Cutting Out The Integrator - Why Shouldn't I Be Able To Buy My Hardware Directly?

I talked to a distributor today that was nervous about selling cameras to me directly. He said he has to go through an integrator. He said the last time he went around an integrator, they all showed up at his office with pitchforks and other torture devices, and he almost lost his job.

On the surface, I understand that manufacturers and distributors can't support trouble tickets with these things, so they insulate themselves with integrators that provide a service along with the hardware.

But for an end user that is well versed in his/her (microaggression?) system and knows the cameras he/she wants .... if a distributor feels comfortable selling direct to that specific customer, why is that an issue?

I have support from my VMS provider (via certifications and license status)

I have support from my Windows admins within the enterprise

I have on-site VMS certified personnel full-time

I have Bicsi certified cable contractors on-site full-time

The integrator we keep on-site helps alot with Access Control, but has done literally zero on our camera systems, other than fill hardware orders, and license key renewals.

Why shouldn't I be able to buy my hardware directly?

Final question.... what's more controversial... this topic or John's Furgeson topic?


Lol, 1, I have an idea for a new revenue stream for IPVM. I am going to sell virtual pitchforks to integrators to throw at you :)

"Why shouldn't I be able to buy my hardware directly?"

Mostly, it is protectionism. Constraining competition allows integrators to profit more, just like professional licensing allows licensees to make more money.

The standard counterargument is that integrators know how how to install, optimize, service, support, etc. However, in yours and many large end users, they often have that expertise in house.

I do think some really knowledgeable integrators can help in optimization, selection and design ('smarts') but most integrators want to sell the whole solution (see the debate here - What National Integrator Will Only Do Labor, Not Sell Products?).

I am looking forward to hearing the responses from integrators. Thanks for bringing this up!

As another end-user site where all security system work is handled in-house, I side with Und 1's position to a large degree. Especially for onesies or twosies - would an integrator really want to be bothered flipping cameras on a small scale ?

"Especially for onesies or twosies - would an integrator really want to be bothered flipping cameras on a small scale ?"

Yes, because it is an ongoing source of revenue, with minimal sales cost, that keeps them with work to fill in between projects.

Ultimately, though, many integrators want the service contract, which is an even better ongoing source of revenue.

But for an end user that is well versed in his/her (microaggression?) system and knows the cameras he/she wants .... if a distributor feels comfortable selling direct to that specific customer, why is that an issue.

Such end-users are the exception so on the one hand it wouldn't seem that big of a deal.

But I believe the problem would be the classic slippery slope. One day you are selling to knowledgable self-supporting end-users, the next day you sell to anyone who can call out part#'s, and the day after that you're driving the van in the parking lot rolling up on 'end-users'.

Joking a little, but who exactly should the disty let buy? Anybody who swears up and down they don't need an integrator? Anybody who asks?

Do you have a resale license? I obtained one for an unrelated business, and now it's not a problem buying from distribution. Though I rarely do.

Anyway, if you can support yourself and if you are not talking about exclusive product, what can't you find on the Internet?

Joking a little, but who exactly should the disty let buy? Anybody who swears up and down they don't need an integrator? Anybody who asks?

This is a good point. As a manufacturer I need to trust that the products will be supported well in the field, lest they get a bad reputation due to customers who are unable or unequipped to support themselves.

Along those same lines it reminds me, who do I (if I'm a manufacturer) communicate when when there's some known problem, or something like a software update? Do I start asking end-user customers to register themselves with me? Do I ask the distributer to 'pass it along' thus forcing them into the support role?

These are a few things the integrator channel is designed (at least in theory) to service. The manufacturer needs to maintain a relationship with somebody that consumes their products--in the traditional surveillance business model, that's the integrator.

I had a customer that managed to get an account at Anixter without any problems (ADI refused them, I believe). The second biggest issue, in my opinion, was that Anixter was charging them full MSRP for all equipment orders. The first was that Anixter stole a client without letting us know what was going on.

