Delivering Value: Beyond Price and Availability

Ease of doing business was selected by 73.8 percent of solution provider respondents in the 2006 CRN Sourcing Study as either a "very important" or an "extremely important" reason why they purchase from a supplier. That put it ahead of price and availability, breadth of product lines and 10 other choices.

"You always want to make more money, but spending one or two points more to get the service and product on time is worth it to me," said Jay Hakami, president of Sky IT Group, New York. "Being in the VAR services business, we have relationships with our clients and we want strong relationships with our suppliers."

It's a sentiment echoed by many solution providers that have learned through years of experience what makes a good supplier partner—and a bad one. Unanswered phone calls, high turnover among sales reps and inconsistent availability aren't going to win a supplier a lot of business.

"You have to deliver in a timely fashion. If they're not thorough and providing good service, we [won't buy]," said Alain Bezahler, president of Boston Computers and Peripherals, Sharon, Mass. "If we ask for a quote or have a question and we don't get a prompt answer, or if they don't ship something on time and don't tell you, we'll go somewhere else."

In essence, ease of doing business often encapsulates many of the other reasons on the list: availability, personal relationships, problem solving and product knowledge, solution providers said.

"Each distributor is only as important as their current sales rep. A bad distributor will get more business if they have a good sales rep and a lousy sales rep is going to lose a sales opportunity for the best distributor," said Risa Stolly, president of A-Prompt, a Whitehall, Pa., solution provider.

"That's very important," she said. "Regardless of whether it's an individual or team, it's very important that people be there for you and that you trust them. If I call a distributor with a question and they give me an answer, I'm more likely to place that order with that distributor even if the price is a little higher. I appreciate the value of them giving me that information."

For John Grove, president of GRS Communications, a solution provider based in Harrisburg, Pa., with $10 million in annual sales, ease of doing business with his favorite distributor, Voda One, includes individualized attention and flexibility.

When one GRS customer was slow to pay on a large project, Voda One agreed to extend terms because they knew GRS' business. "I said, 'Here's the account and what I need from a cash flow position.' They said, 'We'll work with you.' That's the type of thing that's golden in an organization. They create programs for the channel, but they tweak them for individual businesses," Grove said. "They made me feel that I'm not the same as every other reseller out there."

Grove contrasts that experience to one with another distributor with which he had a $5,000 invoice unpaid after 34 days. He ordered a small part for another project, but the supplier never shipped it because of the unpaid invoice—and never told him until he inquired. "That's a company that doesn't know my business," Grove said. "I've never done business with them again."

Robert Rhodes, chairman and CEO of solution provider Systems Evolution, Houston, turns to Ingram Micro first for one reason: his local sales rep, Oscar Grider. "I can truly say he is one of my friends. Every other month he calls to say, 'Hey, some of our partners are able to sell XYZ product. Let me set up a quick meet at a coffee shop.' He's always looking to introduce me to what's hot and why it's hot. That to me is a partner. He helps drive my business as opposed to sitting back and taking orders," Rhodes said.

As important as relationships are, there is no one reason why solution providers source from particular suppliers. The study, which polled 1,096 solution providers, found that solution providers on average contact 3.38 suppliers before making a purchase. And while the average solution provider estimates it sources nearly half of its products from a primary distribution partner, it also frequently shops from different types of suppliers for different reasons.

More than 31 percent of the respondents cited "breadth of product line" as the "single, main reason" they purchased from one of the broadline distributors: D&H Distributing, Ingram Micro, Synnex or Tech Data. In contrast, solution providers most frequently—26.5 percent of time—cited "they have products no one else has" as the single, main reason for doing business with specialty distributors such as Arrow Electronics, Avnet and ScanSource.

Sky IT Group's Hakami said some vendors' closed distribution models likely account for why specialty distributors are sought for more unique product lines. "We specialize in the IBM iSeries. Only a very few carry that. We have to choose one of them," Hakami said. "You can't buy that from CDW or Tech Data. But those companies have the breadth of networking products that we need when we get into the Intel space."

For custom-system builders and component distributors, alternative suppliers and mass merchants, price and availability tended to rise to the top. About 27.9 percent of solution providers cited price and availability as their main reason for buying from custom-system and component distributors, while a significant 48.2 percent did so for alternative sources such as online e-tailers like Tiger Direct, Newegg.com and Buy.com.

The study also showed solution providers were making a higher percentage of total purchases from alternative sources, which rose from 9.3 percent last year to 16.8 percent this year. Darren McBride, CEO of Sierra Computers, a Reno, Nev., solution provider, advises his employees to check out Newegg.com and others like it when they have time to shop around. McBride calls that part of his new "co-opetition" stance with retailers and direct marketer giants like CDW.

"If they have Microsoft Office for less money for whatever reason that no one ever seems to explain, then I am stupid to buy it from Ingram when my customer can get it for $30 cheaper from CDW. I'm not going to fight that battle anymore," he said.

Alternative sources now account for about 5 percent of Sierra Computers' sourcing purchases, he said. Both McBride and A-Prompt's Stolly also said many alternative sources and direct marketers have a distinct advantage over distributors because of their online ordering systems. McBride said he finds it much easier to get pricing for a software product such as Microsoft's Terminal Services license from one of the e-tailer sites than the Ingram Micro site, for example.

Stolly said the process of giving a distributor more revenue should not be as cumbersome as it is. "If it takes 20 minutes to place an order, I'd rather pay a little more and order it in a quarter of the time," Stolly said.

While price and availability and ease of doing business are continuing to drive solution providers to shop alternative sources, solution providers are also more likely to characterize those sources as minor, rather than major or strategic. If this year's Sourcing Study has any message for distributors, it is that their ability to forge close relationships with solution providers is crucially important in a market where relationships ultimately trump price and availability.

Wes Herschberger, CEO of MapleTronics, a solution provider based in Goshen, Ind., said he has seen a number of distributors rise and falter over the years when it comes to establishing relationships with MapleTronics.

"I have been in this business for a long time and seen one distributor replace another time and time again as the king," he said. "It always comes down to the same key thing: the people that are contacting us. It's all about how strong the relationships are that we can build with these people."

STEVEN BURKE contributed to this story.