We all have it happen to us. You meet someone and they ask you what you do for a living. For me the last 10 years have been focused on the, "Channel". The next logical question is always, "...what is that?"
The Channel is one way in which the Computer Industry will express product to market. It's an every changing and dynamic flow kind of like a river. Once it was very cut and clear but in today's market these different elements are crossing lines and creating new paths. But, there are really 4 distinct parts for basic knowledge. Here are the key elements: Manufacturer, Distribution, Partner/Reseller/VAR (Value Added Reseller) and End User. Let me quickly define them and then put the pieces together.
Manufacturer - this is where the product and or service begins. It's the entity that makes something because they feel or the market demands it. IBM, HP, Intel, Microsoft, CISCO, Oracle are just a small handful of names that could be associated with this. IBM, HP, Intel and CISCO primarily produce hardware though they now also have software elements in their mix of offering IBM as an example has sells Lotus Notes is one (see morphing). Microsoft and Oracle are software oriented though Microsoft has dabbled in hardware; Xbox would be an example. These companies spend a great deal of time on R&D, focus groups, etc to bring products to market that customers need.
Distribution - this is one way to market for the manufacturer and where many Partners/Resellers/VARs acquire purchase. A Distributor will often carry thousands of items and thus be a one-stop-shop that is, if their pricing is in line with others. Shopping is smart and an option. So now that Partner/Reseller/VAR can fill up his bag with all the items he needs in order to fulfil his end users needs. Some distributors specialize while others carry a wide range of items.
Partner/Reseller/VAR - these are the guys who will take a computer or some other hardware and or service, add something to it like software, configure it, test it, install it and even maintain it for an End User. They have many names as you can see but to keep it simple let me use Partner. The Partner is usually highly skilled in what they do and considered an expert. They are in business to help End Users. Maybe one, maybe many. Some are small, 5 or so people, and others are huge with thousands and branches across the US. Some focus on a specific vertical like medical or local government while others sell to anyone. Location doesn't matter either. You even see some partners working together especially if one has a skill set that another doesn't. They agree not to touch other elements of the business and play well in the sand box together.
End User - this is the last point in the chain for a product and or service. Meaning, the product, service or whatever, lands and stays here. The end user can be a small company down the street in the local mall or a huge global company like Ford. They often have a business and use computers and software as a tool to run their operations. They don't want to be in the IT business most of the time but may have a dedicated staff.
Now the confusing part starts at the End User end of things in the Channel chain. As many of us know you can purchase items directly from say...HP. So is that a Channel? Yes. Will it be cheaper? Maybe. Will it be installed and supported? Good question. Partners bring that type of value to the End User. Do you know how to install an air conditioning unit or lay concrete? Most likely not so you call in an expert like a Partner. What about new technology to help me save money or reduce cost? Again, a Partner can be the hero here.
Can the Partner purchase products from the Manufacturer directly? Sometimes, depending on contracts between the Manufacturer and the Partner. Each Manufacturer has their own rules and restrictions. Some contracts insist that products only be purchase from only one distributor. Also, partners may be required to keep up to date on certifications and have enough sales to keep authorizations.
So why does a Partner sell one product over another, say IBM and HP. That can depend on the benefits to the Partner for reselling the Manufacturers specific product and the End Users needs. Many Manufacturers make it beneficial to the Partner when they sell more of their line card. This benefit might be more leads, cheaper cost to them, marketing and develop fund and additional help. End User wants and needs may dictate the products they use. Some End Users only buy IBM because, that's what they have standardized on. But other times there may be very special needs like the ability to backup, off site, to a secure location, using very specific protocols. Maybe only one Manufacturer offers that.
Distributors over time have become more than pic and ship companies to Manufacturers and Partners. Today they offer services, training, facility use, and financing just to name a few things. In my last position I was an extension to HP because I had a vast knowledge of the HP PartnerOne Program which was very big and covered almost every aspect of what HP has to offer; printers, desktops, servers, storage, networking, software, etc. This was a huge value to Partners who were new to HP or not large enough to have a full time representative on their account. But, I worked for Ingram Micro and thus could connect to other values in our offering. I became an extension of a business resource to both ends of the Channel chain.
My hope is that this provides an idea of how this market works. I plan to follow up with some more in depth discussions which will show how these 4 different elements are changing. As more morphing takes place there are opportunities to provide and find value at these different junctions.
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