A decade ago, some of the most commonly used terms among suppliers and distributors were “mind-share,” “winning the socket,” and “supplier-focus.” This was the era in which suppliers, particularly those in the chip arena, pushed and prodded distributors to tout their products to the end-customer. This “design in” or “design win” practice was intended to get a supplier’s product designed onto a board.
Every supplier wanted to be top of mind to its distributors, but as distributors such as Avnet, Arrow, TTI, and Future got larger, and specialists like Anthem, Wyle, and Insight were acquired, hundreds of suppliers were vying for each distributor’s attention. It got pretty noisy around the sales offices.
Within the past few years, distributors have shifted to a solutions-focused, rather than supplier-focused, sales strategy. This approach takes a combination of products, directs them toward an application, test drives these solutions, and offers them to the market. Instead of going to the customer with a single component, such as a chip, distributors will include that chip within a full solution — for example, a circuit board containing complementary capacitors, resistors, and connectors. Each of these components is equally important to the solution. Even longtime competitors appear side by side on the same board.
Suppliers haven’t squawked about this as much as one would expect. Just getting on the board (as opposed to being the only supplier on the board) has become paramount. Suppliers have been segmenting themselves into increasingly focused entities: Motorola Semiconductor has split off into specialty businesses; National Semiconductor is focusing on its analog technology; TI has been paring down its product portfolio. The former broadline semiconductor makers are leveraging their specialties. Customers can now cherry-pick among the best offerings in every technology. At the same time, culling through the nuances of every product has become more difficult. Distributors have stepped in to guide customers along.
This isn’t altruism — this is a lucrative business for distributors. By designing a full solution, distributors have the opportunity to sell an array of components, rather than a single device. This solutions strategy, says Ed Smith, president of Avnet’s Electronics Marketing (EM) Americas business, is one of the most profitable portions of EM’s business.
But it requires suppliers and distributors to work more closely together than ever. Suppliers have to train their channel partners extensively in their products and provide such resources as design tools. Channel partners realize they have to work more closely together than ever, says Andy Femrite, manager of Arrow Electronics' Engineering Solutions Center (ESC), “or we’ll never get ahead of the curve.” Avnet (X-Fest) and Arrow (Arrowfest) both sponsor flagship conferences that bring suppliers together to collaborate on technology solutions.
Finally, the “share” portion of “mind-share” is gaining traction. Although market realities frequently dictate how partners position themselves, this trend is long overdue.