The Debate Over The Value Of Distribution Rages On And On And On

While HP's numbers added fuel to the raging debate over whether it should or should not merge with Compaq, the Bell Micro numbers were indicative of the capabilities of the so-called second-tier distributors.

Don Bell, president and CEO of Bell Micro, has set storage as a major focus for his company and is driving demand for his vendor partners.

It's all a matter of focus and value-add. Many in this industry question the value of distribution, saying it is often too slow to adapt to change and not effective in generating demand.

What they should do is peel back the skin and look into the services provided by first-class distributors. Solution providers are customers, and customer satisfaction doesn't just happen: Distributors have to make it happen.

Storage is available from a growing number of outlets and vendors. And we all know it's going to get more competitive.

The fact is EMC's success has awakened the competition. Dell Computer CEO Michael Dell said not long ago that EMC stood for "extra margin corporation." He later agreed to resell its products.

Bell Micro signed new agreements last year with Compaq, EMC and IBM. Bell Micro offers each of those manufacturers an opportunity to increase the number of feet on the street selling their products and cut costs associated with supporting that sales force.

It's the reason distributors have always existed.

Going forward, we will see growing success among second-tier specialty distributors. Their strategy works because they are able to concentrate on fewer product categories and demand respectable margins by supplying lots of handholding to solution providers.

But this strategy only works with products that require expertise.

The value-add for a distributor on products that require little expertise to deploy is merely price, time and delivery. While necessary, these services don't command very lucrative margins.

So, Bell Micro is in an admirable position in that it is concentrating on an area where it can add lots of value through product knowledge and services for a growing customer base.

Bell Micro, of course, isn't the only second-tier distributor. There are many others, each with its own focus.

Avnet Hall-Mark North America is another company that is executing well on the basic blocking and tackling needed to be successful in the midrange arena.

Rick Hamada, president of the company, is correct in his assessment that a vendor's technology has to lend itself to an opportunity to add value in order for it to play in the company's lineup.

Hamada also looks for technology that allows his solution provider partners to further penetrate their existing customer base or expand the number of customers being serviced.

Some distributors, however, worry too much about working their vendor relationships and not nearly enough about improving their relations with the solution providers they ultimately serve.

It's not a chicken or egg thing. Distributors like Bell Micro and Avnet that work hard at driving awareness of their services and expertise in the solution provider community will find vendors beating a path to their doors.

Make something happen. I can be reached at (516) 562-7812 or via e-mail at rfaletra @cmp.com.