The IT industry takes a walk down the Yellow-Brick Road - Part 2 of 3 21 August, 2008 By Robert M. Cohen

The Short Cut To Oz
Most vendors attempt to solve all their SMB problems by taking the shortest possible route to Oz. Without waiting for the brains, courage or heart, these vendors modify existing "products" and market them as SMB "solutions" and then recruit as many VARs as possible to sell these pseudo solutions. Alas, when Oz always seems to be a million bricks away, they blame the lack of results on the VARs and revert back to a direct-to-enterprise model while pumping more marketing dollars into the big-box stores who hopefully will also sell some of the pseudo SMB solutions that the vendor still has in stock.

The Fast Way To Oz
What makes the Great Oz "great" is that he understands the process. Dorothy needed to travel down the yellow-brick road so that she would appreciate the lessons she learned along the way. To be successful in the SMB market, vendors have to understand the strengths and weaknesses of those who can help them along the way and then build programs that help them leverage the strengths and complement the weaknesses.

VARs
When it comes to providing IT-centric solutions to the $300 billion US/Canada SMB market, the most important element in the success equation are the VARs. Responsible for about $240 billion of these sales, the best VARs act as a Trusted Business Advisor to their SMB customers, taking on the responsibility for:

• Understanding what the business objectives and challenges are.
• Determining what solutions are required.
• Selecting the suitable products and brands.
• Acquiring these products.
• Integrating these diverse products into effective, cost-efficient and compatible solutions.
• Installation, testing and trouble shooting.
• Training employees on how to use the solutions.
• Providing on-going service and support.

• Staying solution focused.
• Deploying technology.
• Developing long-term relationships with customers focused on removing FUD (fear, uncertainty and doubt).
• Passionately staying with a technology problem until it is solved.
• Working long hours to get and keep customers up and running.
• Being readily accessible to their customers.

VARs' Weaknesses

• Obtaining new customers.
• Marketing new products or product categories.
• Sales skills.
• Loyalty to providing solutions, regardless of vendors or own requirements.
• Insufficient business skills.

With insufficient product training and limited access to vendors who use their human resources to support the Fortune 500 companies, these SMB-focused VARs have to learn on the go while contending against rapidly increasing competition and decreasing margins. The situation is further aggravated by the insufficient business knowledge that most VARs have and by an industry with virtually no standards and no restrictions as to who can become a VAR.

Yet, despite all the challenges, these VARs get and keep the technology within the SMB world working.

The Need For A Paradigm Shift
Every good salesperson knows that the most important person in the sales process is the key influencer because they ultimately determine what products are purchased. In about 80% of all SMB IT purchases, a VAR owns the relationship with the SMB who rely on their VAR to determine which products and brands they purchase. Still, Vendors view VARs as an extension of their sales force when, in reality they should be treating VARs as their customers.

• Most hardware and software vendors make products.
• More and more SMBs want to purchase IT-centric business solutions that will give them a competitive advantage and a measurable ROI.
• VARs provide vendors with the only cost-effective way to successfully reach and service the needs of SMBs.
• VARs are fabulous at removing the FUD factor for SMBs by installing IT solutions as well as servicing and supporting them.
• Vendors expect VARs to market and sell their products as part of an integrated business solution.
• Most VARs do not have the business knowledge required to develop solutions.
• Vendors are allowing less and less margins and reducing gross profits for VARs.
• Products come with warranties. Business solutions don't.
• VARs put products together (often thinking they are business solutions) by using their overall knowledge of technology coupled with trial and error.
• Most VARs are not set up to economically service SMBs as they have not adopted the necessary technology to do so: remote diagnostics, managed services; SaaS, software licensing, HaaS, etc.
• Without service and consulting revenues, most VARs cannot survive economically.
• The total Number of VARs has declined from about 150,000 in Canada and the US in 2000 to about 85,000 now.
• Without sufficient VARs, vendors are finding it more difficult to effectively sell their products.
• With approximately 2 million product SKUs in open distribution, together with compatibility and convergence issues and the warp speed in which technology changes, it is impossible for VARs to stay current.
• Further complicating the issue is product parity caused by too many similar products entering and leaving the market on an ongoing basis.
• VARs rely on their relationships, experiences and perceived impression of the vendor to help them determine which brands to recommend.
• VARs do not trust vendors and thus are very reluctant to participate in Vendor programs that target the VARs' database.
• Most VARs have about 20 strong vendor relationships. If they were to send out the marketing materials to their customers that these vendor partners are requesting them to do, they will become their SMB customers' largest spammers.
• At least 80% of VARs are NOT business focused & they dislike marketing, are afraid of sales and do not know how to develop IT-centric business solutions.
• Without VARs, SMBs must struggle to purchase, configure, install, service and support their IT requirements.
• If SMBs significantly slow down the rate at which they refresh their technology, the entire IT industry will slow down dramatically.
• This slow down will cause tremendous losses in the IT industry, resulting in bankruptcies, less dollars for R&D, fewer new products and thus less reason for companies to refresh technology & and thus the downward spiral will continue.

To find out more about what the ChannelLine Advisory Council is doing or to join us, please contact me at 1-800-465-2059 or by email at rcohen@integratedmar.com.

Robert M. Cohen, a passionate and enthusiastic channel advocate, is the founder of the ChannelLine Advisory Council as well as president and business editor of Integrated mar.com, publishers of Channel Advisor, eChannelLine and ConnectIT. Since 1980, he has worked with 300 IT vendors, distributors and resellers in developing and implementing strategic go-to-market programs, using a variety of direct, channel and hybrid models. Integrated mar.com, in its role as publisher, channel marketer and founder of the ChannelLine Advisory Council is proud to be a leader in orchestrating the paradigm shift. Together we will make the IT channel more profitable for all of us!