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Wed 30 Nov 2005 04:00 AM

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Running scared

‘Do we own our customers?’ That was the main question that 100-plus corporate resellers and solution providers from across the Middle East and Africa (MEA) were asking themselves at last week’s Digital Business Channel event in Fujeirah.

‘Do we own our customers?’ That was the main question that 100-plus corporate resellers and solution providers from across the Middle East and Africa (MEA) were asking themselves at last week’s Digital Business Channel event in Fujeirah.

Partners in MEA are running scared, claiming that there is a glaring discord between the business channel strategies that vendors want to implement in MEA and the market realities that exist on the ground.

It was fascinating to see resellers from across the region — from Ghana to Iraq — challenge vendors over their existing channel policies in the region and question their future plans. The reseller community remains worried by several trends that they believe are occurring in the market.

The fear that vendors will appoint too many partners without paying due attention to the total market size remains a major concern for many resellers. The negative impact that over-distribution has on both margins and the predictability of a reseller’s revenue streams is clear.

Resellers are also worried about vendors going direct and cutting them out of the route-to-market altogether. Now this is a concern that has been around in the channel for many years, but it is probably a valid point in this region. The fact is that many vendors still have wishy-washy rules of engagement when it comes to defining the accounts that they will handle directly and those that they will leave to the partner community.

I’ve spoken to major vendors and asked them if they have clearly communicated to the channel their policies for separating direct accounts from indirect accounts. Typically, the answers given are far from satisfactory. Some vendors will say that they determine direct accounts by a customer’s size — be it headcount or turnover. Others will say that it is determined by the complexity of the technology that the customer requires. Others will class customers that have the potential to become much larger as direct accounts.

Put simply, most vendors still have a policy that actually allows them to justify engaging directly with pretty much any client they want. It is this lack of clarity that is damaging vendor-channel relations in the region.

In developed markets, vendors frequently publish a list of named accounts clearly setting out where they will take on a direct role and where they will let the channel take on the customer engagement role. I have yet to see such clarity in MEA and as the market matures the need for this type of clear-cut policy will become more acute.

Divide and conquer

The only way a reseller will truly own their customer is by building a long-term relationship based on mutual trust and understanding. The reseller’s role is to deliver the best solution at the best possible price point that meets the IT needs of the customer. The reseller’s loyalty should lie with the customer and not the vendor partners they have.

I met one corporate reseller last week who refused to put the logos of the vendors he worked with on either his business card or his website. He explained that putting vendor logos on was a recipe for disaster, as it would encourage clients to talk to the vendor directly and open the door for his company's role to be disintermediated further down the line.

Vendors want to sell as much as possible and will frequently use a divide and conquer policy when approaching channel relations. They want fierce competition between resellers and they also want a channel that is as expansive as possible.

As always, it comes back down to the balance of power that exists in the vendor-reseller relationship. Vendors love channels where each individual reseller is easily dispensable and the wider channel community has no idea of its collective power and importance.

Maybe it is time for MEA resellers to stop fighting each other, start understanding the collective power they have and work together to ensure that major vendors implement responsible and fair channel programmes. Unfortunately, a mind shift of that magnitude is easier said than done.

Rocket science

In last week’s column, while discussing the various channel strategies of industry standard server vendors in the Middle East, I claimed: “It’s not rocket science building a channel and it’s really not that difficult to do.”

Now there’s a sentence guaranteed to open the floodgates of feedback and it certainly did as a number of channel managers got in touch to reiterate the importance of their role and the challenges that they face on a daily basis in the Middle East. They reckon that building a channel is far from easy and that the challenges in an emerging market add to the complexities.

The key point here is to clarify the fact that every single vendor approaches channel management in the Middle East from a different perspective. However, having said this, the fundamental requirements for a successful channel model are pretty similar and it is the vendors operating in this market that lose sight of these basics and then wonder why their product is not moving that need to look long and hard at their strategy.

For the number one vendor with the largest market share and an established channel, it is all about driving loyalty, hunting down the new routes-to-market that expand their coverage (as opposed to sharing it out between more partners) and fighting off the inevitable challenges from rival vendors looking to steal their crown.

For a brand new vendor starting from scratch in MEA, it is all about finding a committed distributor, investing resources in recruiting a skilled second-tier reseller base and working with the channel to create some pull demand to complement this push activity.

Building a channel may not be easy but getting the fundamentals right is. I’ve seen too many vendors in this region lose sight of their long-term objectives and strategy. It is the short-term approach to channel development practiced by many vendors in MEA that continues to hamper the development of the IT market and healthy competition.

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