Finally, A Winning Formula

Call it a tale of two formulas. One works, but the other doesn't.

Call it a tale of two formulas. One works, but the other doesn't.

Vendors have been struggling in recent years to sell their wares into small and midsize businesses--and so far, they have done better at packaging and posturing than at actually selling solutions. Commercial distributors, meanwhile, are looking to offset falling product margins by drilling into new markets. The result: Vendors and distributors are finding common ground in the small-business market.

Virtually all of the major vendors--Microsoft, IBM, Hewlett-Packard, Compaq Computer and Nortel Networks, to name a few-have created small- and midsize-business divisions, and they have cobbled together solutions aimed at those end users. So far, however, success has been spotty--and at times, thoroughly elusive.

Enter the industry's two largest distributors. Both Ingram Micro's VentureTech Network and Tech Data's TechSelect are scoring big in the return-customer arena at a time when the rest of commercial distribution is based largely on price and availability rather than on a tightly knit relationship. What's driving that success are services aimed specifically at these resellers, such as education and support, and drawing together resellers to collaborate on solutions.

Success in the small-business market comes at a critical time for distributors. Shares in Ingram Micro and Tech Data are trading well below their 52-week highs because of falling hardware margins, among other things. And while Tech Data has kept costs under control, Ingram Micro has used layoffs to cut its overhead.

Small- and midsize-business sales could provide a needed boost. "The sweet spot [for VentureTech resellers] is 25 to 250 PCs," says Rick Sbrocca, VP and general manager of Ingram's VentureTech division. The group has 500 members in the United States, about 17 of which sell into large business with the remainder in the small- and midsize- business arena, he says. It also has 300 members in Europe and 50 in Canada. Last month, he told the U.S. group that the distributor's emphasis is on getting small- and midsize-business customer leads to resellers.

Ingram pulls its VentureTech resellers together a couple of times a year for meetings meant to instill a sense of community, common goals and intensive education on how to move beyond commodity services into more lucrative opportunities. The company held its most recent gathering in Las Vegas last month.

Tech Data's TechSelect is based on a similar approach, except it takes on a more laissez-faire attitude toward its members. "This is VentureTech with a twist," says Tech Data president Tony Ibarguen. "It's a little less directed, and it has more of an online focus.

The intent is the same, however, namely bringing resellers together and helping them move up the food chain in the small- and midsize-business market. "The emphasis is on education and subsidies," says Tim Curran, senior VP of sales at Tech Data. "It's sharing among peers."

Curran says the program has been so successful that it's growing at five times the market rate of growth. Neither distributor would break out the exact numbers, but both say vendors are now looking at distributors as a way of pushing into small and midsize businesses.

"Resellers have been looking for champion vendors to provide support, leads and training," Curran adds. "What we give them are multivendor dedicated sales teams. This is one-stop shopping."

It looks especially bright, as margins continue to get pinched and loyalty is something to get nostalgic about.