Forging an effective sales model for hardware growth

Forging an effective sales model for hardware growth

A combined sales model

Amanda Sachtleben: One of the major aims of this roundtable for Dell and Simms is knowing what you, as partners, would like from them. As you know, Dell has historically sold almost solely through a direct model in New Zealand, but in recent times has branched out with a real channel play. So we would like to know from your points of view how it, in conjunction with Simms as its distributor, can make a combined model of direct and indirect sales effective.

John Preisig: I think it is just going to take a bit of time for us to build that relationship. We’ve got the same thing happening with other vendors obviously - HP does exactly the same thing so it is just a case of working through that and working with Dell to find out where we fit as a channel, versus where it goes direct. It is going to take time.

Amanda Sachtleben: Bill, do you have any thoughts on the issue of online pricing and the pricing customers can find elsewhere?

Bill Hines: There is nothing worse then trying to compete against the people you’re buying from in terms of brands. You would be offering people the price of something and then they can buy it on the website at the same price. It just doesn’t sit with us in terms of the direct sales model and your distribution model.

Grant Stevens: I would agree. When I mention to people about us taking on Dell, the immediate question is, ‘how’s it going to relate to the price online?’ But what is actually behind that is their perception is that what is online has to be cheaper for them and how we get them to realise that [the price] online and [ours] can actually still be the same and they get benefits from either. But people think if they buy it online it will be cheaper and therefore they’ll go online and not even consider us.

Amanda Sachtleben: Andrew, do you have similar thoughts regarding pricing online in comparison with other pricing?

Andrew Charlesworth: Probably initially, but over time I think the market will understand the value in terms of going between online and working directly with that provider. But I think the other big thing for us is really just transparency around Dell and the existing direct accounts, so that we’re not wasting our time approaching accounts that we’re never going to get that business from. We need to agree where we’re focusing our energies and working together to win that business. If there are areas that we can’t touch, then make that as clear as possible and as transparent as possible.

Amanda Sachtleben: Robert, you mentioned you’ve been involved for some years with Dell, internationally. What has been your experience?

Robert Elcombe: Yes, I’ve been dealing with Dell now for 14 years, most of which was in the UK and that is also why I was the first Dell reseller, because as I was emigrating from the UK, Dell approached me to become one of their resellers in the UK, and I brought the invitation with me here. I don’t know how many of us can remember, but Dell has gone down this [indirect] route once before. With 30 days notice, it once withdrew the partnership arrangement and there’s no answer to this question [about the combined model] at the moment, apart from, ‘is Dell in this one for keeps now?’ Is it going to maintain the Dell reseller channel? If the company is going to withdraw it, are they going to give us more than 30 days notice the way it happened last time?

I think the answer to that question is probably to do with what has been happening with Dell in the background. From the way it has structured its manufacturing process now, I think it is stuck with us now whether the company likes it or not. Dell can’t change it.

But the second point I have is that it is very frustrating when I am given the buy price for Dell hardware and my clients approach Dell direct and get a price underneath my buy price. Now, as a reseller, surely I should be given the rock bottom prices and shouldn’t then have to negotiate, playing ping-pong with Dell.

If the reseller channel is going to be here to stay, we should have the lowest prices possible and the client should not be able to undercut our buy prices. That has happened to me on more than half a dozen occasions. I would like to know what can be put into place to prevent that.

Amanda Sachtleben: James, could you respond to Robert’s question?

James Arnold: Generally, the theme at the moment is RRP pricing versus direct pricing. Robert has been involved with us for a long time and up until we launched PartnerDirect in New Zealand, there was an unofficial SI [system integration] programme, where partners were involved in things on a case-by-case basis. There was no-one who was focused on the channel. We had a bunch of sales reps that were customer focused and if a partner was there, great, if they weren’t it did not really matter.

So now Partner Direct is here, a channel team has been formed and it is our job - and I am one of those people - to stop the issues that Robert has been running into. We’ve started first with the SMB class products, so that does not happen any more in Vostro.

As we build our channel programme further and look at the enterprise class products like Latitude, which is what Robert has been selling mainly, then we have got to figure out how we do that.

