Automagical Channel

E-commerce creates the magic of Christmas whenever you want it. You go to a Web site, pick out your perfect widget, tap in a credit-card number (always look for the SSL padlock in the corner, just to be safe) and, in three to five days, you have a package on your doorstep. Joy! The promise of any e-commerce site is that it can reach multiples of potential customers without the overhead of bricks-and-mortar.

Lawrence M. Walsh is editor of VARBusiness and GovernmentVAR. He also writes the Tidal Waves blog.

Think high return on low customer touch.

If the e-commerce company is good, it'll selectively present products to shoppers based on their purchasing histories. Amazon does this all the time, recommending books based on what I've looked for in the past, or on the reading habits of people with similar interests. Amazon and BN.com even bundle book selections for a discount. The efficiency of scale is astounding, and it keeps getting better.

How does this apply to the high-tech channel? Some vendors are considering e-commerce models to support low-end solution providers that have neither the volume nor the market reach to attain higher-tier status in channel programs. Here's how it would work: Solution providers would create accounts through a portal. The portal would serve as more than just a purchasing center; it would provide VARs with essential information and support elements--product announcements, marketing materials, rebates and sales incentives. Imagine going to a "partner e-commerce portal" to look for a quote on a server and automagically being presented with options for bundling that server with management software and discount incentives if you bought three today--all based on your continuously updated profile.

The concept makes sense given the difficulty vendors have in reaching the far end of the channel's long tail. Consider this: The reason vendors tier their channel programs is so they can reward and support their best solution providers. The top tier receives the deepest discounts, the best presales and postsales support, advance information on product releases and those precious leads. But whether they're called Platinum, Gold, Silver or Super-Duper partners, the top tier constitutes only a fraction of the total channel population. It's a reflection of the 80/20 rule, with 80 percent of channel revenue generated by 20 percent of solution providers.

Vendors know how to support their best solution providers, because those partners provide the most predictable revenue streams. Below tier two, the expense and effort of supporting partners become exceedingly difficult and counterproductive. If the cost of making a dollar at tier one is 20 cents, the cost of making the same dollar on tier four might be 60 cents, and the volume is significantly lower. Part of the reason distribution exists is to manage the unwashed masses that don't qualify for higher levels or don't have the capability of growing beyond incremental sales. Distributors receive the volume discounts of top-tier solution providers and provide their VARs with similar support to what their larger counterparts get.

The e-commerce model may help vendors achieve part of their goal of reaping more revenue from low-end solution providers for less. But at what cost? Solution providers need more touch than just through some automated portal. They need real support, guidance and enablement. Self-service tools--such as marketing programs and materials--won't do any good if the solution provider doesn't know what to do with them. Lead pass-alongs will remain vastly underperforming since the biggest and best ones will still go to the top tier. Channel-stuffing may happen when incentives get solution providers to buy more than they need but can't resell. And automation will replace the technical support most small solution providers require.

The e-commerce model may solve some channel problems, but not all of them. Stay tuned to see how effective vendors' efficiency tools will be.