It is a scene from a Hollywood film or the opening chapter of a successful autobiography to describe the moment when a plan was drawn on the back of a napkin.
Those snatched brainstorming sessions often lead to changes that might never have been uncovered in longer, more drawn-out board meetings.
In this case there were two men hunched over a napkin, drawing up plans and agreeing the logic behind them. Those scribbles, which have been preserved, are still the guiding principles for Andrew Binding, vice-president of Northern Europe at Magirus - the man who helped draw them up - and Christian Magirus, the CEO who helped him, employed him and
executed the vision.
At the heart of the approach that Binding wanted to take was the concept of value. As one of the most bandied around words in the channel it is often possible to talk about it without ever being able to point to what it means.
In the case of Magirus it meant shedding itself of volume distribution to Avnet last year and concentrating on four areas: security, storage, virtualisation, and training and services.
"Christian and I sat down and drew on a napkin to show the way that the channel was heading. We represented the Magirus infrastructure distribution model as planet Earth and the new high-value solutions model as the Moon. It was clear to stop economic power pulling the model back we needed to build the new solutions distribution model as a new division."
At the time of the napkin discussion, there were industry warnings, aired in MicroScope, that distribution was heading to a 1% margin world.
"We looked at that model and we could not compete with the large globals that could take advantage of economies of scale," adds Binding.
The choice seemed to be fairly clear cut, with the infrastructure business something that the future model would have to do without.
"To make that decision was fairly risky but we could not have done it if it hadn't come with the backing of our major vendors," says Binding.
The result of the Avnet sell-off was to change the model and build up expertise around specific areas and provide for vendors the benefits of a classic value added distributor.
But unlike most VADs, which operate with one primary string to their bow, Binding wanted to exploit the different skills and encourage resellers to change their businesses.
Again, some of this will sound familiar to those that have heard talk of convergence and that dreaded word synergy, but in practice simply being encouraged to bolt on extra products and services is not often a route to success for resellers.
Illustrating the model
Binding uses the example of virtualisation to illustrate the model. The vast majority of those selling the technology come from a storage background but there are also opportunities opening up on the security front.
Encouraging the resellers to bulk out their portfolio involves providing training and support as well as hand-holding them into emerging areas where there is still growth.
Binding is aware that Magirus has some promotion to do as well as explaining the changes it has made.
"We were off the radar for a couple of years, working to get the model right to build something that is able to sustain high-margin," he says.
After wide ranging discussions with the distributor's resellers,
Binding believes it has got to a stage where most understand why it has changed and what the benefits could be for themselves as a result.
"It is a bigger challenge for resellers to make a change than it is for us. For a dealer, to add one person can make or break the business," he says.
"There is still a lot of desire to change and become more consultative and higher services-based," he adds.
"The more traditional business is going to suffer and we'll see quite a slowdown."
Part of the problem is that not only are margins becoming tighter but also the choices for resellers are becoming more limited.
"Everyone talks about consolidation but we are actually seeing polarisation. The bigger players are becoming bigger and that drives them down a certain business path," he says.
One of the ideas behind the changing model was that Magirus would be in a stronger position to take emerging technology to the market. Although that has happened, Binding has been surprised by the reaction from vendors with more established technology.
"We anticipated the model would be focused on cutting edge technology before it became a volume play and we would have to cycle relationships. But some of the more established vendors have come to us," he says.
He argues that a lot of vendors are trapped in a model that they know has limitations but too much has been invested in it and resellers are engaged with them in traditional ways that make it difficult for both to change their approach to the market.
"Big vendors have not done enough; it has been largely left to the distributors and it has been a key part of our role. They need to take more educated risks with partners because they are embedded in what they are doing," he adds.
Since sitting down and drawing the vision on the napkin, the
computing world has changed. Applications will be delivered in a different way and from a distribution perspective there is a challenge trying to find high-margin business.
Having made the change, Binding believes the economics of the market as well as technological changes like the cloud will encourage other distributors to make similar moves to bolster their services skills. ●
This was first published in January 2009