Over the course of the next 12 months there will be problems. I’m not going to hide that. We need to fix those problems as we run into them and identify them and we are starting to do it. Give me feedback when that happens. Tell me when those things happen and I’ll work with my team to try and stop them from happening again.

I think the real driver is we have now got a bunch of people who are focused on the channel. I have nothing to do with direct. I am 100 percent channel and that is where we’re hopefully going to get a lot more focus on those sort of issues.

Robert Elcombe: On a positive note, since James and Simms have come along, there has been a large and dramatic improvement in the service I have been receiving. So I would like to give that team a pat on the back and say ‘thank you for the steps forward that you’re taking, but there are still giant strides to make’.

Paul Johnston: I think it is worthwhile pointing out that we’re eight weeks into this so it is very early days, but the reality is that finding these types of things out is really important to us. I’d like to follow on from James’ comment and cover some of the other discussion that have happening about the pricing side of things.

One of the things that has just happened is the first joint Dell and Simms catalogue. There are about 360,000 that have been delivered across New Zealand. That has all got the RRP pricing in it and it is all based on the product pricing that is on the web. Certainly within that are the channel margins there to be made.

The nice thing about that is it is leveraging off the marketing muscle that Dell has had all these years, but it is totally focused on the channel. So all of the calls come into Simms and we’ve then been taking the details and passing them onto the resellers to sell the product. We’ve already had a good few sales that have gone through as a result of that.

The only product we were able to fix that issue that you were talking about there initially was the Vostro and we’ve not got that 100 percent right yet, but it is very close to being there. The next step is to expand that and to look at how we can introduce other products into that range, and that’s what is being worked on at the moment.

So this isn’t an issue that is going to go away instantly, but we’re in this for the long term and we are absolutely determined to get things like this fixed. It may take some time for it to be fixed across all the product ranges. But Vostro is done largely and then we’ll move onto the other ranges as we go forward.

Robert Elcombe: This sounds really encouraging and I’m grateful for that. But going back to my main product market, which at the moment is OptiPlex, Precision and PowerEdge and that sort of thing, it still seems strange to me that the customer can approach the Dell direct channel and get a cost price that is 12 percent below my buy price from Dell. That is my biggest area of concern, the fact that there is a better discount to be had and that is not being offered to the reseller channel.

Paul Johnston: Let me cover that one. The reason for that is because none of the product range that you have been looking at in that area, at this point, has been set up for distribution. Distribution is quite a large shift in any business and you can imagine that for a company like Dell to be able to introduce changes like that, right across the whole product range, in one go would just be astronomical.

It has got an entire workforce right now that has been and still is on that product range driven towards selling direct to the end user. Now as we introduce more and more products into the distribution side, what we’ve been able to do with the Vostro range will be introduced into some of the other products. I’m not going to say they will all be introduced because at this point I can’t make promises on behalf of Dell. But knowing the market that they’re looking at and the expansion that they’re talking about already, it will come with other product ranges.

Dave Allum: Do you have any sort of time frame?

James Arnold: I think we need to realistically look at this as about a six to 12 month programme to get us there, and a couple of guys raised one other point - I think it was yourself Grant - about teaching customers that they can buy from the channel. At the moment the focus of our early days on marketing is letting the channel know that we can sell through you. The next step is how we teach customers and change the customer mindset that you can buy direct from us, but that we also have a very extensive channel that you can buy from as well and the value that the channel has locally - and that’s a customer perception change that we need to work on and that is going to have to come from us, from Simms and from each of you guys.

Dave Allum: I know one of our clients who has got about four Dell servers and 35-odd Dell PCs. It has got an account manager in Australia. We’ve already had a conversation with them.

James Arnold: There is value there because even though the guy is in Australia, you’re local, you know the local market, and you can go out there and help the client by being on the ground with them. You can then leverage them and me and have Dell people actually in the client’s office or Simms people in the client’s office. The value add from the channel is you get local presence and local resources and all the abilities that your business specialises in. I think there is a lot we can give to customers by going through the channel, and we have got to change that mindset of them coming to us directly.

