What Does The VoIP Distribution Channel Look Like?

Thanks for returning. You're a very smart person.

In Immature Markets There Is Often A Misconception of How The Channel Works

I had the gross mis-pleasure earlier today of being a silent observer in a conversation about “VoIP Distributors” on the Asterisk Business discussion list. I watched (in awe) as email after email landed in my Inbox. Each one spewing more and more misinformation about what the VoIP hardware distribution channel looks like and what company is what. Painful as it was, I could not bring myself to post the truth in the thread (as truth speakers are apt to be flamed on the list), so I decided to clear the air here.

Here is How All This Started

The whole topic start with a simple question; Who is the largest distributor of VoIP hardware to resellers in the USA. Pretty simple, right? Yes, but I am afraid that the question was never fully answered…so here we go!

Current VoIP Hardware Distribution Channel

Big Box Distributors - It all starts with the big guys - Ingram Micro, Tech Data, D&H. These are the giants who probably touch 80 - 90% of all of the products that end up in the hands of the end user. You have to be a reseller who is doing some serious volumes in order to work with these guys. For manufacturers, these huge distributors function as glorified warehouses and are commonly referred to as “box movers”.

Specialty Distributor - Right below the big guys are specialty distributors. Specialty distributors include folks like NetxUSA, ABP, and Target Distribution. These guys are typically “specialists” who offer a small concentrated product line (as compared to the big box guys). When you call them up and ask them a question, they know more then the price and availability. They sell to resellers and because they are smaller. Resellers do not have to do much in terms of volume in order to get decent pricing.

Value Added Reseller (VAR)/Value Added Distributor (VAD) - This is where people start to get confused. VAR’s and VAD’s purchase products from Big Box or Specialty Distributors and resell the products to end users (what the definition of end user is varies greatly). However, because some resellers grow very large, they are able to sell to other VAR’s and VAD’s. Technically it is not supposed to occur, but it does. It is sort of hard to police.

*Online Retailers - Online retailers, like VoIP Supply, are technically VAR’s or VAD’s who have an online presence. While traditional VAR’s/VAD’s are typically local or regional players with “feet on the street”, most online retailers do not (constraints of the business model). Their value add, for many, comes down to ease of ordering, customer service, support and sometimes price.

Service Providers, Integrators, Consultants - I group these three together because more often then not hardware is nothing more then an enabler. They make their money off of service, so many manufacturers classify these folks as “end users” and permit VAR/VAD’s to sell to them although the equipment eventually ends up in the hands of an “end user”. Again, there are exceptions to every rule - many service providers buy direct from the manufacturer or from a distributor because of volume.

The “End User” - The end user is the person or company that actually uses the hardware. These include residential consumers, small medium businesses, enterprise and government/educational entities. End users will more then likely purchase from Online Retailers, VAR’s/VAD’s or if they are huge, direct from the manufacturer.

So to answer the gentleman’s question, technically speaking, Ingram Micro is the largest distributor of VoIP hardware. In reality, though, they only carry a sliver of the VoIP products that available. If the gentleman was looking for a VoIP specialist, we would have to further define what is meant by largest (product lines, employees, revenues). He probably won’t go wrong with any of the specialty VoIP distributors, or VoIP Supply for that matter.

I hope you all enjoyed my little lesson in channel 101. If you have something to add, leave it in the comments.