It's not impossible to get the equipment direct depending on where you are located. You can absolutely find reasonably priced product online if you live in the US, not so much here in Canada.

The client buys from us again, simply because we sell product to them for less than Anixter and make a profit - everybody wins (except Anixter, oh well). If you have a good working relationship with your vendor, set a reasonable price target and see what they say. It still takes the integrator some effort to put the order through, pick up material and deliver it (unless you can get it shipped directly to site).

Best of luck, I have also been on your side of this equation. I really did not appreciate 100-200% mark-ups on equipment and found a supplier who was willing to work with me on reasonable terms. Perhaps your access control integrator is not the best company to be dealing with for cameras?

"Anixter was charging them full MSRP for all equipment orders.... The client buys from us again, simply because we sell product to them for less than Anixter and make a profit."

Was this a line then that was not available generally on the Internet? Because my first thought is that if Anixter is charging MSRP, there's plenty of online stores (B&H Photo is a prime example but there's plenty of smaller stores) that sells lots of surveillance products at less than MSRP to end users all the time.

I always thought that integrators get pissed when MSRP is not charged.

Surely selling at MSRP is preferable if a distributor is going to sell to an end user but integrators still prefer distributors not sell to end users at all.

Right, but Und 4 seems unhappy precisely because MSRP was charged.

"But for an end user that is well versed in his/her (microaggression?) system and knows the cameras he/she wants .... if a distributor feels comfortable selling direct to that specific customer, why is that an issue?"

Because this sets up a situation where the distributor is competing with their customers and creates channel chaos. But I think your main issue is you don't feel you should be paying a 50% markup on products where there is no value-add from your integrator. Did your distributor tell you that you had to buy from an integrator or just a reseller of some sort? Your distributor should be able to put the business through a box-moving reseller who will take the business for a few points. If the manufacturer only works through integrators that is a different story. In my view this is a flawed strategy precisely because of the situation you are in, but that is another story. Not to denegrate integrators, but from our vantage point we see half the fortune 1000, universities, and government organizations having inhouse capabilities such as yours, sometimes exceding those of their local integrators. You may want to consider products with less restrictive channels.

Sherman Anti-trust laws is a good start, and may distributors have no provisions to collect retails sales tax, some states require retail licenses, and of course manufacturers control how their products are distributed.

https://en.wikipedia.org/wiki/Robinson-Patman_Act

We've seen companies create a company, and a camera vendor signs that company up as a dealer to buy direct, all with the help of manufacturer Rep Firms. It's a slippery slope, and the fact that you have these resources, does not mean anyone else can do the same...

Work with your integrator to reward them for bringing to you creative ideas for the future.

"Work with your integrator to reward them for bringing to you creative ideas for the future."

So I give you a creative idea and in exchange I get to mark up products that you can buy direct otherwise?

I agree that professionals who provide creative ideas should be rewarded but doing so via product markups is an obtuse way of doing so.

I agree that professionals who provide creative ideas should be rewarded but doing so via product markups is an obtuse way of doing so.

I'm sure they would gladly use an even more obtuse method if available...

I guess I over simplified that - eh! based on these words, the value of the integrator is in question with regard to video assistance. What's the value of the integrator if they stop helping on the access control? How much knowledge and value walks out the door? My point was until they get what they want, "Direct Purchasing" they have a preferred vendor helping with one aspect of the business, and not so much with another. It's time to negotiate an acceptable markup, and payment terms, and coupling that with the continuation of the access control services and support that both parties can accept. As a re seller, filling pre-paid, credit card, net 5-10-15-30, orders all get different prices and benefits.

"The integrator we keep on-site helps a lot with Access Control, but has done literally zero on our camera systems, other than fill hardware orders, and license key renewals."

Why shouldn't I be able to buy my hardware directly?