Paul Johnston: There is a big commitment from Simms to hold stock, we’ve already gone in with having $700,000 worth of stock. We didn’t get that right in the first instance, but we are working on that and the clear thing and one of the big issues that Dell has talked about, is for the local market here, you could previously order online for $1000 or you could buy from me for $1000, but it will take three-weeks delivery there, and I can deliver [the order] in two days. That is going to be a major, major thing for you as well, but there will also be some local configurations where you can add value.

If it is just going to be a RAM upgrade or it is going to be something else - it should be something that you are able to do and build your own value into that. So I think there are areas, as James says, where you can leverage off what Dell can offer from its services and its support. But once we’ve got the end users knowledgeable to know they can buy Dell products locally, what really needs to happen is you guys have got to think of ways that you can add value as you do at the moment, to maximise your return on that product, whether it be through services, through peripheral products or whatever.

Robert Elcombe: I don’t mind the competition with Dell because that gives me an entry price and I am happy to match it. Why discount my product if I don’t need to? With Simms’ involvement now - and I am grateful for the stock that you hold - but I have a client at the moment, I could sell them a Vostro 15.6” monitor right now. We could upgrade to the 1080p monitor that is available on other ranges within the Dell product range. How can Simms help me when there is something major like a monitor upgrade for a stock item?

Paul Johnston: The way that is going to work is dead simple. We’ll be working through with the channel about what you’re expecting to sell over a period of time. We’re going to try and get to that position where we’re up to about 80 percent fulfilment. I can’t get to the position where I’m 100 percent because, trust me, I would go out of business by trying to get there.

We also need to be able to track sales as we go through and we’re only just starting that process now. It would be brilliant if everybody was able to give us forecasts, but being realistic that may or may not be possible. But the more information we can get down about what the likelihood is of what you’re going to sell over a period of time, then we will try and adjust our stock holding to meet that.

I said before, we won’t get this right straight away and it will be something that will evolve as we go on, but the plan is to try and get to a point where 80 percent of whatever you order, we will be able to ship within two days. But don’t expect that in two weeks. We need time to get that right and it is going to require a lot of feedback from the channel to give us that ability to do that.

Robert Elcombe: Is there a way that we as resellers could earn a commission or a bonus or a point system, when we sell the consumer range? Now, that is not the focus because I earn no money from the consumer range, I steer well clear of it. But I have been losing orders purely because the client wants a Studio [model] or the client wants the plum pink [colour] and that is their main criteria, and I have lost [the sale]. I have done all the leg work, I have done all the research and then they order with Dell direct, because they would happily order with me if I could provide the product, but I am not going to provide the product at zero gain.

James Arnold: We are open to looking at different ways to do this, absolutely. I am not sure whether we could get it done immediately, but we are certainly open to looking at it. My initial focus is to try and really drive into the SMB space into customers of about 20 seats to 500 seats, who typically wouldn’t look at this class of product, just because it doesn’t really meet the requirements for that sort of user.

The hardware landscape

Amanda Sachtleben: I am keen to hear from some others on what the major issues are that resellers are facing at the moment and how Dell and Simms could assist with them.

Chris Maclean: The two issues, which I would see would be reasonably common around this table are eroding margins, because I think the economy in the past year and a bit has put pressure on margins and they’re certainly the lowest I’ve experienced to be competitive. A lot of that is coming from the top down so we’re finding that certainly the bigger players in town are going in at ridiculous margins, in fact unsurvivable margins. I don’t know if that is a strategy to put the squeeze on people like us, or whether that is just the nature of trying to build your services business. But that is definitely a challenge.

Most of us I am sure have got good service businesses, which is why we’re still here sitting around the table, but that is what helps places survive. I guess the other thing is we are coming off the back of an economy where people didn’t buy product for ages. It was absolutely essential purchases only and if anyone has found a way around that, please shout. From what I can understand, most people are down pretty significantly on their previous year’s sales.

