Looking Ahead Jeff McKeever, MicroAge

The indirect-sales channel is coming back, a development as inevitable as the momentum shifts in life itself. The future lies in the channel's ability to foster underserved markets, evangelize and deploy emerging technology, and respond to social trends related to technology.

In the 1960s, there was no channel. There were no VARs, no resellers. There was no discussion of the merits of selling direct vs. indirect. There were only a few nascent manufacturers of the information technology that today is commonplace in every organization. Companies such as IBM, Sperry, RCA, General Electric and Scientific Data sold building-sized mainframes directly to large organizations. The sales channel was direct. Period.

Then a tipping point occurred, set off by the shrinking computing form factor. Apple Computer, Radio Shack and others introduced computers that were affordable to individuals for use at home and in small offices. Several years later, IBM followed with the PC. At that time, manufacturers' direct-marketing and -sales capability was ill-suited for broad-based selling of products that retailed for less than $3,000.

But that alone was not enough to signal the rise of the channel. Two other trends were afoot: Baby boomers were turning in their bell-bottoms for pinstriped suits, becoming business-savvy entrepreneurs looking to profit from technology; and computer companies began to recognize the power of brand.

In the 1980s, marketers exploited the power of brand names such as Ford, Disney and McDonald's,not to mention Apple, IBM and Compaq Computer. The manufacturers needed a way to move technology into the hands of broadly distributed consumers and businesses,they also needed to protect brand integrity.

The channel offered an answer: Authorized dealers and master resellers represented a controlled system for Apple, IBM, Compaq, Hewlett-Packard and other manufacturers to bring personal computers to market through a professionally trained sales force that would protect the integrity of the manufacturers' brands.

The system blossomed through the 1980s and 1990s. And it flourished along with the rise of networking technology, which was labor-intensive to install and maintain,a job well suited to a channel of resellers, VARs and integrators.

The booming economy created a social order of IT consumption, making commonplace the purchase of technology for the home. This was key to the initial success of direct marketers such as Dell Computer and Gateway, which had been increasingly underserved by resellers, as they pursued more lucrative opportunities in business.

When the Internet exploded on the scene, increasing the pressure to reduce costs and increase profits, the momentum shifted hard and fast back to manufacturers' direct-selling policies in 1999.

Companies including Dell had perfected this model to serve the home market and capitalized on the shift. Others quickly followed. Vendors viewed the Internet as a perfect vehicle for direct-marketing strategies. Meanwhile, large corporate IT departments sought to regain control of distributed computer power. And the Net promised to put purchasing power into IT buyers' hands at significant savings.

The shift to direct selling has left many in the channel scrambling to reassess their role and value proposition. While large enterprises certainly have the internal expertise and buying power to command the attention of major manufacturers, many midmarket companies do not. In fact, the disruption to the channel has left some midmarket customers increasingly underserved and unable to cost-effectively obtain the expertise they need to utilize technology.

Meanwhile, social trends are transforming our country into a "nation of free agents," with technology-savvy professionals seeking to capitalize on their individual expertise and knowledge base and develop lifestyles more suitable for integrating work, family and personal interests.

The pendulum is swinging back again to support the existence of the indirect channel, with a twist: In the marketplace today are thousands of disenfranchised, highly trained and knowledgeable technology professionals. They want to stay in the industry. The challenge for the channel is to find a way to link these people with the midmarket companies that need their insight and technical knowledge to implement emerging technology.

The cost of technology will continue to fall, as in the past, and pressure to extract unnecessary costs from the delivery system will continue. The competitive advantage for channel players that want to benefit from this latest shift lies in their ability to offer quality and service.

Concentrate on building a client relationship-based organization. Look for ways to blend the talent and expertise of technology professionals left unemployed by the tech recession with your organization. There is no better time than now to build a culture and structure for delivering value.