Channel Will Top Direct Sales, Study Finds

 
 
By Ira Apfel  |  Posted 2005-06-15 Email Print this article Print
 
 
 
 
 
 
 

Indirect sales are projected to take the lead by 2007.

If youre wondering about the future strength of indirect IT sales, consider recent findings from Gartner Dataquest, which predict that indirect IT sales will surpass direct sales by 2007.

According to a 2004 study by the IT research company, the preference for direct IT sales of products and services will fall from 59 percent in 2004 to 49 percent by 2007.
The study was based on four sources: a primary research survey of IT vendors, secondary research based on vendors press releases, input received at briefings and conferences from vendors and various channel companies (VARs, solutions providers, systems integrators and ISVs), and input from analysts that cover each IT category and market.

IT services and telecommunications, in particular, will be increasingly sold through indirect channels, the study forecasts.

Gartner, of Stamford, Conn., also expects channel companies to place greater emphasis on service in their efforts to satisfy customers, as profit margins derived from selling products continue to dwindle.

In addition, IT service providers that want to penetrate the SMB (small and midsize business) market will realize that a direct-sales strategy targeted at new customers is often ineffective, and they will work with other IT services companies that are established in the target markets.

What does this mean for top-level executives interested in making major IT purchases? Those who lead SMBs should understand that IT vendors will increasingly rely on channel partners to provide solutions, said Michael Haines, a Gartner analyst and principal author of the report.

"I would also realize, if I were a CEO, that large vendors dont have the personnel to cover myriad companies in the small and midsize marketplace," Haines said. "Also, many channel companies have been building some very tailored solutions for companies in virtually all industries. At the end of the day, the CEO gets a lot more choice of tailored solutions when they rely on the channel."

CEOs should ask themselves several key questions when weighing indirect sellers, Haines said. "Are you best working with a value-added reseller or a software solution?" he asked. "Do you need a total solution, or are you primarily looking for software or integration and support?"

Haines urged CEOs to define the requirements of what they want to buy against their strategy. "Believe it or not, theres a lot that dont do this," he said.

Of course, the direct-sales route is still often best when buying IT products or services, Haines said.

"When youre simply buying hardware and replacing a couple of PCs or laptops, sometimes buying directly via the Web is more convenient, and sometimes you get better pricing," said Haines. "The only other time to use direct sales is when theres just not a channel company that meets your needs, or the buyer has a global requirement that just cant be fulfilled by a channel company. There are not a lot of companies that are good at channel management for multicountry buyers."

Ira Apfel is a free-lance writer based in Bethesda, Md. He can be contacted at iapfel@yahoo.com.

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