I have had a conversation with someone here already and we’re like them, in that we’re back to the sort of numbers experienced in procurement in 2003 and 2004. So thank goodness for the services business. I think those are the two things that are certainly facing resellers generally.

Amanda Sachtleben: Jonathan, would you agree with that? How have you been finding the market?

Jonathan Prentice: I was the person [Chris] was discussing this with and I absolutely agree. Companies are causing major problems by literally just dropping 2 percent and it is just moronic. I don’t know how you even survive doing that and what kind of manager puts that kind of model together. We’ve been discussing it amongst ourselves and we’ve all come to the same conclusion. We are loading our services and expecting the customer to go elsewhere for hardware, which is why the Dell offering is kind of a shining light in some regards.

We basically experienced 2003’s conditions again last year in hardware and software licensing, the services was the difference. We actually got a lot more services, but it is just starting now. Customers are just starting to pick up the hardware that was almost dead, and they had better hurry up and replace it now.

Having the offering to be able to come in significantly lower than an HP buyer for pretty much the same box, is actually a really good thing for my business.

Amanda Sachtleben: Do you feel that it will be important for people to see the value in the hardware rather than just push the services?

Jonathan Prentice: Well, I think the value in hardware has disappeared. The margin in the desktops, hell, I could bend over and pick up a crumb off the floor for the money I am going to win in selling a desktop nowadays. There is nothing in it. So for me, although [Dell is offering] Vostro, I’ll never sell a Vostro. My customers just aren’t interested in a box that can’t dock. If they’re a business person, they want a business laptop and they need business features; they need tested equipment, they need reliable gear with good support. If they want to buy a Vostro - and sure there are some really nice machines - it is not what I am looking for. What I am looking for me is the storage, I am looking for the service, I am looking for the value in that equipment.

We all know that it pretty much all comes out of the same factory, where it doesn’t matter what badge it has got on it. So the value in the hardware really is nothing for me. It is just a means to an end. For me it is about the solutions. It is about supporting your customer. It is about partnering with the person who is buying the solution and selling the solution, rather than the gear.

For me, the challenge is speedy return on quotes, which I am not getting at the moment, and I’ve raised that already. In this current environment with Simms and Dell, I don’t have that. I’ve got to go to the Dell website, get some idea of the quote - customise it myself, get some idea of what it actually costs, quote the customer and then hope that I actually get the quote from Simms within a week, which isn’t happening.

So for me, I need [the quote] in 24 to 48 hours and if it is urgent I need it now. Having to wait a week for a quote just doesn’t work, I want all the value that Dell can bring, I want all that benefit but to be excellent, to be my partner of choice, I need to have those quotes fast. I need to have good back up and I need to know who to yell at when something is not going right.

It is about value to the customer and it is about value all the way through. My services is really my core.

After last year, if we can’t survive on the services, then we are never going to survive. Hardware is going to become a nothing. It is going to get to the point where businesses are going to put half a percent on hardware. I am seeing some components at one and two points. I am seeing entire deals at two points. All it is, is them trying to get their services revenue up, so I’ve got to do a better job. I’ve got to have better services. I’ve got to have better support. I’ve got to have better partners. That is why I’m really here is to look for a better partner.

Amanda Sachtleben: Bok, do you have any thoughts on the downward pressure on margins and what possible responses would be?

Bok Sun: To me it is still about pricing. I have got three quotes from Dell already, and I have had to log into my account to see what that price would be and I have to check with Dell first. But that is going to take time. [Customers are] still wanting to buy direct, most likely as far as I can see. I also wish I would get better support on server parts. I’ve rung and asked for help, but have not got an exact answer.

Amanda Sachtleben: James, is this something Dell has been working on?

James Arnold: Coming back to something mentioned earlier - who do you need to yell at? For everybody, that is me. I am used to it. I’ve been working for different vendors for some time and I am used to being yelled at, so I am more than happy to take feedback, to take complaints, to take criticisms and then figure out how to fix those issues. But slow quoting times is unacceptable, so my goal for everybody here, including Simms, is 24 to 48 hours. We haven’t been doing that. We’re just like other companies out there, we’ve actually just gone through an internal system change. We’ve gone from a very long-term solution for doing our quoting, which was called Smarts, to a brand new system and that happened last week.

