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The Solutions Sell

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.

8 comments on “The Solutions Sell

  1. Barbara Jorgensen
    October 6, 2010

    I'd like to hear from some designers out there–have you noticed a difference in how your distributors work with you? Would you rather be shown a component, or does a solution help you save time?

  2. bolaji ojo
    October 6, 2010

    Barbara,The folks over at Newark will tell you they are not selling mere products but total solutions. Their focus is on design engineers and this has been the trend at least in distribution for some time as you are no doubt aware. They are not alone. All the major distributors offer design-in services and they are all beefing up their teams of field application engineers (FAEs.) The companies aren't just doing this to make themselves look pretty. OEMs are demanding value-added services to support in-house development teams and few companies are best positioned to serve them like distributors who often sit at the intersection where contract manufacturers meet OEMs, chip vendors, ets.

  3. Barbara Jorgensen
    October 6, 2010

    You make a key point here, Bolaji–the distributor is in an excellent position to influence the design. They will also be the first to admit that they steer customers toward the components they carry. Here's the interesting part, though, and we'll talk about this in future blogs: Even if a distributor is successful in positioning an array of suppliers in a design, there's still a chance that distributor won't fulfill the production order when that design gets to manufacturing.

  4. SP
    October 6, 2010

    I can relate to this situation. Have seen how much pressure distributors put to use specific supplier's chips on the design. Some even go to the extent of saying that use x because y has a long lead time and many not even come. In some cases designers have choices but in others distributors rule. Afterall who wants the design to be stuck up for few components.

  5. Barbara Jorgensen
    October 7, 2010

    Interesting–never thought of it that way. If the entire design is held up for want of a few components, then visibility into leadtimes is a help. But if it limits engineers' choices, not so much. Thanks for weighing in

  6. tioluwa
    October 8, 2010

    Well its all a from of gamble.

    If a design Engineer works with the solution offerd by a manufacturer, through a supplier, he stands the chance of having his design out quickly. However, there is also the risk of the solution not meeting his perticular specifications.

    I've had to face this in the area of metering, where manufactureres offer complete System on Chips  (SoC) that seam to offer “everything” However, when it comes down to details, you find that the solution doesn't meet all specification, but since it comes in a full package, the designer has to make some compromises or chip in a few modifications to meet his specs

    So again, its a gamble, both the the manufacturere and the Designer.

    But in the long run, the Solution based systems tend to make things a whole lot easier for designers as you have most of the work largely done, design done to standards, instructions given on how to make some modifications to fit different end-user applications (if applicable) and many others.

     

  7. disty advocate
    October 8, 2010

    this exchange of posts brings up another discussion point {the elephant in the room } when will component manufactures truly give demand creation credit to the distys pubicly. how many manufactures actually, proactivly and overtly encourage oems to work with their channel partners for design solutions. i realize that this maybe an easier position for manufactures to take for the high end and more complex components but surely distys provide design soltuion assitance {on all component technology levels} to many small to mid level oems that honestly will never be provided design assitance directly from the component manufacture.

    thus the vast array of design services being offered online by more and more distys. but still the designer will go first to the manufacture —it is the hand off {to the appropriate disty partner} that becomes important. lets see more of that and acknowledge it. 

  8. Barbara Jorgensen
    October 8, 2010

    Hi Disty Advocate–I think that depends on the supplier and on the market circumstances. When the economy is tough like it is now, suppliers will emphasize the importance of their demand creation programs because they are fighting for every dollar. When things are flush–like 1999–the channel's best use was fulfilling orders. At that time I heard one major supplier was pulling its demand creation programs back in-house. Then the market turned.

    I do give credit to those suppliers that impelment programs that compensate a distributor no matter what happens when the order is shipped. Molex is one such company–if a distributor books an order, they get compensated even if they don't fulfill that order. That model may not work for every supplier, but kudos to those that manage it.

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