Partner View

Once Upon a Channel

• By Howard M. Cohen
• September 01, 2010

In August 1981, IBM introduced its first "personal computer" and, explaining that nobody but IBM could sell IBM, decided that the few selected companies that would be furnishing these small units to consumers and small businesses would be "resellers" instead of "sellers." These resellers would form a "reseller channel" for sales from IBM to the millions of small customers who would be buying these new devices.

And because the venerable, large retailer Sears was one of those first selected for the reseller channel, it pretty much became the model for how the relationship would function.

Fast forward just a few years and you'll find some of the more enterprising resellers looking to grab share from their larger competitors by heavily discounting personal computers and related equipment to the point where profit margins became tissue thin. Once again, the channel turned to the original model and, following the Sears approach to selling dishwashers and refrigerators, began to include service contracts with every sales quotation.

Once the reseller channel found success in selling service and maintenance agreements, it quickly added configuration, installation and many other "attached" services -- services that were tied to the new equipment the customer was purchasing.

Then Compaq extended its warranty, which was originally 90 days parts and labor, to three years, followed quickly by Apple and many others. This had the effect of cutting the legs out from under much of the service-agreement sales the channel was enjoying. Undaunted, some channel players found ways to improve the efficiency of their order taking and delivery, further cut their prices and continued to thrive simply by reselling more equipment to buttress their sagging revenues.

Others saw no future in that and began to innovate more fiercely than ever. With the support and validation of the major software publishers and some hardware providers, many resellers evolved into "solutions providers." Initially referred to as systems engineers, network engineers, systems integrators or VARs, these firms procured and provided equipment. But they made their profits by consulting with customers, designing their computer networks, implementing various new technologies, and providing ongoing advice and support to their customers for a fee.

Today, solutions providers and the technologists they employ no longer resemble the resellers of the PC's early days. Instead, they more closely resemble law firms, medical practices, accountancies or architectural firms. The professionals they employ deliver their expertise and experience in exchange for a reasonable fee, just like lawyers, doctors, accountants and other professionals do.

In fact, the relationships they enjoy with their clients are quite similar to the relationships those clients have with other professionals. They have truly become trusted advisors who clients depend upon to guide them through the intricacies of information technology, just as they depend upon lawyers to guide them through the intricacies and complexities of legal matters, and accountants to best leverage new tax laws.

There are, of course, some dissimilarities. Most other professionals and professional practices enjoy the benefits of accreditation from state and state-approved educational facilities, while information technology specialists can only be validated by the manufacturers and software developers of the products they implement.

Looking ahead, when companies embrace the economies of remote utility computing, IT solutions providers will need to further refine and redefine themselves. With services surrounding implementation and support of on-premises infrastructure diminishing, they will once again be faced with the challenge of innovating new value propositions for themselves. Application development? User support? These are but a few of the avenues they'll explore, but if we look to their track record over the past three decades, the one thing that's certain is that the next generation of IT solutions providers will be a robust and flourishing industry.