In-Depth

Distributors: Thinking Outside the Box

Today's distributors do much more than ship products and track orders -- it's too bad some channel partners don't know it.

• By Rich Freeman
• November 01, 2010

When most partners decide to stage a marketing seminar, they turn to a big-time hardware or software maker like Microsoft for financial and logistical support. When Simi Valley, Calif.-based AllConnected Inc. wanted to execute a demand-generation event some months ago, however, it turned for help to an organization some in the channel wouldn't even think to contact: a distributor.

Specifically, Certified Partner AllConnected planned its event in conjunction with distribution giant Ingram Micro Inc., of Santa Ana, Calif. Ingram helped the integrator and outsource IT provider gather funding from Microsoft and three other technology vendors. It provided ready-to-use marketing materials and best-practice guidance on maximizing attendance and sales leads. And it assisted in making sure all four vendors were in the right place at the right time on the big day itself.

"We ended up having a nice educational event for our customers," says Alan McDonald, president of AllConnected.

All in a day's work, according to Kirk Robinson, vice president for VAR sales, market development and business intelligence at Ingram. "Most people think of distribution as a place to purchase product," he says. "Obviously I'm biased, but I look at that as secondary." What distributors really do, Robinson contends, is aggregate the resources partners need to close deals, whether that's hardware, software, credit, marketing support or all of the above.

"We can simplify growing a business profitably in the channel because of the relationships we have," he says.

Indeed, though they once did little more than take orders and manage shipments, today's distis offer a seemingly endless array of programs and services -- so many, in fact, that their greatest challenge often seems to be getting the word out to the channel.

"I've met people who never knew some of these resources existed until they asked," McDonald says.

A Good Aggregation Point
Not that most distributors are suffering from neglect, mind you. Business is looking up -- sometimes way up -- for distis these days. Ingram, for example, saw worldwide revenues jump 24 percent in its second quarter (the most recent for which data was available at press time) compared with the previous year's Q2. Phoenix-based Avnet Inc., meanwhile, recorded an even headier 38.5 percent year-over-year sales uptick in the same three-month period.

"There's definitely been a nice spike in IT spending in the last six to eight months," says Joe Quaglia, senior vice president of marketing at Clearwater, Fla.-based Tech Data Corp. His firm saw second quarter revenue in the Americas rise 8.4 percent versus 2009.

Distributors credit several factors for those robust numbers, including solid demand for the Microsoft Windows 7 OS. But the biggest contributor, they say, is the rebounding economy. Many companies that deferred upgrades during the recession are now running mission-critical systems on dangerously outdated hardware and software.

"You've got some people making purchases just out of sheer necessity," Robinson notes. Of course, resellers aren't obligated to include a distributor in those purchases. They can -- and often do -- buy directly from manufacturers. Indeed, bringing a disti into the loop potentially eats into margins. After all, distributors are middlemen, notes Christine Dover, a research manager and channel specialist at analyst firm IDC. "They're going to take their share," she says.

Most partners don't seem to mind. The benefits of working with distributors far outweigh the costs, they say.

"They have access to solutions, to engineering resources, technical support, product information, training [and] just a whole host of services that really enable us to be a much bigger company," says David King, president of Red Level Networks, a reseller, managed services provider and Gold Certified Partner in Novi, Mich.

Moreover, distributors often know more about a product's real-world capabilities than the company that actually makes it, many partners say, and they tend to be savvier about licensing too. They're also a rich source of financing. Indeed, D&H Distributing Co., of Harrisburg, Pa., offered some $40 million worth of credit extensions to partners in 2009 alone and expects to offer another $20 million in 2010, while Tech Data says it extends "billions" in credit to the channel.

"We're a bank as much as we're a 'pick, pack and ship' company," Quaglia contends.

Above all, though, many partners find working with distributors simpler than maintaining relationships with dozens of different hardware and software makers. "They're a good aggregation point for us," King says. "I've got one relationship to manage that helps me with a multitude of my vendors."

Microsoft values distributors for similar reasons, notes Paul DeGroot, an RCP columnist and analyst who covers sales and support strategies for research firm Directions on Microsoft. Boosting sales to small and midsize businesses (SMBs) is one of Redmond's top priorities, but staffing up to sustain direct relationships with the thousands of mostly smaller partners SMBs typically buy from would be a huge expense. Distis offer a more efficient way to reach those firms.

Overlooked Resources
Still, though distributors are a familiar part of the IT landscape, partners are often surprisingly unaware of all the benefits they offer. Quaglia sees proof of that whenever he speaks at partner conferences. "Almost every single time I'll have customers come up to me at the end and say, 'I had no idea that you do that,'" he says.

Here, according to Quaglia and others, are a few of the many distributor resources that partners sometimes overlook:

Solution Centers: Describing a solution to a customer is one thing. Showing it to them in action is another altogether. Yet most partners don't have the time or money to build full-scale demo environments on their own.