There is no truly defensible reason for why you can't. The security industry is still going through the process of coming into the 21st century. We already see companies like Hikvision selling direct, even if it's under a thinly veiled sub-brand.

The average camera and VMS system is not that hard to setup and maintain. And even as far as support goes, many manufacturers will support end-users already. Even if this model caused support costs to go up, the manufacturer could easily make another 15 points selling direct, and that would cover increased support requirements.

We're still in the model and mindset of things being required to go through a dealer, just to maintain an outmoded channel and avoid hurting feelings. That is changing though.

Hikvision site currently lists a handful of distributors, doesn't offer anything apparent in the way of buying direct. What is the sub-brand?

This answer is going to sound heavy-handed, and I apologize for that. It is Thanksgiving and believe it or not, I am in a decent mood despite what the following might indicate.

This topic raises its ugly head on these boards from time to time. There are plenty of threads about it, but, no one bothers to research and read previous discussions. That is one problem the entire sales channel has with selling direct. Those that want to buy direct don't bother to read (and I know plenty of integrators and installers that don't read either). If you won't read threads, you won't read instructions either, and for the most part, we know it. I have written novels on how to use the simplest things we offer and no one bothers to read them. So no matter how well versed you may say you are, and very well may be, there are plenty who aren't and don't. End users are very often their own worst enemy.

Protectionism is near the last thing on my mind to be honest. What is on my mind is that my vendors (distributors too) expect me to market and support (sales) their product. As much as I despise doing their marketing, okay, that is the deal. If I am going to put that much work into it, there has to be some reward. If not, I will stop doing it. Plain and simple. If I generate interest and you sell direct, I am through with you. Short and sweet. I hope you can see how plain that is.

We have sold lots of equipment directly to larger end-users ourselves at far less than MSRP over the years. The only requirement I have is that they go to the same schools my staff attend. I know they know how to use the product properly. That is the only requirement. You know what, we will continue that practice. Someone, somewhere has to make sure that the installer knows what they are doing. When they call with a problem, we stand behind it all the way. An ounce of integrity is worth a pound of apologies. The poster has done that, and in those cases I, his integrator would have no issues selling him what he wanted at a far reduced cost. It is just good customer service.

There are other issues that distributors have to consider. Yes, sales tax is one, so is support, relationships with their customers etc. If that distributor knows or suspects that you saw the product at a lunch-n-learn conducted by an integrator, it would be bad faith to sell to you direct. It is just not professional and breeds distrust. Sometimes they can't know where you got the idea from, so as a policy they don't sell direct. Selling direct, disrupting the supply chain might not bother you because you got what you wanted, but these two have to work together tomorrow, and the day after that, and the day after that. Selling a one-off item to you satisfies you, but it creates a mess that you don't have to stick around and clean up.

I do wonder if the OP ever once asked his integrator to supply the product at a reduced price? Did it ever even come up? Chances are it did not. If a customer of mine were to come to me and ask, I would be glad to help them.

Not that the original poster would do this, but many would: So you buy some part of your security yourself, connect it in some way to your VMS (for example), something goes wrong and you hold them responsible. How fair is that? We spend hours if not days unraveling a problem that you created all because you wanted to save a few dollars. Then you get my bill. Sometimes you even expect me to cover it under the service contract. How fair is that?

This month is Small Business month. I have read a ton of support for local businesses. Some go into detail as to what happens when you do; what the dollars mean to that business and the local community. Why does that get lost? Is it the money? Is there a price on community support?

Another question is why some think they have an absolute right to or an entitlement to disrupt an established supply chain? Earlier last week one person asked why is it so hard to find integrators that will only provide labor. Couple that with the on-going effort to cut out the perceived middle- man and what will you be left with?? I for one know full well what the market will be left with and it is not pretty.

