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| Brian Aebig |
As seen in CRN Canada -- In today’s economic environment, the IT industry, like many others, has become a “buyers’ market,” and end users are searching for partners to provide them with the best value for their limited resources. While the definition of value varies, suppliers, distributors and resellers must adjust their businesses based on end-user demands. Channel partners that aren’t able to adapt to the changing rules of engagement created by economic conditions, or are too rigid in their definition of value, will quickly find themselves out of sync with market realities. This will have a serious impact on the resellers’ ability to grow profitably and offers little defense from competitors that have mastered business fluidity.
Each player in the IT supply chain will need to adapt their business strategy to succeed in this buyers’ market. To create the highest value for end users and determine the best partners to help accomplish their business goals, resellers need to understand how each supply chain participant will adapt their businesses.
Where All Deals Begin and End: End Users
It’s no secret that end users are carefully examining every dollar spent and reducing costs. This means fewer deals, with each deal competed for more intensely and by more suitors. The net result is that each end-user dollar demands not just more volume of product, but greater value and deeper solutions penetration. Additionally, each deal must map to the end-user’s business goals, reducing costs, improving productivity, or solving additional business problems.
If their current partners don’t live up to these new expectations, end users will listen more intently to sales pitches from potential partners, claiming they’ll meet these expectations. In a buyers’ market, the end user can, will, and must dig deeper than ever before, and the impact of this is felt across all remaining supply chain members.
The Technology Behind the Solution: Suppliers
Suppliers understand that IT spending has slowed and are offering discounts and special pricing to stimulate deals. In return, they’ll be looking for distributors and resellers to help them enter new markets. Resellers that stick to their “old ways” and current installed base will not be rewarded to the degrees previously enjoyed. Instead, suppliers will invest more heavily with the distributors and resellers that will most successfully help them penetrate new markets. This can include incentives like enhanced margins and opportunity protection.
Profitably Growing the Supply Chain: Distributors
The role of the distributors is to align the expectations of suppliers and end users, and enable resellers to exceed those expectations through differentiation and delivery support. In a buyers’ market, this increasingly means enabling resellers to penetrate high-growth technology areas or vertical markets.
Distributors work with suppliers to identify markets with high-growth potential and invest resources in helping resellers penetrate those new markets. Savvy resellers can leverage their distributors to cost effectively expand their business into new markets. Services can include business planning, specialized market education services and tools, lead generation, partnering guidance and even services support.
Exceeding End-User Expectations: Resellers
During economic boom times, resellers’ businesses expand considerably and oftentimes stretch outside their core competencies. These new capabilities can then be cultivated and nurtured over time in house. However, the game changes in a buyers’ market. Resellers must adjust their growth strategy to focus on their core value propositions, where they can provide the most value to end users. Resellers can rely on their partners (distributors, other resellers or suppliers) to supplement their expertise and enable them to continue growing their businesses without extensive risk and investment.
Resellers especially should leverage partnerships, such as those with their distributor and even other solutions providers, to expand into new growth technology and market areas. The resellers that can successfully do this will be rewarded with increased sales, improved margins and supplier discounting and rebates. This also creates a stronger and more diversified balance sheet for resellers, helping them ride out a slow economy and positioning them for success in the economic turnaround.
Navigating a Buyers’ Market
A buyers’ market can very quickly expose a company’s gaps in expertise and delivery. To successfully manage a buyers’ market, each member of the supply chain must be synchronized, focused on end-user demands and identify creative ways to expand their businesses. The supply chain can move in concert when all partners are:
• Accountable: Supply chain partners must understand each others’ value propositions and demand accountability to performance expectations. With a clear and mutually agreed upon understanding, suppliers and end users will reward their partners for the value delivered.
• Focused on the end goal: Partnerships across the supply chain are key. Yesterday’s value may not be good enough to support tomorrow’s customers. It is important to have candid conversations to set expectations with your supply chain partners on what you and your customers value, and how your business, along with your partner’s business, needs to evolve to preserve.
