Profitable platform-based business models are growing rapidly within the IT distribution industry, and whilst global enterprise distributors can build their own platforms, SME distributors are struggling to do the same.
There can be no doubt that the IT channel is changing rapidly. The sheer number of mergers & acquisitions taking place is evidence for the pressures which channel companies are facing right now.
Not only under pressure from vendors looking to maximize their coverage, distributors are also dealing with cloud migration, increased competition, smaller margins, increased barriers to entry, direct vendor engagement and industry digitization.
In addition, distributors are now facing a major disruption in the form of the platform-based business model, which is seeing major success in many other industries as well.
IT distributors are now facing a major disruption in the form of the platform-based business model.
A platform-based business can be simply described as a model which creates value by facilitating exchanges between two or more interdependent groups, usually consumers and producers. Once the digital platform or layer is setup, other businesses can easily connect their businesses, build products and services on top of the platform, and co-create value. Expanded customer reach, reduced operations costs and a high level of operational visibility are all tangible benefits associated with the platform business model.
If this all sounds familiar, that’s because it is. Google, Apple, Facebook, Amazon, eBay, Instagram, YouTube, WhatsApp, Uber and Airbnb are all platform businesses, and now large global IT distributors are looking to replicate the success of that model within their own industry.
Large enterprise IT distributors have the resources to build out their own digital distribution platforms. This in turn exposes the rest of the channel to risk due to their scale and easy entry into new markets, whilst smaller distributors struggle to compete due to not having similar resources at their disposal.
Obstacles to SME distributors include the cost of implementation and development, as well as uncertainty on where the market is heading. With business model transformation typically not being a priority, and combined with the usual SME focus on cashflow, the platform business model remains under-utilized by SME distribution businesses.
SME distributors are finding themselves increasingly shut out of the market.
This exposes them to considerable business risk and SME distributors are finding themselves increasingly shut out of the market. Vendors can insist on and leverage global distributor platforms (or create their own), whilst end-users expect to engage on sophisticated platforms which allow them to learn, shop, buy and service their purchases.
SME distributors should thus be seriously investigating taking advantage of a distribution platform which levels the playing fields with the bigger distributors, and comes with all the cost and reach advantages which such a system provides.