And while I am at it, (this has nothing to do with the OP) integrators are not middle-men. We do re-sell products yes, but that is not all we do, not by a very long shot. It is but a fraction of what we do. We do not run a retail store. This is not the same as Best Buy, Target, Walmart or Sams. They have systems they sell there. Would you really ask Sams Club to lease the equipment to you? Would you expect them to refund your money because you can't make it work? I would ask you to go into a Best Buy and ask the young person working there, just starting out in life, how many days of storage the hard drive will furnish? Ask him for ideas on how to mount the camera under the eave of your house or business? Ask the person working at Target if they know why the PTZ joystick doesn't seem to work, or why the cameras freeze up? Maybe if you ask nicely the clerk at Walmart can help you pull your cable or troubleshoot your wireless for you. But I am not here to beat up on them or anyone else.

If that is what you want, by all means; there is a supply chain for that. It is out there. But when that equipment does not perform up to your expectations, please don't get into my ear about how "unfair" the system is. Better equipment performance requires knowledge. If you think I am wrong, ask why IPVM (just to name one of many) offers certification training.

Sorry, this went way over the top and lasted a lot longer than I expected.

Happy Thanksgiving!!

Mark, good points!

"I do wonder if the OP ever once asked his integrator to supply the product at a reduced price? Did it ever even come up? Chances are it did not. If a customer of mine were to come to me and ask, I would be glad to help them."

Question: would it make a difference if the line was tightly vs loosely dealer restricted? For example, let's say you sold Axis and Avigilon. Would you treat Axis product only sales differently from Avigilon given that the former can be widely bought online?

No, I would not. I readily admit others might.

Mark, I think that you are somewhat rare as an integrator, which you should take as a supreme complement :)

In regards to this part of your comment:

Those that want to buy direct don't bother to read (and I know plenty of integrators and installers that don't read either). If you won't read threads, you won't read instructions either, and for the most part, we know it.

I've had MANY cases of techs from integrators calling up support and essentially saying "I have no clue on your product, but I was told to install it today, so you need to walk me through everything I need to know." I've also had several end-users that have done more reading and investigation on a product than the installers. These are more anecdotes than data, but my personal feeling is that the average would be that direct-sale end users would be no more of an overall burden than the same product volume moving through integrators in terms of product support.

Another question is why some think they have an absolute right to or an entitlement to disrupt an established supply chain?

Or, "Why does this supply chain think it has an entitlement to not become more modernized?"

I think there are several integrators who will make the transition into a newer sales channel for security. They will do it by offering knowledge and service and assistance at a price point that provides value to the customer. I also think there are a lot of integrators, probably the majority, that think the current approach will last forever and they will continue to make 30% on hardware sales and will be able to prevent users from purchasing direct at discounted prices.

They will do it by offering knowledge and service and assistance at a price point that provides value to the customer.

I think you're wrong about that in the majority of the cases: I have actually addressed this very thing with MANY customers and guess what they say about paying for our knowledge? "The other guys include that as part of their proposal".

Fact is, integrators DO give away their knowledge & expertise regularly because the majority of end users have one of them come in and tell them what they need (design a system for them), and then they go out and get bids based on that initial design work.

When I suspect that may be the case, I don't provide detail like part #'s, drawings etc with my proposal. When the client asks for that I tell them point blank that those things represent an engineering cost to us and I'll be happy to give him all of our design work AT A COST and that I will most certainly share all of the design work with them if my proposal is accepted and we do a contract with them for the work. I suggest every integrator do this to protect your work.

All that said - I have no problem with an end user buying direct but would suggest they have all that "in-house expertise" attend factory training and require them to read ALL the latest industry news on a regular basis to stay on top of changes in technology, security issues with their equipment, and attend the regular training updates many vendors provide or Partner meetings on an annual basis etc. These are all things the integrators do.

All I ask is that they NEVER call me or any other integrator in to "give them a quote" when all they REALLY want is our knowledge & expertise for free, which they'll then implement internally. Be honest & willing to pay a consulting fee for an integrators knowledge if in fact you need it.

