Special Focus
Future of VAD
 Value added distributors have created a niche by driving adoption of emerging technologies. But as these technologies mature, they are now focusing on bringing new solutions and services to the market
By Ramdas S
Value added distribution has evolved over the past two years and has proven to be a trusted path for many small and niche vendors to reach targeted reseller base in the country. In the days ahead, the business model is expected to go through a transformation.
A big value add
What differentiates a value added distributor (VAD) from any other distributor? A VAD takes charge of a number of roles that a vendor is expected to do, including appointing channel partners, implementing and designing channel programs, training, certification, marketing campaigns and in some cases even determining pricing of products in a particular geography. In contrast, a regular distributor focuses on just channel fulfilment.
VAD is more involved in operations such as logistics, collections, and ensuring the distribution reach. But the main reason for the success of value added distribution is that all three stake holders—the vendor, the VAD and the partner—have been able to derive a definite value. “Under our value maximizing services (VMS), we offer maximum support when a technology or a product is about to be introduced. It is the time when everyone in the sales cycle—from the reseller to the customer—needs to be handheld, and a lot of effort goes into providing proof of concept,” explains S Sriram, CEO, iValue InfoSolutions, Bengaluru. “When the product or the technology is ready for mass consumption, a VAD’s role changes and distributor who can predict numbers steps in.”
The model seems to be an accepted norm. When addressing a new geography, most vendors are not keen on major investments and prefer to liaison the core operations through a VAD. However as volumes pickup, vendor steps in to manage many core activities.
Explaining further, Sriram adds, “Once the commoditization happens, we see value in providing services around the product or the technology, and we call them value added services (VAS).” R Rajesh Kumar, Business Head, Inflow Technologies agrees, “Every technology moves through a maturity cycle, and VAD plays the most important role in the early adoption phase. Once the mass adoption starts, we switch to offering VAS.”
Almost all VADs track large enterprise accounts, with most claiming to have insight into the plans of at least 4,000 of the largest IT buyers in the country.
Changing roles
Increasingly, VADs are providing services and solutions that are either vendor-neutral or span across multiple supply chains and vendors. A classic example is Avnet Technology Solutions, which is trying to offer unified solutions that are targeted at specific verticals such as healthcare or government and technology verticals such as IT virtualization. “Our solutions distribution model is tailor-made for channels looking at selling solutions. These channels are not worried about Bill of Materials (BOM), or direct relationship with multitude of vendors. We take care of the supply chain and tailor solutions for such customer,” says Michael Costigan, Director, Avnet Technology Solutions, Asia-Pacific.
Westcon is planning to introduce its branded vertical solution programs that have succeeded in other territories such as SecuityPoint (targeting security resellers) and ConvergencePoint (targeting unified communication market). “We are also taking services offered by our vendors to system integrators, and helping them to put together the solution,” adds Rajeev Unnikrishnan, Business Head, Westcon India.
While most VADs like Westcon are looking at tailoring solutions based on existing packaged services of vendors, some are looking beyond existing relationships. “We look at the customer requirements, and work backwards on the vendor alignments. Every sign-up so far has been a result of careful evaluation of potential,” says Sriram. iValue has launched nearly 30 VAS— ranging from ISO27001consulting to data archival and protection—that it’s trying to take to channel partners.
Ahmedabad-based M-Virtual Technology India (M.Tech India) has also been eyeing overseas market to offer their VAS, and has already entered the Middle East market. “We’ll leverage on our expertise in India, and offer services on various products and technologies of our vendors,” explained Rajendra Shah, MD, M.Tech India.
Shah has forged alliances with global VADs such as ComputerLinks, Head Technologies, Optimus and Macnica Networks Corp to cover virtually all geographies through a global alliance program. “We are using our network to substantially reduce costs of deployment, while ensuring that everyone in the value chain makes money. Hence, today an SI in India can pick up a global tender, and use our network to deploy it across nearly hundred countries.”
Education and certification is another area where VADs are hoping to make money. For example, M.Tech India is also an authorized training centre for Nokia, Blue Coat, Check Point, TippingPoint RSA and EC Council courses. Both Westcon and Inflow have announced their training and certification business ventures, and are taking the channel route to sell their education services. Westcon has recently announced a relationship with SonicWall and is offering training and certification for their products. It has a few more similar ventures planned.
Charting new territories
Presently most of the vendors signed on by VADs are in the security, storage and niche networking space. For a typical firewall or UTM vendor, pain points of identifying, appointing and addressing the right channel partners are easily managed by a VAD. Most of the targeted partners are either large corporate reseller or systems integrator.
Almost all VADs have started thinking beyond the three focused areas. “The thumbrule is not likely to change. We’ll continue to address partners, who are directly selling solutions to an SMB or enterprise customer. However, as new technologies start evolving, it’s natural for a VAD to explore new territories,” says Kumar of Inflow.
Virtualization and products and services surrounding this hot technology seem to have captured the imagination of most VADs. “We are actively exploring ideas in this space, and will announce a strategic offering through our partners soon,” says Sriram of iValue.
Unified Security Solutions are of interest to iValue, Westcon and Inflow. “In future, we see convergence in security, with physical and IT security merging. We are planning to add new vendors in this space to address the potential,” says Unnikrishnan of Westcon.
Software solutions also are perceived as a potential area of interest to VADs. Novell had roped in Inflow as a distributor to address and develop their tier-2 channels. Similarly M.Tech signed on Solarwinds, a network management software vendor and has been a strong partner of Citrix’s application virtualization software. However not all software solutions can be sold through the value added distribution model feels Unnikrishnan.
“Only software that can be productized and supported through a proper framework can be sold through a distribution model. A good example can be Novell or Borland, where a distributor like Inflow or Westcon can add value and help identify and develop the right channels,” says Unnikrishnan. He further adds that many smaller and niche software solution vendors are not mature enough to operate through any kind of distribution model.
While Avnet has strong relationships with mainstream vendors like IBM and HP and distributes their servers, storage and software, not all VADs feel the need to associate with large vendors. “It’s all about adding value to a vendor. We don’t see an association with a mainstream vendor result in a win-win situation,” says Sriram of iValue. However Kumar of Inflow says that while partnering with a run-of-the-mill products vendor is over-ruled, he is not averse to re-distributing a specific technology or product where Inflow can add value. “We had preliminary discussions with some of the mainstream vendors. While nothing has concluded, we are not averse to selling a product from a larger brand that will add value to our other offerings.”
The road ahead
Value added distribution is constantly evolving as technology landscape changes. As technologies get commoditized, VADs face the challenge of finding greener pastures to ensure that their business model continue making “value sense” to all stake holders in the value chain. Another matter of concern for most VADs has been the consistent acquisitions and mergers in the industry. Many niche vendors have been snapped up by larger vendors, and future alignments are often decided by the merged entity.
Tailoring solutions and services, and adding more niche product lines seems to be the way ahead for VADs. |