In speaking to some in the South African channel over the past few weeks, many channel veterans have proclaimed that 2017 is, without doubt, the toughest year they have ever faced in their decades-long channel careers.
With political and economic conditions seemingly spiralling out of control – both locally and globally – the ripple effects have meant that doing any kind of business in today’s environment is doubly difficult. In the words of one stalwart, ‘It was easier doing business during the sanctions era.’
At the apex of the distribution triangle, international vendors have not only been struggling with their own nations’ dire economies, but also with a lack of innovative new products, coupled with trying to come up with feasible solutions in new areas of business such as digital transformation, the Internet of Things (IoT), cloud computing and artificial intelligence (AI), just to mention a few of the new trends.
Further down the supply chain, distributors are having to wrestle with the likes of yo-yoing exchange rates, severely stretched credit budgets, curtailed marketing from suppliers and new, disruptive entrants making waves in logistics and delivery services.
Stuck in the middle of this rock and a hard place are the reseller community, without whom very few vendors and distributors would be able to do business in this country. As they eke out whatever business they can in an ever-diminishing pot of both government and private sector spend, many of them are being forced to relook, rethink and re-invent their business.
They could be considered the lucky ones. The circumstances today are so dire that many of them are turning to the last resort they can – simply closing their doors and disappearing from the channel altogether. Who in their right minds, some say, would want to be a reseller in today’s market?
Mark Davison found a few that are prepared, once again, to batten down the hatches and to weather the storm to get their views on the current situation – and advice on how to survive.
Everyone with access to a newspaper, television or the Internet knows of the turmoil engulfing the world at present – specifically in global politics and national economies.
These harsh realities are also affecting South Africa, some would say more than other countries. There is political upheaval with claims and counter-claims on state capture; there are the country’s downgrades by ratings agencies; an undervalued and volatile currency in the rand; and, of course, the extreme economic conditions that have filtered through from the rest of the world.
But when one looks at the IT distribution channel locally, there are other more sinister issues that impact on the normal day-to-day business of vendors, distributors and resellers. Factors that are not only disbelieved by colleagues in the East, Europe and the US, but are often met with a nervous laugh and a shake of the head when they realise they are true.
The theft of products from bonded warehouses, not to mention brazen break-ins at distribution warehouses themselves; the hijacking of delivery trucks with millions of rands worth of stock – and the added expense of armed security to ride shotgun; ingenious frauds conjured up by criminals to get their hands on the latest technology or gadgets. And that’s not to mention the more run-of-the-mill open thefts from premises, or conmen looting companies’ bank accounts.
Traditionally, we carry an annual cover story on the trials and tribulations of the reseller community, one of the hardiest group of businessmen that anyone will come across. For decades, they have weathere the bad times, tempered by few and far between good times.
But what made this year’s article a little more poignant was the following email Channelwise received from a subscriber to cancel his monthly subscription:
“Good Day Allan,” read the mail. “Thank you for keeping me updated with your publication. I started my business in 1991 and I have now closed the doors on Swift Computer Rentals in Durban. Not a big operation, but it was an essential service to the industry down here. With the 2008/9 recession, we took a big knock and I did not expand after that. Business has been very slow since then with very little training happening due to budget cuts. Recently, we were swindled out of our last 10 laptops by an impostor, so now we call it quits and close our doors. Regards and all the best with your publication. Please take me off your mailing list.”
We can only wish you well, Bart, in any future endeavours.
There is little doubt that, without the final insult of having its last laptops stolen, that Swift Computer Rentals would have still been in business. It may have been tough to eke out a living, but that is the kind of people that resellers are. They seldom give up – not without a fight, anyway – and will always see a silver lining, an opportunity, in any dark cloud.
One such person is Cecil Eybers, sales manager of Pretoria-based IPT, and a near-40 year veteran of the South African reseller channel.
“The market is definitely tough at the moment,” Eybers says. “As tough as I’ve ever known it to be. For the first time in my career, I’m seeing some of my personal clients sweating their assets which is a new experience for me and surprising. This is especially true on the client side of the business. On crucial enterprise level equipment, customers are still spending because they need that to continue running their business, but when it comes to PCs and laptops where they can save some money, the refresh rate isn’t happening like it used to.”
Eybers says that there are definite reasons for this trend.
“Companies are definitely feeling the pinch,” he says. “Worldwide, markets are down and groups of companies are suffering from this. There are a lot of contributing factors, but in South Africa the downgrading by the ratings agencies has had a definite affect. There is a lot of reluctance among international companies to invest due to this and the problem is further compounded by the current political situation in the country.
“So yes, a lot of blue-chip companies are sweating their assets which is something they never did in the past,” he says.
This shrink in spend, he says, affects the whole channel and that, all being in the same boat, distributors and vendors are doing what they can to help resellers.
“They are also feeling the pinch – the downturn in the economy has a snowball effect,” he says. “The guys we’re in partnership with have always been good and they are coming to the party. We all work together to do business and do what we can. From that point of view, there has been no shift in attitudes. People are still working together and trying to deliver.
“From a distribution point of view, we see a lot of value being added – not just in areas like cloud computing, but also in their financial models where they help partners to close deals. Many of them are really becoming one-stop shops for partners to access services and add benefits to their own customers.”
Like most resellers, Eybers is optimistic about the future. “I don’t think the current situation will last forever,” he says.
And, again, like the rest of his reseller colleagues, he does see opportunities.
