The local ICT industry is aware of the benefits that come with indirect sales models, especially in SA with issues such as black economic empowerment (BEE) and technical skills shortages.
Some international vendors with a South African presence have caused confusion in the market with a tendency to sell both directly to customers as well as utilising channel partners.
Even companies such as HP recently experienced the 'direct versus indirect` selling problem. In some instances companies are asked to sell 'directly` to a customer, as opposed to putting the business through the channel.
The channel has not been happy about this, as most of these customers are "big deals".
However, a company such as HP might sell products directly to customers, but it still pushes the fulfilment of the deals through the channel.
HP chairman and CEO Carly Fiorina recently remarked that $50 billion of the company`s $73 billion in annual revenue for 2003 was generated and influenced by the channel. She added that HP would not be able to reach its strategic goals without working closely with the channel.
The company says the channel is its business` lifeblood, both locally and internationally. "One of HP`s cornerstones is the ability and flexibility to deal with the customer in the customer`s preferred mode.
"Of particular relevance to the channel-based model in SA would be the value added in terms of BEE. Ex-stock deliveries are also key due to the relative distance from manufacturing plants which are largely based in Europe," said Fiorina.
"One of the major benefits of the direct model is the ability to break down a customer`s transaction into its component parts. This enables cost separation of the product and its value-added components," says Thierry Boulanger, manager, Solutions Partner Organisation, HP.
"Our strategy in terms of the direct business is entirely consistent. HP has demonstrated growth in the Personal Systems Group channel-sourced business in SA in excess of 30% per annum. Some of HP`s initiatives which have been used to generate this growth include the Teleweb lead-generation team and the SMB Choice programme."
Commitment
"We have, in collaboration with our channel, demonstrated significant growth in our South African market share and believe that demonstrates that our customers, by and large, also recognise and value that contribution. We believe in being a channel-centric company, assisting partners with the growth of business and mutually beneficial outcomes," concludes Boulanger.
Acer MD David Drummond believes that for PC vendors, a market like SA is not big enough for a combined model, and the most logical route would be to go fully channel. "The contradiction with having both models will lead to a company building up an expense structure being built up on the direct side and it will only be covered up the channel side."
He notes that maybe on the software and solutions business side a company can get away with employing both models.
Although the South African channel is still in a teething phase, Drummond projects that the next five to 10 years will see well-established reseller and retail sectors. He says both are going through a growth stage and resellers in particular are realising the importance of becoming value-added resellers (VARs).
"A couple of years back, one would find a lot of services companies and resellers, but now you find companies doing both because if resellers want to capture major commercial tenders, they need to be able to provide services beyond the box-drop," says Drummond.
Vendors have also realised the importance of VARs and are putting a lot of emphasis on the technical training and accreditation elements in their channel programmes.
Rectron CEO Mark Lu comments that despite the fact that after the demise of Siltek, there has never been enough credit available in the channel market, the sector is beginning to look much more financially stable.
Rand/dollar
"When the rand lost a lot of its value against the dollar a couple of years ago, a lot of channel players fell by the wayside, but now that we have seen the currency gain some of its value back, importing dollar-based products once again seems more affordable," he says.
Lu adds that the strengthening of the rand against the dollar has not only boosted imports, but also the demand for ICT products from first-time buyers.
He comments that the government, through its policies, is doing a lot to encourage the growth in the small and medium enterprise sector. Its drive to have all educational institutions "connected" is also improving things on the channel side, he says.
"Strange enough, although the Y2K upgrade period is almost four years overdue, companies have not really spent enough and we have not seen much fireworks in terms of spending from the corporate side either," says Lu.
On the plus side, over the last 12 months, certain duties were scrapped on the importation of certain ICT equipment, which resulted in the local PC, for example, being more affordable when benchmarked against US or European alternatives.
Meanwhile, although many companies might argue that SA still has the potential for another large distributor to enter the market, signs are that the incumbents have managed to overtrade the major cities and are now targeting outlying areas and other African countries.
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