My esteemed editor has made some bold statements and posed some significant questions related to this month’s cover story that takes an in-depth look at the “state of the channel”.
One such statement says that “there is little doubt that with the changing landscape in technology and among vendors, the channel is facing some of the toughest challenges in its history”.
Another pronouncement says that “with new entrants into the industry and more vendors adopting hybrid sales models of both direct and indirect, competition is as fierce as it’s ever been – and becoming even more cutthroat by the day”.
It is against this background that the decrepit “old hack” then poses the following questions:
- So how is the traditional distribution channel dealing with developments like these?
- And how do they cope with the aspersion from some quarters that “the channel is becoming irrelevant”?
- Are distributors and resellers being forced to change their own trading models? And how are they going about this?
- What, in the meantime, are they doing right? And why will the channel always play a vital role in countries like South Africa, and a continent such as Africa?
While there is absolutely no doubt whatsoever that the astute old scribbler is correct and that the traditional IT distribution channel is under threat and facing some imposing challenges to profitability and sustainability, it’s not necessarily all doom and gloom.
He, of all people, has been around long enough to know that the traditional three-tier IT distribution model – that has been around since the advent of commercial computing more than eight decades ago – is constantly subjected to “boom” or “bust” cycles.
Throughout the history of commercial computing, economic cycles directly linked to the state of world and national economies and the fortunes of countries faced with political and social upheaval as well as the vagaries of dealers playing cowboy by trying to manipulate stock markets and other trading tools, have impacted the IT industry as an important barometer of economic growth and wealth creation.
Technology, too, plays a role in deciding the “feast” of famine” state” of affairs in the IT industry – but very seldom in total isolation from the harsh reality of the overall state of the international or local economy at the time.
If things are extremely tough and uncertain in today’s IT channel in South Africa, there is no doubt that this has far more to do with the ANC government under the leadership of the current president than with any other fact.
Thanks to Number One and his bumbling cronies, the South African economy is hovering just one notch above junk status and only just avoiding slipping into recession in terms of GDP.
If GDP growth was above 5% and jobs were being created by the millions, it is hardly likely that it would have occurred to my esteemed editor to question the viability of the channel – things would be flying to the point of embarrassment in terms of how much money was being made in the IT sector under ideal economic and political conditions.
In the scramble to survive in a economy that is flirting with being formally classified as a “failed state”, it’s hardly surprising that stakeholders throughout the supply chain – from vendors, through distribution and resellers – are scrambling to survive by trying different business models.
Aside from the fight for economic survival, it is fairly certain that most players in the channel know that the classic business model should and will never be discarded. No vendor in the world has come up with a successful plan of how to take their products direct from the factory floor to the end user and still make money.
And as for the relevance of the distribution and reseller channel in South Africa, look no further than the recent “Radical Economic Transformation” pronouncements and the role that black economic empowerment is destined to play to understand that the channel in this country is here to stay.