That has impacted us without question and we have not been as fast as we would like to be, but it is improving. When Lenovo did it I think it was a year-and-a-half ago. It had a tough time for a period of time and obviously we’re all aware of Ingram’s recent challenges. We will certainly, in a very short space of time, get back up to the 24-hour turnaround time that I know is expected of us.

Dave Allum: One of the other things, which is also something that Jonathan mentioned, is that yes, the margins are low so one of the things that we’ve got to be able to do is find product easily. I know that when we’ve gone to - and it is not just the Dell website - but the other websites, is we struggle with filtering on specifications, We would like to do that quickly rather than having an engineer spending half an hour, so that we can do it in five minutes. It is all those costs that go into us providing those quotes.

James Arnold: I call that a configurator and I think you’re talking specifically about servers or storage kit. They already do suggest that for notebooks, but it is an internal call that hasn’t been made available to our reseller community yet. But we have it and I am trying to get it cleared through our legal department so we can provide it to you guys. It is a configurator. Basically it is every spec available for everything we sell across the board. It excludes servers and storage, because there are millions of different components. Zane [Bryhn] is leading the charge internally [for Dell] about getting a configurator so you can actually do that. Both Zane and I completely understand the need, because we are new into this business. I need that tool for my own personal use, let alone you guys.

Dave Allum: And as you were saying, it is quicker to find things on Google than your own system.

John Preisig: It is particularly important in servers, so if there was a solution where you could say, I want this processor, these are the choices on the hard disks I’ve got and these are the Raid controls that go with those hard disks.

So I do not want to have to call these guys to get the quote, because I am doing quotes at 10 o’clock at night and I won’t be in a position to do it at 10 o’clock at night. I don’t want to have to ring you guys and then [wait] 24 hours or whatever. I want to do it right there and then. That could be integrated directly into the pricing as well, if it was smart enough to do that. Because I think the biggest thing is not necessarily the pricing, but getting the conflict right to start with, what parts go with which computer. It is silly things like does the server come with a DVD drive, if it doesn’t, this is the DVD drive for it. I am sure everyone here has probably been caught in the trap, they’ve ordered a server only to discover it doesn’t come with a DVD drive. It is little things like that, which need to be in that portal, where you can just click and then build a server. Then if need be, we can print that out or email it to you guys to get the prices. But it would be nice if we could build the server and get a list of the RRPs that we know what we are dealing with.

James Arnold: I am in the process of working with Zane and getting out there and training partners as they come on board, and providing that information to your sales reps and your teams. I’ve got a fantastic spreadsheet, it just tells me everything about that system. So we’ve got stuff, we are getting there and we’ll start providing it.

Grant Stevens: Talking about the website, if you go and buy, say, Microsoft Office, but on the right-hand side [of the website] it suggested retailers, is that going to be on your website or are people that are on your website never going to know about it?

James Arnold: We are going to have a dealer locator on our website, yes. In terms of Microsoft Office, I don’t know. I am providing the information back to our marketing team with all the details for partners that have signed up to be on our dealer locator. Before it goes public I’ll come to every partner and say ‘do you want to be on this or not’?, because some people may not want to be and we’ll have a general locator on the public website.

Paul Johnston: We’ve already done a fair bit of work on that. We’ve got Google maps for everybody’s businesses and it will go on both the Simms website and the Dell website. But as James said, we’ll obviously come back and make sure that you guys are comfortable to put that up. There will be full search functionality in both websites, so that people coming into the public section on the Simms’ site, on the Dell site, will be able to see where they buy, and it will come up there.

On the peripheral products, Dell is a huge reseller of a whole range of different products. There are some challenges with that with regard to configurations that come through, because we don’t distribute some of those products. But you as a channel partner obviously will be able to get access to them. So some of the things that I would ask you to have a think about to give us feedback on, is how we can sort of work through that integration.

