It’s no exaggeration to say credit is the life blood of channel business. Distributors provide credit to partners who don’t have the wherewithal to roll out IT projects, and many resellers choose their disties based on their ability to extend credit and financing.
The recent economic downturn has impacted both distributors and partners with IT budgets being slashed down and banks tightening purse strings.
The dilemma facing distributors today is not whether to lend but who to grant credit to and for how long. In the wake of some runaways in the market, distributors have started scrutinising the reseller’s profitability, equity in business and how quickly they are able to pay back.
Many of these distributors are now forced to engage the services of credit insurance firms to fine tune their credit policies, which is indeed a step in the right direction, though many resellers complain about the way they are treated by these firms.
Another burning issue in the channel is profitability. With competition getting very fierce and margins slimming down, there has been a realisation within the channel community that you no longer compete based on pricing alone and sacrifice net profitability at the altar of top-line growth.
It’s often a tightrope walk given the fact there is a huge pressure on distributors from vendors to meet the numbers and margins are heading south. Striking the right balance between top-line revenue and bottom-line percentage is the key to survival and the onus is on vendors to do more to build a partner’s long-term profitability. Partners will have to restructure their business models in tune with the changing market trends and invest in systems to ensure efficiencies and better profitability.
We will nail down some of these vexing issues at our annual Partner Conference, held in conjunction with Awards on June 12. We have a line-up of top industry speakers and panel discussions to gauge the pulse of the regional channel and will take an in-depth look at the factors shaping the IT landscape. And in the evening of the same day, we will honour leaders from the whole channel eco-system, spread across 29 categories at a gala dinner ceremony being held in the Jumeirah Emirates Towers Hotel in Dubai. Hope to see you there.
