Channel Chief Roundtable: We're Relying On Distribution More Than Ever

As cloud and new technologies shake up the channel, the role of distribution is growing as a trusted adviser to the partners, channel chiefs and solution providers told CRN.

"We see value in the distributor probably greater than we ever have," Frank Rauch, vice president of Americas partner organization at VMware, said in a roundtable discussion with CRN.

The channel chiefs said they all do a significant portion of their business through distributors. Hewlett-Packard Vice President of Worldwide Channels and Alliances, Enterprise Group Jesse Chavez said that 70 percent of the company's indirect revenue comes from distributors. IBM North American Channel Chief Tami Duncan didn't reveal the company's percentage of business through distribution, but said it depended "heavily" on distributors.

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Dell's Vice President of Channel Sales Frank Vitagliano said that while his company doesn't do quite as high a percentage of partner business through distribution, he said that the distribution business has been growing "dramatically" for Dell.

"We're finding from a capability standpoint, there's just nobody that can do it as well as they can," Vitagliano said. "We're in the process of ramping it up."

Where distributors are really showing their value for resellers is with what Ashok Thakur, owner of Hicksville, N.Y.-based Computer Consultants Network, called the "Three Ps': price, program and personnel. That value is even more apparent with cloud, which Thakur called "the biggest mess we've ever seen." Distributors have the infrastructure and logistics to handle the complicated marketplace and make it manageable for resellers like him, he said.

Edison Peres, senior vice president of worldwide channels at Cisco, said at the CRN roundtable that one of the biggest values for the distributor in the cloud world will be as the cloud aggregator, especially as solution providers look to pick up multiple applications from a variety of vendors.

"I think that they're going to play a nice role at being able to aggregate those different cloud offerings into a package that makes sense for the reseller as well as for the end user," Peres said.

To that end, HP's Chavez said that distributors need to ramp up the value-add that they are able to bring to the conversation, whether it be through aggregation or another means.

"I think that's the value that a distributor will bring, that aggregation, so that solution providers can take those different components based on the markets that they're serving and bringing that all together so that it's seamless for their particular customer," Chavez said.

Some distributors also are building portals that help enable the cloud aggregation, so whether it is a VMware hybrid cloud or other companies, it is opening the conversation for aggregation, VMware's Rauch said.

Peres said that he didn't anticipate many distributors spending a lot of money becoming the providers themselves, but he did think they would take existing infrastructure and leverage it toward a cloud environment.

IBM's Duncan said that one of the biggest things she is seeing in distribution is building out its own Infrastructure-as-a-Service. At the beginning of April, Ingram Micro did just that with the launch of a collection of hosted services at its Ingram Micro Cloud Summit 2014, including Ingram Micro Hosted Exchange, Ingram Micro Virtual Private Server and Ingram Micro Web Hosting.

In the roundtable discussion held prior to the Ingram launch, Duncan said that the distributor having that infrastructure conversation is a good thing for IBM.

"If a client comes in and asks for a particular quote, I would love to have my distributor be able to prompt that partner. To say, 'Have you thought about offering this as Infrastructure-as-a-Service, as opposed to a straight-up hardware purchase?' Have you had the conversation of capex and opex, because we're not going to catch all those things," Duncan said.

"The distributor is going to be the first point they go to. They can be a huge game-changer for us in giving those suggestions and helping move that market."

NEXT: Distributor Marketplace Reach Still A 'Critical' Piece For Vendors

Rauch said that, for VMware, having the reach, scale and operational aspects of the distributors is key because VMware simply doesn't have the bandwidth on its own to reach the same amount of partners. In particular, Rauch said that distributors have been particularly effective at handling and upselling renewals for VMware.

"If you're talking about that midtier partner community as well as a smaller-tier partner community, they need the technical help. They need the help in understanding how to put this together in a value proposition that makes sense," Peres said, agreeing with Rauch. "I think distributors are a natural at being able to do that."

Cindy Bates, vice president of small and medium businesses at Microsoft, said that as the software giant works to get out the word of how partners can transform their businesses, distribution has proved critical.