And to the manufacturers, distributors and Reps who practice selling direct....I may do business with you to suit my purposes but I'll never be loyal or your partner or give you ANY information about my end user customer because you are a competitor - its that simple.

HOWEVER, as a tax payer I have a major issue with it if the end user buying direct is a gov't agency using my tax dollars to staff up to do all that work in house. If you look at the #'s - hiring a full compliment of talent to install, service, maintain, program, troubleshoot etc. for a video system or even multiple video systems is far more expensive (insurance, 401K, HR, absences, injurys etc) than utilizing a certified integrator who will send a different technician if the guy they usually send is injured or out sick etc. I could expound for hours on why it saves money to outsource to an integrator for a specialization such as security and this is probably equally true for non-government agency's but since my taxes aren't paying for your business's profitability I'm fine with you spending more than you probably should or need to because someone had the shortsighted idea that saving a few bucks on a camera was worth adding to your payroll and overhead!

...integrators are not middle-men. We do re-sell products yes, but that is not all we do, not by a very long shot..

Come on now, that's crazy talk!

You, who take the largest slice out of the pumpkin profit pie!

Not to mention you are also middle-men of product information and returns processing.

Thoroughly enjoyed and agree with your comments.

Regards,

Tom Hutchison

I think the discussion of integrators providing value other than product and reducing prices is a moot point. It's not what's being discussed here.

OP is stating with all sincerity that he and his staff can handle camera installation and maintenance, even having some certified people on site. So if we're taking him at his word (and I have no reason not to), he's qualified.

The only reason to not allow a qualified person to buy a widget is protecting the channel. We can debate whether that's a good reason or not, but it's the only reason.

Even if an integrator were to reduce prices, if ultimately all that's expected is that they'll supply product and everything else is handled in house, why would a qualified end user want to pay any markup?

Buying products in a modern electronic market is not the same as buying electricity or water. More often than not, in those cases you are dealing directly with the producer who has built the distribution chain. They build that direct chain only because they know there will be a sustained, economic reward on the other end of the delivery. There is often no need or room for a third party.

I am going to leave "integrators" out for a moment because as I have stated, we are more than middle-men. A closer example is a company that sells directly over the internet. They too provide value. The single largest value they offer is a place that connects consumers with manufacturers. Some manufacturers make an excellent product, but they are just horrible at connecting with the consumer. "Middle-men" connect people and that is essential to success. Other tangible values are absorbing risk AND distributing knowledge. What risk you ask? Currency exchange, transportation, damage, returns, trust and often they act as a shield from bad intent just to name a few. You think not? Power Seller on Ebay account for only 4% of the sellers in total volume, but half of all E-bay sales flow through them. People trust them more than they trust the average E-Bay seller. In 1999, "middle-men" accounted for 25% of this countries GDP. Today that is over 35%. So much for a "virtual" frictionless economy.

Then you can factor in what their knowledge adds to the equation. I am 100% sure (never having met them) that B&H Photo has saved many-a-customer from making mistakes, large and small over the years. That has value. How much value is determined not by the middle-man, but by the consumer. Always has been, always will be.

Middle-men have value or they would not exist. It is the law of the jungle.

Manufacturers apparently do not want the hassles of establishing a supply chain just for that small percentage that want to buy direct. If that supply chain had a sustained economic reward at the other end, they would have already built it. That part of the market is so small, those consumers are asked to go stand in that line over there with all those other people.

I have no issue with selling widgets to people who are qualified. I have done it myself. Do I charge some profit? Yes! Yes I do!! I am not the bank. We ordered it, they manufacturer shipped it (and sent me an invoice that same day), we paid for it, received it, shipped it to the consumer (if it was not dropped) and then we get paid. There is a gap of time there when the item gets shipped and we get our money from the consumer. Time = money.

As for "paying any markup at all"? Profit is the only reward there is in business at the end of the day. It is the gas for the economic engine. No one might like it, but it is the cost of admission.

