There’s a shift underway in the channel, with vendors deciding to dictate margins available to resellers across New Zealand.
How? By simply dictating renewal RRP prices and by sending renewal notices directly to end-users, including pricing and offerings to transact directly.
Many tier-1 vendors quote poor renewal numbers from resellers as the reason and claim that they are reducing the complexity.
To achieve this, they believe they should get a bigger slice of the renewal pie, and that five per cent margin for the reseller is appropriate.
These same vendors expect that a product renewal costing thousands to cover costs should provide enough for the channel to manage the customer, e.g. a $5,000 renewal provides $250 margin to a reseller.
But how many vendors would get out of bed that for much?
Other vendors that have followed suit are also pointing to their own increased involvement in the renewal process.
Meanwhile, distributors are offering pre-sales resources to assist in the selling process, covering everything including design, and if required implementation, appearing as if they are the reseller.
What about the resellers that don’t require this assistance however? Because some partners have invested in expensive training and certification programs, so how do they recoup these added costs?
For example, VCP certification training is almost $7,000 and annual partner registration costs almost $2,000 for basic professional partner levels. That requires $180,000 in sales before you even make a cent.
In my opinion, having vendor resources available helps bridge the knowledge and staffing level gaps that exist particularly for the tier-2 IT organisations.
It can often make the difference in terms of being able to compete against the bigger tier-1 players in the market. These players promote certification capabilities across the country but often do this on the back of a few certified staff operating in the main centres, with no extra expertise in the regions.
On top of this, they have the added advantage of large vendor rebates to further widen the competitive gap.
I believe that New Zealand doesn’t have the market size to allow regional companies to survive on such small margins.
But if this continues, then the inevitable outcome is fewer capable resellers and less competition.
So, what’s the problem I hear some of you say.
Throw cloud into the mix and then the real question arises - do we really need the channel?
Customers find great value in working with resellers and have realised that cloud is not the silver bullet and is not capable of solving all problems, despite increased market rhetoric from those with a vested interest.
Therefore, this means that end-users are still influenced by the channel when deciding on new products and solutions.
When resellers have had enough of being ignored by vendors and find market alternatives, our customers don’t mind following us.
But who is impacted by this the most? The customer.
If small companies can’t survive because of this type of activity, then the customer ends up with limited channels for options and support. Innovation goes out the window too.
Smaller companies must be more responsive, they learn to adapt to market demands and become creative simply because they’re forced to compete on levels that the larger companies become complacent about.
All businesses need to make a profit so when vendors start dictating then we as a channel need to respond.
I would call on a lot more regional IT resellers to start to exercise your choices and remind these vendors and distributors why the channel exists in the first place.
When we all start to walk with our dollars and they come back asking why has our business dropped, the answer will be very apparent.
By Rick Clement and Andrew Scott of Black SANZ Technologies, an IT service and procurement company based in New Plymouth.