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DMRs Will Blaze The Path To Channel Model Innovation In The Coming Decade

The mid-1980s to mid-1990s were the glory years for what we used to call aggregators and corporate resellers--mega-sized resellers, most of which were publicly held.

Inacom, MicroAge, Vanstar, Businessland, Neeco, JWP and Entex all dominated the pages of CRN for many years. Most of these companies were unable to make the transition from hawkers of hardware to solvers of technology business problems. MicroAge, while still around, is much smaller than it was. Compucom is another former giant that survived many ups and downs; more recently, it once again became a private company.

The smaller solution provider has reigned supreme during the 10-year stretch from 1995 to today. Privately held for the most part, these companies typically measure their revenue size in the tens of millions of dollars. They solve business problems with technology and represent so many different business models that it's hard to put them into even a few buckets. Many were around during the glory years of the big players. In fact, this group is the one constant in the channel.

Over the next decade, what are we likely to experience in the channel as it pertains to success? In some ways, I believe the next 10 years will look a lot like the past 10 years. The channel players that survived the past decade will very likely remain the dominant players of the future. Hundreds of thousands of small solution providers will continue to reign.

The one area where I anticipate some interesting changes, however, is among the so-called direct marketing resellers (DMRs). I say so-called because DMRs are anything but direct marketers. They sell equipment built by other suppliers, which puts them in the indirect channel, but the "direct" in DMR helps with their valuation on Wall Street.

This group will be the class to watch over the next decade. CRN reported last week that the agent program being piloted by CDW seems to be gaining some traction. And if you have been watching PC Connection at all, you must have noticed that it is pushing service capabilities as it attempts to break out of the product sales model. PC Connection is leveraging other VARs' as well as its own capabilities. There are many DMRs evolving their models, including Zones and Insight.

Because the CDWs, Insights, Zones and PC Connections of this world push large volumes of product, they are particularly attractive to vendors. Now they are trying to leverage these volumes with other solution providers as well.

In time, the DMRs could resemble some of the aggregators of old in that they not only will sell to end users, but also increasingly will act as suppliers to smaller solution providers.

Over the next 10 years, DMRs and smaller solution providers will figure out how to partner with and leverage each other to drive even more efficiencies into the channel.

Some of these players will fail and ultimately disappear. Others will find the right formula and become very large and even more influential in the market.

It's one of the things you have to love about the channel: It's always changing. And vendors have to realize that they always need to be recruiting new solution providers to keep up with that change.

Make something happen. I can be reached at (516) 562-7812 or via e-mail at rfaletra@cmp.com.

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