Opinion

Eating into your own channel?

Meera Kaul, managing director at Optimus Technology and Telecommunications

Rising oil prices, the Euro Zone meltdown, the Arab spring and volatility laden economies: the world’s economy has not been hit so badly in quite some time.

The recession seems endless and however much we compare it to earlier periods of recession, how hard it has hit our regional technology sector is a graphic story to be told. Global technology corporations have seen share prices slump, salaries frozen, profits plummeting, downsizing of workforce, investment slashed and IPO’s abandoned.

Most global vendors demonstrated predictable behavior. They slashed expenditure, cut discretionary spending, lay off staff and consolidated their regional coverage.

The downslide for most vendors continues in the first two quarters of this year as well. Some vendors are taking drastic measures to consolidate revenues while others are executing potentially damaging actions to reduce discretionary spend on precisely those avenues which should ideally enable them to remain competitive and profitable in the long term during the recession phase and immediately after the upturn starts.

From a channel perspective, I classify vendors based on three economic volatility management strategies:

  1. The ‘channel can go to hell’ vendors
  2. ‘Shut off the marketing tap but keep the channel going’ vendors
  3. The ‘recession can go to hell’ vendors

Needless to say, vendor strategies that face the volatile market with grit, determination and focused strengthening of the brand will emerge the winners. Strategies of vendors that undermine their channel will diminish their own appeal.

The ‘Channel can go to hell Vendors’ have started to compete with their own channel by diminishing the value of their own indirect channel. In most cases, they are diluting Tier 2 partners by moving them out of their own customer relationships and replacing them with Tier 1 or direct deals. Most of such vendors have abolished price protection or stock rotation, cut down; marketing development funds (MDFs) and introduced a renewed focus on SME sales.

Most vendors adopting a channel elimination strategy are dealing with their own unsustainable businesses as they are trying to account for loss of revenues and margins by ensuring early invoicing and reducing operational costs.

The vendors with ‘cut marketing costs but keep the channel going” strategies are reducing the awareness of their partner programmes in favor of the fact that it will ease operational maintenance. These vendors have decreased the number of field account resources and reduced the investment in partner training, development and enablement. This may adversely affect their regional spread in addition to hampering the interest of partners to continue selling their product lines.

The mavericks in this economy are the brilliant strategies of the “recession can go to hell” vendors. These vendors understand that loss of focus in their own channel strategies will impact channel interest in their business negatively. These are the vendors who believe that this is the time to review and strengthen the value proposition of their products to the channel. These vendors are impacting their business through more partner friendly channel programmes and the emphasis they lay on their commitment to their channel. Their channel is witnessing the impact of a communicative, transparent partner vendor who continues to invest in their training and skill enhancement and leadsthem to greater rewards through both short term and long term revenue generation strategies.

 

 

 

 

 

 

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