Distribution Dust-Up, Customer Behavior

Printer-friendly version Email this CRN article

It has been awhile since we have had a major dust-up between a vendor and distributor, so IBM's decision to part ways with Synnex was especially newsworthy on several fronts. The feedback we received on our ChannelWeb.com stories ran the gamut from criticizing IBM for a foolhardy move—which it wasn't—to speculation that Synnex's customers don't fit IBM's long-term strategy. Actually, despite the old saying that there is never such a thing as an amicable divorce, this one comes close.

Can be reached via e-mail at rdemarzo@everythingchannel.com.

Synnex co-CEO Kevin Murai said he was surprised by the move, while IBM decision-maker Ayman Antoun said the decoupling was made to streamline the supply chain. Anyone who follows IBM knows this decision was a long time in coming and signals IBM's intent to examine its worldwide distribution strategy. There will undoubtedly be more distributors outside the U.S. that will lose the rights to IBM's product line. Given IBM's leadership role in the industry, it is likely that other vendors will follow suit and analyze their distribution relationships as well.

Let's look at this move on a number of other fronts. IBM has been kicking around its distribution strategy for years. With the IT market caught up in a recession, IBM was looking for ways to cut costs and capacity in the channel. Just remember, its hardware sales decreased 9.5 percent in the third quarter. The hardware unit known as the Systems & Technology Group is now run by Robert Moffat, a channel-savvy operations whiz who is moving decisively to re-energize and restructure the business. In addition, IBM has licensed its X-series technology to Lenovo and has less of a presence in the SMB market today than it did several years ago, although that may change in the next year or two. IBM also said it wanted to rely on distribution partners that had a more global business, so it is sticking with Tech Data and Ingram Micro on the volume front and Arrow and Avnet on the value side. By the way, 35 percent of Synnex's sales came from selling HP equipment last quarter.

On Customer Behavior: Vendors are also taking a look at how the economy is causing changes in the way customers are buying technology and how they are engaging with their solution providers.With customers pulling back on IT spending, many are challenging solution providers to prove their mettle, especially when it comes to pure product transactions. Based on our studies, we know that during recessionary periods or economic turmoil vendors increase their focus on partners while customers pressure their VARs to provide better pricing or terms. Based on conversations with VARs, customers are taking longer to sign off on deals and are asking for more detail on justifying purchases. Of course, issues related to financing are prevalent, too, given how tight the credit markets are. Still, solution providers confirm what customer studies are showing—IT projects for process improvement and customer acquisition or retention are where funding will remain steady. Other projects are up for grabs.

What are your customers talking about?
Everything Channel SVP and Editorial Director Robert C. DeMarzo is at

Printer-friendly version Email this CRN article