To fill that gap, many distributors operate state-of-the-art solution centers that partners can use to give clients hands-on experience with new technologies. Ingram, for example, has facilities in Buffalo, N.Y., and Santa Ana, Calif., each containing $10 million worth of late-model hardware and software.

King, for one, considers them invaluable sales tools. He recalls the time one of his customers had doubts about a blade server solution he was trying to sell them. Bringing them to one of the Ingram solution centers made all the difference. "That was the tipping point that ended up sealing the deal," King says. "We ended up winning a project for about $300,000."

And don't think access to solution centers is just for high rollers, notes Quaglia. More than 4,000 SMB resellers visit the 6,000-square-foot Tech Data facility in Clearwater every year. "It's really designed for the guy who doesn't have a lot of resources," he says.

Business Advisor Programs: Thinking about expanding your business offerings? Distributors can often streamline the process of getting a new technology practice off the ground. Through its SolutionsPath program, for example, Avnet provides in-depth business planning advice, training and sales tools to partners looking to enter markets like virtualization, storage and security, or vertical industries such as health care and government.

Qualified Sales Leads: Most hardware and software makers collect leads on their Web site and pass them on to partners. Distributors, however, often run far more sophisticated and proactive lead programs. For example, Westcon Group Inc., of Tarrytown, N.Y., trolls through public records to help resellers identify recipients of economic stimulus dollars doled out under the Obama administration's $787 billion American Recovery and Reinvestment Act.

"We know when a school has been given grant money," says Lynn Smurthwaite-Murphy, the company's senior vice president for the United States and Canada. The same goes for state and local governments and federal agencies, she adds.

Similarly, the Ingram Micro IMGrants program helps partners find clients who qualify for government grants but haven't applied for them yet. By alerting customers to such opportunities, partners can both earn their gratitude and get the inside track on any subsequent technology purchases.

Marketing Support: Most large resellers have in-house marketing resources. Not so for the average smaller partner, though. "Many of them don't have a marketing team," Robinson says. "Some of them don't even have a marketing head." As a result, most major distributors provide a range of on-demand marketing services. Ingram, for example, offers guidance on branding, building an effective Web site and formulating go-to-market strategies. Other distis, including Tech Data, offer assistance with event planning and collateral development.

"It's sort of like having Tech Data's marketing organization inside of a VAR's business," Quaglia says.

Connections and Networking: Big-time distributors do business with pretty much everyone who's anyone in the vendor community, and they're often more than happy to make introductions for resellers. "We can make sure they understand who the players are out there and start to build those relationships," Robinson says. Distis also know their way around the reseller community, Smurthwaite-Murphy adds. If you're looking for a company to acquire or partner with on a joint offering, a distributor can often help you find likely candidates.

Partner Communities: Distributors bring partners together in other ways, too. Many of the major distris support partner communities, such as the Ingram VentureTech Network and SMB Alliance or the Tech Data TechSelect organization, in which resellers meet periodically to share market insights and business tips.

"The advice I get, the relationships that I've built [and] the best practices I've received from being in the VentureTech Network have made a huge impact on our business," says McDonald. Membership in partner communities is often by invitation only, however, so check with your account manager to see if you're eligible to join.

Cloud Computing Services: Microsoft isn't the only company that's bullish on hosted software, platform and infrastructure solutions. Distributors increasingly see opportunity in the cloud as well. "It's going to be a key staple of our future," says Robinson.

Ingram and Melville, N.Y.-based Arrow Electronics Inc., to cite two examples, both offer a range of "white label" online services that partners can attach their brand to and resell. The Ingram Seismic product line includes online versions of Microsoft applications such as Exchange and SharePoint, on-demand storage and more. The Arrow Fusion platform includes cloud-based processing and storage resources as well as hosted e-mail, collaboration, contact relationship management and business-productivity tools.

Get Engaged
Though opinions vary, many partners take a less-is-more approach to distributors. "Because of the time and effort it takes to really develop a good relationship, we try to minimize the number we have," says King.

Having strong relationships is essential, adds James Veraldi, executive vice president of Micro Strategies Inc., a provider of business applications, integration services and networking products in Denville, N.J. A distributor you're close with is likelier to come through when you have an urgent need. "Nine times out of 10 I get that issue resolved much faster than I would've with some other guy that doesn't know me," he notes.

Indeed, forging close ties with your distributors is a smart idea, says Quaglia, who believes the secret to working successfully with distis is really no secret at all: "Engage with us," he says. You'd be surprised how many ways a distributor can help you once they understand your needs and priorities.

McDonald agrees. Distributors offer access to a richer pool of resources than most partners realize. "If you're just going to order products," he says, "you could miss out on a lot of tools to help grow your relationships and your business."