Market swamped with Resellers: Di Marco

Technology One Executive Chairman Adrian Di Marco today raised doubts about the ongoing viability of Value Added Resellers in the Australian enterprise application mid market. 

Mr Di Marco said the market was being swamped by over 100 VARs competing against each other to sell overlapping or the same products from the three major vendors - Microsoft Business Solutions, SAP Business One and Oracle. 

“The reseller model in the Australian mid-sector is flawed – it is too small for vendors to remain profitable without compromising the needs of the customer. 

“In the sales process, we come across numerous Resellers all pitching one product to one customer. The only differentiator these Resellers have against each other is price and service – and at the end of the day – it’s the customer that’s going to suffer.

“The reason why Technology One continues to win business against the multinational vendors is because we own the customer relationship – the buck stops with us. In the Vendor/Reseller model – customers may leave themselves open to finger pointing, with neither the Reseller nor the Vendor taking responsibility for issues.

Take Henning Kagermann’s, Chairman and Chief Executive of SAP,  comments in an article titled “Don’t blame us, we just supply the stuff”, Australian Financial Review, 26 November 2003. “If it happens that in the relationship between the client and the partner something goes wrong, it’s a pity but I would say it’s not the responsibility of SAP.” 

One of the major issues with the Reseller model is that to remain competitive and profitable, Resellers often need to be able to sell more than one product. Should they choose to drop a product, the customer is left to find someone else to support their product or forced to go back to the market for a new solution. 

The way that resellers make their larger profits is through their services arm – via consulting, implementation services, customising solutions direct for customer needs, or building additional modules. 

“However, each time a vendor ships a new release of their product – these customisations need to be rebuilt. Great for the Reseller’s profit margins, but an ongoing cost and unnecessary cost for the customer. 

Mr Di Marco said the reseller model does have its place, but not in a market as small as Australia. 

“Resellers are great for smaller vendors or vendors emerging into new markets where they are trying to gain market share without major overheads.

“However, the major multinational software vendors are showing no commitment to the Australian market by solely selling their products through a third party.”