Channel Crossings: Internet Growth Intensifies Need For Value-Added Resellers

• 02/01/2000

In a few short years, the Internet has gone from being a novelty ("What’s e-mail?"), to an up-and-coming trend ("Would you buy stuff on the Internet?"), to an overwhelming fact of life ("Omigosh, we’ve got to get on the Web before we’re out of business!"). The evidence is clear. The number of worldwide Internet users will grow from 172 million today to 282 million just two short years from now, while business-to-business (B2B) electronic commerce is expected to reach $3 trillion in 2003 in North America alone.

While the Internet keeps social theorists busy guessing about the future, the reality is that it’s up to businesses across all industries to make it work on a day-to-day basis. That means designing, installing and maintaining extensive IT systems positioned to take advantage of this tremendous opportunity, particularly in the B2B space.

That’s a tall order for any company, but particularly for small- to mid-market companies which can have limited resources and technical staffs. That’s where the IT value-added reseller (VAR), or IT infrastructure provider comes in. A skilled infrastructure provider can be a key partner for companies in need of developing robust solutions for Internet business and other enterprise business needs. Infrastructure providers, such as those operating through the HP channel, can offer a wide variety of services, including:

Evaluating and recommending IT system components. No business environment consists of just one brand of computer equipment. For example, while you may operate HP servers, you may also use Cisco Systems for vital Internet networking equipment and EMC for storage. Also, many companies have servers from different manufacturers purchased at different times. A skilled partner can help you tie all these disparate components together.

Managing manufacturer relations. IT systems consist of equipment from multiple manufacturers, yet small- to mid-market companies would be hard pressed to maintain high-level relationships with more than one of those manufacturers in the same way a major IT infrastructure provider can. It’s the VAR’s job to maintain close relationships with its key manufacturers; by partnering with a reseller, customers leverage that extensive knowledge and relationship base.

End-to-end responsibility. When multiple vendors are involved in a computing project, no one takes complete responsibility for the project’s success. However, a competent infrastructure provider should maintain end-to-end responsibility for the success of its projects, providing a single point of contact and eliminating potential finger pointing among vendors if difficulties surface.

"Best of breed" answers for e-business. The best infrastructure providers are able to guide their customers through all facets of Internet projects. This requires teaming with leading players across all e-commerce market segments, from high-level management consulting partners to software partners. Working with its alliance partners, the provider can guide customers through the entire e-business solution: strategy, procurement, security, integration with the back end, infrastructure and more. This approach will give users an optimum e-business solution in the shortest possible time frame, allowing for maximum ROI on the technology investment.

Better buying, billing and financing. By using an established, successful infrastructure partner, customers can take advantage of concentrated buying power, as the infrastructure provider is dealing with key components in significant volumes virtually every day. It is a good idea for customers to examine their infrastructure partner’s ability to provide technology financing for their computing environment; a reseller that can provide financing and leasing services truly offers a full-service, single-source solution for the customer.

E-BUSINESS BOOM

The move to e-business has created tremendous opportunities for companies to expand into new markets and upgrade business processes. It is also creating tremendous risk. Building an effective e-business computing environment is both challenging and unfamiliar for many companies.

Companies that are developing an e-business presence must change their computing environments to accommodate this, along with many other new business demands. An experienced infrastructure provider can help companies navigate this change. Having a single point of contact can be particularly important for HP users because Hewlett-Packard, which has an excellent server line capable of being used in diverse business environments, has chosen to team with a number of third-party business partners to create its Internet networking solutions.

The potential benefits of this approach are great. Because it incorporates multiple partners, HP’s Internet solutions set is more advanced and offers more options than that of many of its competitors. For example, HP has opened up its hardware platform to make it available to many different applications developers. Furthermore, they’ve invested in many of those software developers. This helps HP build symbiotic relationships that take advantage of the entrepreneurial culture at these new enterprises.

The typical mid-sized company is not in a position to fully evaluate the offerings of the numerous players required to build an e-business solution. Unfortunately, a lack of awareness or understanding of what a full service e-business solution entails can end up costing a company far more than they would have paid for the services of a value-added reseller.

That makes it even more important for HP users to consider using an infrastructure partner that truly understands how all these components work together. Ideally, the partner should be able to perform a detailed and thorough up-front analysis to determine its customer’s overall business goals and link this to the objectives for e-business.

While much of the buzz about the Internet focuses on consumer transactions, the future of B2B Internet applications is even more promising. In fact, several research studies have shown that B2B spending will far exceed consumer spending on the Internet. As a result, even businesses that have little or nothing to do with the consumer market must build a robust Internet presence.

It has been estimated that, by 2003, more than 65 percent of B2B e-business purchases will be made in six major segments of the economy: government, high tech, retail, industrial equipment, motor vehicles and shipping. E-business penetration in these sectors will have an even broader impact, since suppliers converting to B2B e-business to meet the needs of clients in these sectors will likely use that new infrastructure in their relationships with customers from other industries. Accordingly, good supply chain management today depends more and more on e-business solutions.

In fact, we are seeing numerous new and innovative B2B e-business initiatives at financial, manufacturing and other organizations. For example, most automotive manufacturers deal with thousands of different parts and components suppliers and are moving to all-electronic procurement systems. That means that, for example, a mirror company with 200 employees now has to deal with the auto manufacturer via the Web. The auto manufacturer gives them the electronic specifications, but it’s up to the supplier to install a new Web-based financial transaction system. In this "sink or swim" environment, an IT infrastructure provider can help guide its customers through this sometimes nerve-wracking process.

If the market for technology infrastructure is so important, why don’t companies, such as HP, sell directly to all their customers? The answer is that HP and other manufacturers focus on what they do best: Selling systems to their largest customers. HP’s team of sales representatives is relatively small and focuses on Fortune 100 clients that make exceptionally large purchases. In most instances, however, hardware manufacturers "outsource" the sales function to value-added resellers in order to leverage the existing relationships that the resellers have with customers.

Major manufacturers, such as HP, generally have "channel managers" to monitor the business practices of their resellers to make sure they are operating in the same manner as an HP sales rep would. This helps produce an exceptionally close relationship between the manufacturer and the reseller. For example, HP calls their own sales force "on-payroll HP sales reps" while they refer to their major resellers as "off-payroll HP sales reps."

It is also important to note the differences among resellers. While some smaller resellers are content to work on one or two deals a week, they don’t have the knowledge capital, resources and national reach of HP’s top class of Enterprise Resellers. In today’s market, thorough and rapid implementation of computer systems and networking equipment is vital. An Enterprise Reseller will provide implementation services for a wide range of e-business and technology initiatives, including UNIX, networking, NT, storage solutions, ERP solutions and enterprise systems management services.

As we move into this new century, the HP channel represents some of the best commercial server products for e-business and other important technology initiatives. HP has clearly demonstrated its commitment to meeting the needs of all of its customers. For example, with HP’s "instant capacity on demand," a customer can purchase a system with four CPUs. Then, for a nominal maintenance fee, the customer can have the option of turning on – through a keyboard command – additional CPUs that were built into the system when it was installed. That’s a big advantage for customers since they don’t have to buy the CPUs up front, and they have 30 days to pay for them when they do need to turn them on. HP is the only manufacturer to have this option on all their servers, including the L-Class, N-Class and V-class.

In the rapidly changing world of business, which is more and more dependent on the Internet, customers who partner with qualified infrastructure providers are well positioned for ongoing success.