But the argument essentially boils down to "because that's how it's always been" and that doesn't fly in the face of logical alternatives.

Profit is the only reward there is in business at the end of the day. It is the gas for the economic engine. No one might like it, but it is the cost of admission.

But why?

If an end user is not asking for what you are providing, such as the material only sale you've described, why should they have to pay for you to make a profit simply because that's the channel?

Imagine you were buying a TV. The manufacturer ships it to retailers (in most cases, I know some have additional steps of distribution) and you walk into a retailer and take it home. Now imagine if Best Buy told you they can't sell you that TV at the price you know it costs, but can supply a proposal for their Geek Squad or whatever they call it these days to come install it. Or they can charge you 15% and you can walk out with it and install it yourself. You know that you're more than capable of procuring that TV, installing that TV on the wall, and setting it up. Would you say, "Oh, ok then I'll pay you 15%"? I wouldn't, and I wouldn't expect the OP here to say it about cameras.

It's an unpopular opinion, but the channel model is dated and in a lot of ways absurd. I'm sorry to tell people this, but it is. It's going extinct. I was telling people this when I was an integrator 5, 6, 7 years ago and salespeople would complain about online sales, and it's only gotten more obvious with time. End to end systems stall it somewhat, but it's still only a matter of time.

Given your scenario, I would walk ( I just bought my first flat screen last year so maybe I am not the best guy to ask). But, and this is a big but, that is not reality. That is not how TV's are sold. TV's are designed to be carried out of the store, plugged in and turned on.

This is not how lots of CCTV products are sold. By design, there is more to it.

You can make a good case that if the design of the product changed, not the supply chain, then this would work. It is not the supply chain is the problem. That chain simply responds to demand. When and if the design of the products change enough, so will the supply chain. It always does.

Is it going extinct? No. Will it evolve? Yep.

Things always do. But I just don't believe that the majority of consumers will go the DIY route in the immediate future. Particularly not businesses. Installing and maintaining security is not their core business. If the IT guy is spending months fixing a problem with the new NVR like we saw a few weeks ago, guess what he is going to do? He will start looking for a better mousetrap.

If you owned a business and decided because of circumstances you needed security, certainly you would include the IT person in the conversation this day and age. But would you ask him to install it? I don't think so. He is there to keep my network safe; he is there to make sure data gets from point A to point B, he is there to run audits, make sure we are compliant and 100 other things. Now you want to add this to his plate?

If it were that easy, truly Ethan, integrators would have been out of business 5 or 6 years ago. Yet, here we are...still. What we do has changed to be sure. It is not finished changing either. But extinct? I would disagree.

It doesn't matter how lots of CCTV products are sold. It doesn't matter if some people have IT departments install their cameras internally or not. The question here is about OP, a skilled end user, looking to not pay markup to an integrator to hand him some cameras. And I have not seen any compelling reason he should be expected to.

We can discuss all we want that integrators provide more than that and have value, and it's true, they do, but he's not asking to be provided with anything more.

Your argument is that businesses should always stay away from everything but their core business? That's a silly argument.

HVAC isn't our core business but we found that it was cheaper to teach our maintenance guys to take care of the air conditioning in our facilities rather than make a phone call every time something went kablooey and risk customers getting hot and walking out.

App development isn't our core business, so we brought in a consultant to help us figure out how an app should look. A lot of the work was done in house, though. The app came out looking real nice. Won a design award from Google.

Driving trucks isn't our core business. So we don't. We put stuff in boxes and let UPS handle the rest.

Sometimes it makes sense to develop your own capability in house. Sometimes it makes sense to partner with a consultant on a project by project basis. And sometimes it makes sense to outsource. But imagine if we had no way of buying HVAC equipment on our own, and had to buy from an installer or pay a hefty markup. We'd be broke and we'd be sweaty.

