Rise of the SME reseller – where the rubber hits the road
The world around us has changed. Traditionally, the channel has relied on corporate spending for the bulk of its revenue. But customers – including the public sector – are increasingly pushing their spending towards smaller resellers to support transformation. The channel has a key role to play in supporting that.
“The channel can benefit from supporting smaller businesses in their efforts to access and deliver on larger tenders,” says Bernice Hynard, General Manager: Print Solutions at Tarsus Distribution. Hynard goes so far as to say that doing so is central to any channel company’s strategy going forward.
“National Treasury is placing the focus on QSEs – qualified small enterprises – as suppliers to government. A QSE is a BEE company that turns over less than R50 million a year.”
It’s long been recognised that greater partnerships between the public and private sectors is required to ensure the success of SMEs. To this end, channel businesses (such as Tarsus Distribution) are encouraged to support smaller businesses to assist them to deliver on government contracts.
The goal is to create a diversified and inclusive supply chain that includes small business, particularly QSEs, explains Hynard, by providing SMEs with business development support and access to funding.
“Some four or five years ago, most of the big expenditure at larger resellers came from corporate accounts such as banks, accounting and legal firms. During this period there was consolidation in the reseller base where bigger corporates swallowed up smaller businesses. Now we’re seeing a period of fragmentation. It’s not so much that those businesses are unbundling, but rather that a significant amount of the expenditure that we’d expect to see from government is being directed to smaller businesses. This opens up opportunities for bigger IT players such as distributors and system integrators to move their businesses in a different direction.”
She hastens to point out that corporates will continue to spend, but their budgets have been culled to accommodate investment in technology to support their remote workforce, such as cloud, software and hardware to enable business as usual.
For the foreseeable future, Hynard says government investment is expected to be directed towards small business. “This is a government-stated objective and we’re already seeing it being implemented. The challenge for SMEs is that they might win a big deal, but because they’re a small business, they may not have sufficient credit cover or enough technicians to cover the deal’s footprint. The COVID-19 pandemic might have resulted in the SME retrenching some of its key staff, for example.
“The channel can support this by creating an ecosystem for SMEs that helps them on their journey as they grow. We almost need to become a business incubator. This is what transformation is about, helping smaller businesses to grow so that they can make a meaningful contribution and – in turn – help the smaller business behind them.”
The channel can draw on its capabilities and its partnerships with financial institutions to create an environment that can provide SMEs with the infrastructure they lack, whether it be cash or technical resources. Each SME is different in terms of the area in which it requires support, and the channel can also draw on its vendor network to support SMEs with a technical footprint where required.
“Naturally, this approach to partnerships isn’t entirely altruistic: all parties involved will gain benefit, not just the SME. The channel partner will ultimately grow its market share and bring more revenue into the business. But it is the right thing to do as all small business owners require additional support as they move from being a small business to a bigger business that can stand alone.”
This approach to uplifting and enabling SMEs acknowledges that the sum of the parts is greater than the whole. “Collaboration isn’t just a nice to have for business today – leveraging strategic partnerships to create ecosystems holds great business benefits for all participants. Going to market with a more inclusive approach brings added value to the business.
“The channel can almost serve as a trusted advisor to the SME, sharing expertise and knowledge that it’s garnered over many years of doing business in that sector. Over and above the supporting infrastructure, the SME also gains access to a resource that might be able to help it solve a specific customer query or challenge.
“National Treasury is pushing hard to grow small business, with 30% or more of its spend directed towards SMEs. We’re trying to create an environment where the smaller resellers can provide those solutions in a safe and reliable way by partnering them with someone who has resources they don’t necessarily have. Government is also looking to source from local suppliers, which creates opportunity in provinces outside of Gauteng and the Western Cape. So, for instance, QSEs in Limpopo will benefit from Limpopo municipalities’ budget. Which opens up opportunities for regional resellers.”
This is where rubber hits the road for transformation. It’s easy to collaborate with big corporates if you’re a big channel player. For an SME, it requires a lot more effort and this is how you transform, by supporting smaller operations until they can support themselves.”