Feb 1, 2009

Sales should generate value or just collect it

“Unfortunately, generations of salespeople have been brought up with the notion that they create value by bringing in revenue…bringing in revenue means collecting value, not creating it. And that is not enough to survive in today’s competitive markets.”

Source: McKinsey Quarterly

In Israel IT vendors like HP, IBM, Oracle, Microsoft, etc have in recent years re-organized their sales and support abilities.


For the very big corporations they have moved to sell directly and for the SMBs they have very successful two-tier distribution organizations.

What about those companies that employ between 250 to 1000 employees ?

During this recession how should they “connect” and sell into this market? 

During this new economic era can they  “trust” their  old sales force and distribution partners ???


According to a new study by Mckinsey (see below) the two-tier distributors should always be used.

 I tend to disagree. I believe that VAR resellers are more important than two-tier distributors

In the market I follow, Israel, we can see that IT global companies try to conduct business through distributors that bring revenues not those that created long term value. OEM companies should recognize the value created by VARs and invest in such partnerships rather than distributors. Companies like Emet and Glasshouse have both shown the value of a good VAR. Value added resellers (VARs) focuse on specific customer segments, and industries. Small and midsize enterprises prefer to buy from VARs because they understand their needs and industries.


“Talented people can become experienced, but experienced people cannot be injected with additional talent.”



WHAT DO YOU THINK>>>>>>>>>>>>>>>


 I will quote parts of their study .



DECEMBER 2008 • Mckinsey  Quarterly, Distributors may hold the key to high-tech sales growth in many markets.


 -“as OEMs look for growth in new markets, they should take a closer look at the value offered by some distributors—particularly those known as two-tier distributors.

Two-tier distributors  (so named because they buy from manufacturers and sell to resellers) are well positioned to boost sales in emerging markets, where these distributors’ revenues have grown by 33 percent annually for the past five years. What’s more, in both the developed and the developing world, such distributors can help manufacturers sell to small and midsize enterprises—for they control 42 percent of all distribution to that market—which is growing by 7 to 10 percent annually.

Two-tier distributors do well in markets (as Israel) for several reasons:

1: deals are smaller, so the cost of a manufacturer’s direct sales force is prohibitive in comparison with the cost of using a distributor. Such distributors sell multiple brands of hardware and software so they can gain scale and serve these markets more effectively.

2:  local resellers are better at assessing credit risk in emerging markets and are more likely than large manufacturers to finance smaller deals. Finally, manufacturers sometimes have considerable difficulty forecasting sales in developing economies and building the necessary expertise to address them. A distributor with a network of resellers can mitigate credit risk for manufacturers by taking some of that risk on its own books and tap the local market knowledge of its resellers”-



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