Vendors land blow in direct versus channel debate



End users prefer to buy from vendors and are more loyal to them than resellers, CRN/ Computing research finds. But all is not lost for the channel, according to Doug Woodburn

One of the first questions anyone who works in the channel faces when asked to explain it to a family member, friend or new colleague is: why does it exist?

Everybody has heard of HP, Dell, IBM and Microsoft. But most people would assume that businesses buy their hardware and software directly.

As we all know, the answer is fairly simple: no single vendor can offer every piece of the IT puzzle, or hope to reach every target customer without the help of a network of partners. Their specialism lies in designing and manufacturing the technology, and the channel’s in selling, integrating and servicing it.

What your friend or relative also won’t know is that for decades an awkward tension has existed in our industry between direct and indirect sales.

Despite the basic division of functions described above, vendors are often tempted to sell direct when they can, throwing them into co-opetition with their partners.

And neither can the channel take its existence for granted.

For every occasion when the indirect route seems to have won the day – as when Dell ditched its ‘direct-only’ mantra in 2007 – we’re told the channel is facing a new existential.

Advantage vendors

It’s an argument that may never be settled, but recent research by CRN and sister publication Computing – unfortunately – adds weight to the latter school of thought.

Indeed, the further one reads into the research, the more one must shield their eyes from its findings.

The report makes fairly sobering reading for the channel, although a few mitigating points can be made in response.

End-user respondents were asked whether direct or channel relationships leave them happiest.

Unfortunately for the channel, direct sales scored an average of five out of seven on the satisfaction front, compared with only four out of seven for channel sales.graph1

The research also asked both end users and channel sellers about the first port of call for end users when researching new technology and services. Some 64 per cent of VAR and MSP respondents believed that they were the first port of call.  But the reality is that 53 per cent of end users prefer to go to the vendor directly in the first instance, and only 35 per cent the VAR.


And neither are customers as loyal as the channel think they are.

Some 66 per cent of VARs and MSPs believed that end users were more loyal to them than to vendors. The opposite is true. Only 36 per cent of respondents considered themselves loyal to VARs, yet 48 per cent considered themselves loyal to a brand and/or vendor.

The research also questioned why end users use the channel. Only 30 per cent of end users rated relationship as an important factor. However, when asked about why they thought end users favoured them, channel players believed that relationship was the key factor – some 61 per cent of VARs and MSPs made this the number-one reason.

Resellers are also massively underestimating the importance of cost. This factor came tenth on the list of sellers’ reasons for buyers using them, with only 19 per cent rating it as important. But cost was first on the list for buyers.

In defence of the channel

So end users prefer to deal with vendors directly and are more loyal to them than resellers?

While this might come as a blow to the channel, there are a couple of points that could be made in mitigation.

Firstly, while it’s true that an end user may have a better experience dealing with a vendor individually than with a reseller, generally speaking they would only ever be able to get part of an IT solution from any one vendor.

If an end user were procuring only a fleet of servers, buying them direct would almost certainly be cheaper, and they may even get a better service if they are a big customer. But then they’d have to do the same for storage, networking, voice, printers, software and security etc. Who would integrate it all together, and who would wrap a service around it?

With very few exceptions, only resellers are in a position to stitch a total solution together.

The question also assumes that end users know exactly what technology they want to buy. But in the event that an end user didn’t know which technology best suited their needs and approached a vendor for guidance, they would certainly get a biased answer. Only a reseller could give an impartial viewpoint.

Take these factors into consideration and there are good reasons why end users would favour partners over vendors which may not have been exposed in the research.

That said, the research certainly suggests that resellers and MSPs can be over-confident about their standing with customers.

Resellers that are happily convinced that they “hold the relationship” with end users and effectively act as gate keepers for the vendors should take stock. It might be true, but in most cases probably isn’t.

If anything, the advent of cloud appears to have stacked the odds further in the favour of vendors, with many customers not seeing the point of buying cloud services from resellers, the research found.

When asked who they were likely to favour for cloud services, 62 per cent of end users would buy directly with only 24 per cent going via a VAR and 12 per cent through an SI. The quotation below, from the head of technology at a services company questioned in the research, illustrates the weight of the problems the channel as a whole faces.

“We would go direct at every opportunity and only to a VAR if we had to because we don’t get any additional value from VARs.

“By and large when you are buying cloud services, we generally find that the relationship is much better with the cloud providers than with the VARs, you don’t need to go through someone else.”

The COO of one reseller questioned in the research acknowledged that cloud has deprived the reseller of the customer ownership and control they have traditionally enjoyed.

“Now it’s not so easy because all the stuff’s moved into the cloud – you’ve got to export it all out and import it back in to a new environment, it becomes difficult to change,” they said. “When it becomes a billing relationship and you’re not adding any value, then I think the customer ownership shifts.”

Nevertheless, the research concludes on a hopeful note, arguing that there is strong demand for resellers who can evolve into cloud brokerage businesses who aggregate, integrate and customise cloud services.

That’s just one of a number of key topics discussed in the research, which looks at how buying and selling enterprise technology in the era of cloud and digital transformation has changed. To request the full report, visit: