The local channel has had a turbulent year. Margins remain under constant pressure, cashflow is tight, and competition is more fierce than ever.
By Simon Campbell-Young, security guru at First Distribution
However, these aren’t the only challenges the South African channel faces. There is global pressure from vendors on target attainment, and they are driving harder and harder for ROI across the African content. Moreover, the slew of global vendor acquisitions that we’ve seen over the past few years also impact on the local channel.
It’s not always a bad thing. As a distributor, we expect that the vendors we work with will have a complete portfolio of solutions, either broad or speciality, so that when we approach our customers, we can offer them a total package for their needs – be it networking, storage or security. Sometimes a merger or acquisition adds a missing element to a vendor’s offering, allowing us to offer a more complete solution to our customers.
Although mergers and acquisitions will certainly affect their business transactions with their customers, these events do not interfere with how their operations are run. Having said that, we sometimes need more clarity from vendors on any changes in the channel policy that might happen after the deal has been concluded. We engage with, and have far more interactions with our customers than our vendors.
As long as these deals do not cause any problems for our customers, it doesn’t make a massive difference to us. However, we do need vendors to give us forewarning of any strategic moves or channel changes that will have long-term impact on our organisations.
If partners are already doing business with specific product lines and those solutions are currently being used in their customers’ businesses, it can be tricky to convince them to change to a new process that is often the result of the consolidation following a merger or acquisition. In these times, a vendor’s guidance and training becomes a necessity, to ensure partners can make any transitions happen smoothly and seamlessly.
While mergers and acquisitions might help vendors to boost their existing product portfolio and have better visibility in a new area, the impact of the business consolidation largely depends on the vendor’s channel strategy going forward. Outcomes can be both good and bad for the channel. There are a couple of factors that could impact on the channel.
Firstly, the visibility of the vendor in the specific region in which the partners operate, and secondly, the vendor’s channel strategy following the inking of the deal.
In all likelihood, we will see local consolidation of these distribution agreements in Africa, and will we see agreements moving from one distributor to another as the vendor deals create new opportunities for the channel in their areas of expertise and in the regions in which they are strongest. In fact, we are seeing local consolidation at a distribution level as the local market contracts, forcing many to look further north and across into the ME regions for growth.
There is also the issue of vendor interference with the channel, particularly while they are finalising large deals or acquisitions. During these times, vendors have been known to involve their internal sales and pre-sales team in these events. This can foster a sense of insecurity among partners, driving larger systems integrators to put the brakes on collaboration with vendors.
However, the industry is only going to see more consolidation of business and leading vendors will continue to buy other organisations in order to improve on the scope of offerings and better their presence in every region. As the channel, we will have to brace ourselves for these transitions.