Is the Reseller Channel for Network Equipment Declining?

Back in 2008, TMCnet posed an interesting question about traditional PBX vendors. Has VOIP outgrown traditional business service channels? And that got me wondering, what is going on in the traditional network equipment channel? Is it starting to erode in favor of direct sales?

We are seeing a split in buying patterns.

1) Companies that do not have an in house staff generally make their equipment purchases based on the advice of their Network Consultants, VARs or local reseller.

The line between Network Consultants and VARs has always been a bit muddy.  Most network consultants tend to dabble in reselling.  Hence this relationship behaves like the traditional channel where consultants and VARs represent specific manufactures, and  mark up equipment to make margins. Customers benefit because the true cost of the consulting, to design and deploy their  networks, is subsidized by the margins the VARs make on their equipment sales.

2) On the other hand, companies and institutions with  in house IT staffs are starting to get away from the traditional equipment reseller.  They are more likely to do their research on line, and are more than willing to buy outside of a traditional channel.  This creates a strange double edged sword for OEMs,  as they are heavily dependent on the relationships of their channel partners to move equipment. For the same reason that those factory outlet stores are located outside of town, OEMs do not want to shoot themselves in the foot by selling direct and competing with their resellers.

Even though there is some degradation in the traditional channel, I don’t think we will see its demise any time soon for a couple of reasons.

1) Network solutions remain labor intensive, and expertise will always be at a minimum. Even with cloud based computing there is still a good bit of infrastructure required at the enterprise and this bodes well for the VARs and reseller who offer their expertise while acting as the conduit to move equipment with mark-up from the OEMs

2) Network equipment itself resists becoming a commodity. Yes home routers and such have gone that route, but with advanced features such as bandwidth optimization and security driving the market , network equipment remains complex enough to justify the value added channel.

What are you seeing?

Related Article:  Us channel sales flat for third straight year.

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