"All of them are in an evolution, as we all are, in terms of how their businesses will evolve. But I see them continuing to be critical for us at Microsoft," Bates said.

Beyond just offering the technical help and exposing resellers to new technologies, Computer Consultant Network's Thakur said that the distributor is better able to act as a "trusted adviser" to resellers than a vendor. The distributors are in a better position to advocate for him with vendors than he would as a single reseller calling with a problem, he said, and that is a very valuable relationship for him, he said, especially as some vendors undercut partners and go direct.

"We don't like to deal directly with the vendor because they steal your end-user contacts," Thakur said. "That is a big Achilles' heel for us because they want all the information about the end users; all of them say that they never contact the client, but they always do. I don't trust them." However, he said that he is able to trust the distributors to not do that.

Synnex CEO Kevin Murai said that Synnex's capabilities as a distributor have allowed it to attract key vendors into its portfolio because it approaches the market differently.

"From a customer perspective, a reseller perspective, it's our goal to be an enabler and a key part of how they actually go to market. I don't just want to be a product supplier to my customer; I want to be a strategic piece of their overall business model. For those who do take advantage of the capabilities that we have, they do view us that way," Murai said.

Tech Data Senior Vice President of Marketing Brian Davis said that he sees his role in developing strategy for the distributor around enablement an inspiration with new technologies. He said Tech Data is working to provide resellers with the tools they need to build better businesses.

For Ingram Micro, enabling partners who want to move more of their traditional hardware business to the cloud has become a growing imperative, said Renee Bergeron, vice president of cloud computing at Ingram Micro.

"Just under half of solution providers self-identify as cloud resellers,’ Bergeron said. She said it’s still a small part of their overall business, but that partners are all now beginning to invest. ’We see many partners selling hosting service, and email and infrastructure products, from cloud partners like Amazon Web Services and Rackspace. Ingram Micro is going to be there for customers as they look to transform their businesses to the cloud."

Not all vendors, however, are calling the state of the market a win for distribution. One cloud vendor channel executive, who did not want to be identified, said that the traditional role of distribution has been to provide inventory and inventory management, credit and reach into the marketplace. He argued that the cloud negates some of the value of those roles. Cloud means there is less inventory needed, he said, and recurring revenue means there might be less need for financing to support it.

"When I look a couple of years out and I think of the value that [distribution] has, I see inventory as much less important; I see the credit as much less important," the executive said. "Then you talk about the reach. The reach is debatable. I think you could go either way. You can go, 'Well, they do have the reach and they can aggregate some stuff,' but in a world where stuff is a click away, I don't know how powerful that reach is."

The executive also said that with customer loyalty "exceptionally low" and with VARs picking up multiple distributor relationships, he expected distributors to find some challenges along the way as they pick up more aggregation responsibilities.

NEXT: The Future of Distribution -- What's in Store?

HP's Chavez said that as distributors pick up more solutions aggregation responsibilities, they will need to start specializing in one way or another.

"They need to specialize. I think eventually the volume distributor will need to specialize a lot more whether it's a vertical or a certain capability that they're trying to drive in the marketplace," Chavez said.

IBM's Duncan agreed, saying that distributors have a connection with a partner or their offerings in certain verticals and can suggest complementary offerings to OEM technologies that might not have been connected before. For example, Duncan said that connecting vendor solutions in the health-care space can be especially helpful.

"It makes a great solution for providers or clients that we might not usually touch," Duncan said. "I see that growing, and I think it's going to have to grow because the pick, pack, ship supply chain isn't going to be enough to survive in the coming years. We see them evolving to a different kind of provider for us."

However, channel chiefs in the roundable agreed that the future for distribution in the channel is bright.

"I think we were talking about the demise of [distribution] for 20 years and they're still as strong as they've ever been, and I think they will continue to be. Whether they end up providing any groundbreaking services to anybody, I don't know. But they're so good at the basics you have, that it just keeps going," Vitagliano said.

CRN Senior Editor Tom Spring contributed to this story.