“When it comes to smaller resellers, I think they should be looking at opportunities in services,” he says. “More in data centre services, not the exclusive services offered by large service providers that have huge infrastructures and lots of capital.
“Cloud services have opened a lot of doors for smaller resellers,” he adds. “Many of them have had relationships for decades with their partners. They know they can trust them and offer the services they’re providing to their own customers with confidence. This opens up another market for the smaller guys, a market in which they can survive and make a profit. There are a lot of opportunities in cloud computing and resellers can compete in this market with larger organisations.
“There is a lot of activity in the Microsoft 365 space, for example,” Eybers says. “And even the smallest of dealers can participate in this offering services. It’s just a matter of finding the business.
“Another area is the Internet of Things (IoT),” he continues. “It’s the new buzzword and the latest and greatest, but it’s been with us for quite some time. It was just undercover, but now the industry has found a name for it which is brilliant. Anyone that doesn’t look at IoT is making a mistake. That’s where the world is going and it’s another opportunity for us to get into niche markets, focus and add value.”
And what advice would he have for fellow resellers?
“It’s the same piece of advice I’ve given for nearly 40 years: Get back to basics,” he says. “It’s all about relationships, trust, embrace technology and grow within the market. And when you get an opportunity with a new client, why waste that ‘golden hour’ with the CIO telling him what you do. He knows what you do … we all know what we do.
“The message has got to be: Why would the client buy from us? Why should he do cloud with your company? Not what you do. That’s the value that you’ve got to add and that is where you get attention.
“Stick to the basics,” he says. “Do what you say you’re going to do, live up to your promises, and deliver. Make an impression and live up to your standards. If you deliver on why they should do business with you, then you’ve got a client for life.
“Oh, and one more piece of advice,” Eybers says. “When I first started out, one of the company veterans told me: Look after your losses, your profits will look after themselves. And it’s true. Losses will eat you alive, but your profits aren’t going to change every day.”
In the IT industry, people often talk about the bleeding edge. At the bleeding edge of the local channel, though, are the thousands of smaller resellers throughout the country that ensure product gets to customers at the right place, the right time and the right price.
One such reseller is Clive Jorissen, a 20-year channel veteran and owner of BCR Security and Guarding, a company with multi-million rand turnover that specialises in security solutions.
Jorissen himself deals with a number of distributors almost on a daily basis and paints a vivid picture of just what life is like for resellers at the very coalface.
In agreement with everyone else in the channel, he admits that 2017 has been one of the toughest business years he has experienced. In talking bluntly about his personal experience with distributors, he says that the challenges today can be broken down into four specific areas:
Knowledge: “A major problem we seem to face is suppliers not knowing what stock they have,” Jorissen explains. “Many times orders are booked and when collection time comes, the pricing is either exorbitantly dissimilar or there was no stock to begin with. The process of sourcing the merchandise becomes an exercise in futility and a gross waste of time. In fact, we no longer use several suppliers who have priced themselves right out of the market . The cavernous pricing differences of basic machines and software is mindboggling.”
Support: “It seems that, nowadays, there are few suppliers that stand by the products that they sell,” he continues. “For example, we recently purchased a top-of-the-range laptop for a particular client. The client opened the laptop in front of us and it wouldn’t start. We take the laptop back the very same day to our original supplier, and are told that we need to take it to the ‘main’ supplier. The main supplier then tells us it will be a two-week wait to get the brand new device back. As far as I’m concerned, this kind of situation is unacceptable and it has forced us to adopt a policy whereby we will only purchase equipment from companies that give us technical and sales support.”
So-called volatile exchange rate abuse: “Pricing at certain suppliers changes within the same day even though stock was purchased at a set price and they have it in their storeroom,” Jorissen says. “This becomes impossible to budget for and, in my opinion, could be construed as being a little bit unethical.”
Budgets: “Clients are battling to find the budgets for technological improvements that are needed for their security,” he says. “It is at this very time, when people are at their most desperate, that it is critical to keep your systems up to date with the advancements made in security and IT.”
In a niche, specialised market such as security, Jorissen says that distributors could make life easier by ensuring that they have the appropriate skills on board. And this is not just pertinent to security, he adds, but any number of vertical markets that many resellers are now focusing on.
“We provide security solutions, not just products to our clients,” he says. “Consequently, if distributors could fully comprehend and understand what their products are capable of – and be able to communicate these various benefits to us – it would make for superior solutions that we, in turn, can pass on to our customers.
“Frontline staff and marking departments could also have better internal communication,” he adds. “Many a time sales will not be aware of the specials that have been advertised. In some cases, one can even show the salesperson the newsletter advertising a special and you will still be met with a blank stare.”
Account managers are another area which Jorissen feels distributors could improve upon.
“I know it is sometimes difficult, but distributors should try and ensure they have knowledgeable account managers on board who can provide clients with one quote, one solution,” he says. “It is unnecessary and frustrating to have to deal with 12 different departments – one for cabling, one for software, one for desktops, ad nauseam.”
And Jorissen has equally straightforward advice for his fellow resellers.
“Find the very best account manager at the supplier who understands their products and can assist you making the best choice for your client,” he says. “Be aware of dropping your pricing too low ‘to stay competitive’ as you won’t keep your doors open for long. Solid solutions, with great products and trustworthy staff takes money. Believe in your product and stick to your guns.
“Be honest with your clients at all times, they are putting you in a position of trust and to break that would be unthinkable,” Jorissen adds. “And keep looking for impossible solutions. They are out there, and if not, make it happen.”