Distributors find themselves trusted neutrals in a world of vendor specialisations
The Global Technology Distribution Council (GTDC) released a report at the end of July entitled The Evolving Role of Distribution in Technology Go-To-Market Models. The focus, understandably, was on the role of distribution in the near and longer term as it evolves from “a transactional intermediary into the operational layer of the technology ecosystem”.
The report noted that distributors are increasingly providing “the orchestration, automation, enablement, financing, marketplace operations, compliance support, analytics, and ecosystem coordination needed to execute effectively in complex, multi-vendor environments”.
It predicted the role of distribution would continue to expand over the next five years “as marketplaces mature, AI becomes embedded across channel operations, ecosystem selling accelerates, and compliance requirements grow more complex”.
The reason for the optimism around the significance of distribution arises from what you might call the delivery limitations of a channel model where partners have been encouraged to focus on, and develop expertise in, a select number of vendors’ products, services and platforms. The problem is that model no longer matches what customers need or want.
As Larry Walsh, CEO and chief analyst at Channelnomics (which conducted the research), noted: “Customers are no longer buying isolated products or standalone services; they expect integrated outcomes delivered across increasingly complex ecosystems.”
He claimed this “creates a gap between what clients need and what vendors or partners can consistently deliver on their own”, adding that distribution can help to overcome those issues by “aggregating the resources, capabilities and operational infrastructure required to execute at scale”.
I always enjoy reading articles, reports or research that reinforce the ongoing role of distributors into the future because there was a point a while back when the consensus seemed to be that distributors were going the way of the dinosaurs. At least that’s the way I remember it.
But what I want to pick up on here is the difficulty that the long established channel model has in matching customer expectations in today’s world. According to Channelnomics, while vendors might excel at developing products and services (not always the case, I find) and partners deliver implementation and value-added support, “neither can consistently meet all customer requirements independently”. The obvious question here is: could they ever?
According to the research, 76% of customers view multi-vendor systems support as critical but less than a quarter (22%) believe channel partners are capable of delivering it. There’s a good reason for this. Most of them probably aren’t. But to borrow a much used phrase: “It’s not their fault, it’s the system’s.”
Self-limiting
For many years, vendors have sought to incentivise and reward partners that are highly specialised and focused on a limited set of specific technologies. This requirement for specialisation has also restricted the number of vendors that partners are able to work with. Specialisation takes a lot more time and effort, forcing partners to put more of their eggs in less baskets.
To a certain extent, customers have been complicit in the development of this model because they have either willingly chosen or allowed themselves to be persuaded that one product, service or platform is markedly superior and deserving of their investment over all others. Once that decision is taken, the choices going forward inevitably become more restricted. Until recently, that is.
Because the reality is that products, services and platforms are, in many respects, not that different. How could they be when one product or service needs to be able to interoperate with other technologies? The truth is that there has always been a tug of war between two separate dynamics that seek to justify charging a value-add premium through differentiation while, at the same time, extolling the virtues of interoperability with other products, services and platforms even though they must, by definition, be inferior.
This tension is resolved through the promotion of ‘best-in-breed’ products, services and platforms although, even here, it’s unclear whether that description applies to the very best products, services and platforms or to those that fit best with the vendor’s own products, services and platforms.
You could argue that part of why vendors and partners find themselves in this predicament is because of their success in marketing a particular model to customers which, to some extent, never really existed except to justify differentiation. But the problem is that the model has created its own reality which is now difficult to break free from.
Let’s revisit the issue of multi-vendor systems support and the very large proportion of customers who view it as critical. Is it wrong to ask why this should be such a huge challenge when a very basic attribute of technology is that it ought to be interoperable? If it isn’t, someone should be wondering how it got to this stage and who’s to blame. That seems a very basic failing.
It seems a little bit unfair to expect channel partners to be able to correct it. In an ideal world, channel partners wouldn’t be required to.
According to the GTDC, distribution is assuming that role, “becoming the connective layer that makes ecosystems work by providing the partner relationships, enablement, governance, operational support, and orchestration needed to help vendors and partners collectively meet evolving customer demands”.
This shouldn’t come as any surprise. For years, distributors have stocked, supplied and supported multiple products from a wide range of vendors across distinct technology sectors such as servers, networking, storage etc.
For the most part, vendors haven’t pressured them as forcefully into specialisation because they have interpreted the role of distributors differently. And they were right. But they may have also overlooked the core attribute of the distribution layer: that it sits slightly aside from the vendor/partner/customer model. As such, distributors are at a slight remove that enables them to adopt a more neutral view of products, services and platforms.
They occupy a unique position in the go-to-market model that isn’t beholden to or locked into a specific vendor. That’s why they are being touted for their ability to deliver multi-vendor systems support when so many channel partners can’t. In that respect, despite the GTDC’s reference to an “evolving role”, distribution remains more or less the same as it’s always been.
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