Tom Petrocelli's take on technology. Tom is the author of the book "Data Protection and Information Lifecycle Management" and a natural technology curmudgeon. This blog represents only my own views and not those of my employer, Enterprise Strategy Group. Frankly, mine are more amusing.

Monday, June 01, 2009

One of the things I love about social networks is how ideas can get bandied about and start you thinking. One question tossed about recently was (and I paraphrase) “What value does a reseller have?” Great question given the current rate if industry consolidation. Makes aggregation more of an aggravation. Besides it keeps getting easier to interact directly with vendors, so why not buy directly from the manufacturer? In theory that should save money, right?

My glib answer was that value added resellers will be valuable as long as there is value add. Small resellers can do that through superior service and trust. People buy from people they trust and it's easier to trust a small company you know then it is a giant faceless corporation. Even if HP will come out to your place of business to install a single server, many people would still prefer the local folks they know well. Small business also tends to trust small business more than big business. It's like a club.

So what about the big boys such as Ingram Micro? No one will confuse them with a small, local, value add reseller. They are a massive company. Large resellers arose from the need for an efficient supply chain in computer products. That need is fast diminishing. Vendors can handle logistics themselves and can run or outsource call centers and Internet operations to handle orders. What value can they bring that a large vendor can't match? In a word - Financing.

Money. Denaros. Cash. A lot of companies want the gear but can't afford to tie up their money. It's not the cost but the liquidity. If I tie up my money in computer equipment then I can't do other things like pay my people. Financing offers a way to get what you want but not pay for it all at once. Great option for a business with cash flow but low capital resources.

Only the big boys can afford to do that. You're friendly neighborhood reseller usually can't offer great financing. What they might have is a resale of a manufacturer's finance plan. A big reseller can offer awesome terms, move equipment, and generate cash flow. Nice plan.

Big resellers can also offer free (or cheap) advice. Not the stuff you get from a salesperson (such as “I think you should reach into your wallet and give me your money”) but hardcore technical advice. For free. That's right. A big reseller can afford a bunch of techies that dispense advice to customers just to maintain relationships. No salesperson will call – just yet anyway. Smaller resellers can do that too but it's harder. They simply don't have the folks to do it. They need those folks selling or delivering solutions, not handing out free advice. I didn't come up with this myself. Food giant Sysco does this all the time as a way of keeping their customers afloat and, of course, buying from them. We should learn from them.

So, if you are small you have to offer incredible service and be as trustworthy as an old hound dog. If you are big, you can offer financing and free advice to keep customers going and buying. Or you can just die. The third option kind of stinks so I don't suggest it.

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