Traditional VARs will provide less of main IT channel in 2015, as other segments grow faster, says distributor The traditional VAR segment is in decline, though to be fair, it will still make up the majority of Avnet's customer base for some time, says Dieter Lott (below), EMEA VP M&A/Business Development at distributor Avnet, who predicts that the channel faces a lot more consolidation in 2015. {An expanded version of this article first apperared earlier this month as part of the premium content for IT Europa subscribers; for more details on how to subscribe, contact Stephen Osborne (sosborne@iteuropa.com)}
Driven by the end user, he sees many more cross-border and region buyouts, partnerships and deals. “There are just not that many multi-region resellers and this will change”.
And the new channels – integrators, managed services providers, ISVs and SaaS providers – are growing much faster than traditional channels; his internal analysis shows many growing at two-three times the rate of the older firms.
This is all driven by the pace of change and need for agility, which is why he has also personally taken on more responsibilities, those for the Enterprise Business Group, managing the core strategic supplier relationships. Dieter Lott continues to be responsible for strategy, pan-EMEA account management and global System Integrator (SI) sales.
“My new role is aligned with core vendors – the ten main suppliers we have IBM, HP, Oracle, NetApp, EMC, HDS, VMware, Cisco, VCE, and this list will include Lenovo going forward because of the work we do with X series. We need to know where they are going and translate that into sales activities, and that is my job. Any distributor has to look across the vendor landscape rather than just talk to one or two.”
“One of the key areas of focus is that we are seeing an accelerating rate of adoption of technology; previously the early adoption would be in the UK and Nordics, but that is changing – new ideas are spreading faster across Europe, so there is a need to for us to centrally drive programmes, and do them faster. We still believe in a country organisation because that is where the users, our customers and vendors sit, and not all markets are the same.”
In terms of agility and moving quickly, it is getting confusing for partners; there is so much going on, he says. There are so many trends - cloud, changes in technology consumption, converged infrastructure etc. “What we see is that there is more technology and it is adopted faster so it is more effective for us to manage change centrally. For example we have invested in security – we see a gap where there is a lack of a “holistic” view of security - where there have been specialist resellers in the past, the channel now has to take a wider view.”
Rather than point products, it is now part of the design of the data centre, for example. “We built a business unit in the Netherlands that centrally drives programmes, this means we can enter markets in a few months with a customer base; if it was done country by country it would take a year.”
The other benefit is in identifying best practice. “So that is my goal – to drive sales focus in the central team instead of just managing the strategic relationships, doing quarterly reviews and providing feedback, which was not, in my view, really driving sales.”
On the other side, looking at the customer base; he has to look at these trends centrally. “We see a rapid trend for adjacent companies entering IT markets: MSPs, ISVs and integrators that are growing much faster than the traditional VAR. With this group it is a question of how to support them – each of those different kinds of operation requires a different value proposition. Traditionally a distributor has sold horizontally with the same value proposition, now, we are differentiating: for example the MSP who makes a big upfront investment with data centre, so anything which optimises that with just-in-time, pre-configuration, or utility pricing is attractive. We can partner with the specialist MSPs and encourage reselling; we are definitely approaching that type of customer differently.”
Among these new channels are the integrators, who traditionally didn't touch hardware and software, just working on application and developments, but in a saturated market, the large SIs have entered in competition with large VARs and outsourcers, he says: “They are great at selling services, but don't have a vendor focus; we can help them with that. So we decided my role should have a balance in the European function, both focusing on multi-regional customers and developing competitiveness.
He is expecting a consolidation in 2015 on an international basis. Historically there have been very few multi-region resellers who work in more than a few countries. “That will change. End users want to make central decisions, but need regional support. That will drive more acquisitions – it would not surprise me if a large VAR like Kelway started going outside the UK. So Avnet needs to change too – a country-based approach doesn't work.”
Those multi-regional customers are growing faster as well, so Avnet needs to react. “You can only centralise certain things- one is centres of excellence, particularly where resource is constrained – it is hard to find highly qualified people in many areas now. For example, Working with VCE we have a specialist highly qualified team in Strasbourg. That doesn't mean there is no presence in the individual country.”
And skills are going to be key in 2015: there the big names have power. “That will increase, clearly. We are seeing it in certain areas, where we are finding it hard to find people, and customers say the same, and that is one of the reasons we invested in Avnet Services – covering areas where they can't find the resource.”
Administrative tasks can obviously be centralised, with more economies of scale- the materials management team is centrally led, but sits in five locations, looking at inventory across Europe. And it is still important to have local customer relationship and business development. Vendors are still powerful locally and incentives are country-based.”
“Our core customer base is still the medium-sized, traditional VAR, but they are looking into new areas, and are developing themselves into solution providers, managed services or whatever. They are recognising that eventually the market is moving to software and services. That is being reinforced by technology trends; we will see them develop services arms alongside traditional product sales.”
“And of course in the near future we will see the next generation in IT – the first generation 'Y' managers will emerge with a different mindset creating a different work environment and with different vales,” he concludes. A lot to think about in his new roles, then.