I don’t intend, as a distribution partner, to go after every product that Dell carries, but where you’re running into particular configurations that may be on a public website, how do we integrate that in with the locator? If it is Microsoft Office, any dealer can get access to that through the current distributors and I would imagine that just having the retail price there isn’t a bad thing, because obviously if you’re able to go with that, that’s great.

But it is that type of thing if you can just think about that and say ‘look, this would be useful’, or ‘this would be a problem for us, you really need to go after this product as a distributor as well’. That’s the type of feedback that would be worthwhile.

Marketing the brand

Amanda Sachtleben: There is a value perception with different hardware brands. How could Dell channel its marketing, and provide marketing support, to partners to assist them to co-sell?

Jon Thornhill: Any marketing support would be appreciated. Going back to your first question also, I’m quite positive about the opportunity with Dell and with Simms. To quote Paul, he said something along the lines of it is not a sprint, it is a marathon. I think it is a half-marathon in that there is an opportunity now to get out there and differentiate the offering.

Our experience has been the market has been a bit confused about what Dell has been trying to do. We are also grateful to have James on board and he has been very good to us so far. I think there is a window now and an opportunity to get out there and go and do it and make sure that we’re all on board.

To me the biggest thing is communication and in my world with distributors, they get very big very quickly and they lose touch with their customers and they stop caring about their customers and their resellers. I am sure that is not going to happen with Simms, but I really think that is the biggest advantage. The communication must be there, the support must be there and the time it takes to get things done must be as short as possible.

We don’t see Dell Direct as a competitor because we know what their space is, we know what their products are and we knew that when we came on board. We’re not going to try and compete with it. I understand that for some people, Vostro’s not in their product range. It is in ours and that’s why we’re very happy for Simms to hold that stock and to be able to deliver it just in a day or two’s time.

But we’ve got to rely on how we differentiate ourselves. I think we’re very different to everyone else in here, in that we built our business on refurbished machines, so new equipment for us is brand new really. I think together with the work that Dell does, the marketing and awareness they do and with Simms providing the right service and good pricing, we have got a good chance of making this really successful.

Amanda Sachtleben: Do buyers stay loyal to particular brands, and if so, how could Dell counter that?

Bill Hines: There is probably that loyalty to the Dell brand that I am hoping to capitalise on. It is common in New Zealand actually. People have bought HP because they’ve always bought HP or bought IBM because that’s what they’ve always done.

If you tell them there is something better out there, they don’t believe you, so obviously that is a challenge for Dell. There is a perception with a lot of businesses that Dell only sells to the home market or it is just a cheap brand. We’re probably partly to blame for that, but yes, there is a lot of brand loyalty.

Amanda Sachtleben: Do you find it is hard to show people other brands options too, Grant?

Grant Stevens: People go by what we tell them. We have a saying in our shop that we sell what we love using. So if we love using it we get excited about it. Someone came in this morning and said ‘I need a laptop’. I said ‘well you’ve got that or that, that one is $1400, that is $1100’. He chose one and said ‘I’ll have it in two hours’, because he took our advice that we don’t have it if it is not worth having.

Robert Elcombe: On a positive note, I would like to say that Dell product is very good once you’ve got it and if it goes wrong, which is rare, particularly in the business range, the service to repair it is very good once it is diagnosed. I am happy to fill the missing parts, which Dell haven’t performed well at here in New Zealand, which is the telephone support, the initial diagnostics, and that is good for me because the customer gets a win-win situation. They get good product at a good price with superb local support, which is what I provide.

Bill Hines: The next big issue really is the support. Changing or adding a new product to the range is a good way of going about things. One of the questions I have is how will we deal with the support issues surrounding Dell? If we’re selling Dell, I know what I do with this product and that product and I am like you, in as much as I restrict the brands that we sell to ones that we trust and that I trust the support services on.

Robert Elcombe: I can answer that question for you, because I’ve been doing this for a number of years. Dell provides, with all their hardware, a diagnostic CD. I’ve had years of experience and it is second to none. I know the Dell product inside out.

That is why I am keen to work my way through the initial challenges. The service is what I am buying into. It is the backup service that I am buying into as well as the product and the reputation and the brand.

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