and beyond our traditional fulfillment growth potential, and enables technology solution providers to deliver technical support and service on a fee-basis to this vast market.

Using the power of the Internet, we are creating opportunities to compete in the new economy and redefine our role as a net market maker for the technology industry. Yes, the cheese has moved, but together with our technology solution provider customers who are willing to sniff out change and mobilize into action, we will take advantage of the opportunities emerging in this new channel model.