Due to exterior construction, we needed to move a 2 1/2 ton AC compressor unit about 20 feet.

Estimates from Sears and several local AC vendors were all on the order of $2,000.

I took the courses, passed the tests, got EPA certified, bought the vacuum pump, bought the gauges, bought the miscellaneous items (copper couplers, moisture absorbers, sight glasses, valves, acid, brass, and flux), and moved the outdoor unit for about $1,000, plus the value of my time (maybe 10 hours learning and 2 hours doing).

These discussions seem very similar. There's a learning curve. Not everyone can or will do it. But protected margins can be very attractive to a leaner competitor, even for a one-off job.

Is this discussion really about what one calls oneself? What are the obstacles to becoming an "integrator?" Do Anixter or ADI require minimum volumes? Otherwise, why not complete the minimum paperwork and become your own "integrator?"

Otherwise, why not complete the minimum paperwork and become your own "integrator?"

Taxid#?

Unfortunately, when budgets get cut, security is one of the first things to get rolled back. Many of the DIYer's and IT guys doing security as his 101st responsibility within an enterprise are doing so reluctantly. They don't want to get involved in security. They are forced into it.

I assure you they would rather make one call to an integrator and be done with it. The push for DIY security comes from higher up the chain.... it's not just rogue IT guys looking for more responsibility.

Middle-men have value or they would not exist. It is the law of the jungle.

But that doesn't accurately portray the security products channel. The middle men are protected, manufacturers don't sell direct to end users, it's not an option.

By your reasoning, there should be no problem with manufacturers selling products directly to end-users. Let the customer determine where the value lies, and what it's worth.

And who, may I ask, is stopping you?

Everything is negotiable - margin is margin regardless of the cost basis.

Without debating the ethics about disintermediation, I'm wondering what the problem is for end-users who can walk the walk and talk the talk, and are as determined as some seem to be here.

Again, once I had a resale cert, I had little problem.

Wouldn't a small in house security group in a much larger company just setup as an integrator if there was significant money to be saved?

Maybe there is something illegal about not paying tax on the purchase even if one still collects it on the self-sale?

I don't know where you live, and don't want to. I have no inclination to cause you any trouble what-so-ever. But a Resale Certificate is a document that allows you to not pay sales tax IF and only if you are buying the product for resale to someone else.

Collecting and reporting sales tax can be a major league pain in the you know what. Just here in NC each county (and there are 100) is allowed to charge whatever sales tax rate they want, in addition to the states share. Then we collect it all based on each county's rate, report it and deposit it. We just love sales tax day.

And yes, I know several companies that have in-house installers and techs as well. We service some ourselves. And yes, it is illegal to collect sales tax and not pay it. I know someone who did that over the course of a few years. The IRS padlocked his door.

Mark, but is there anything illegal about using a resale cert to buy without tax and then sell to yourself at cost, collecting from yourself and remitting the tax to the TAHJ?

That is what I meant by:

Maybe there is something illegal about not paying tax on the purchase even if one still collects it on the self-sale?

Not that I can see, no. As long as you keep good paperwork, the IRS might shake their heads, but it would probably fly.

I know of several large retail chains that have done that, with the vendor and reps all knowing and condoning the practice.

This release of pent-up frustration is causing my head to hurt.

Who Needs the Middle Man

Upper management used to have a slogan at Ingram Micro:

Don't meddle with the middle!

More like a threat...;)

I wonder if any manufacturers would sell direct to the consumer if they had a product that is as strong as Apple? In my opinion, yes they would in a heartbeat. They would disrupt the channel, cut integrators' throats, sell us out, call it whatever you want. Apple products are sold direct, in Apple stores, buy retailers worldwide, on-line etc. The price of a given product (new) is nearly always the same if you are buying apples to apples (same options). Apple (and everyone else who sells their product) sells at MSRP and bank billions doing it. Why doesn't a manufacturer design, build and sell a plug and play IP camera? One that will plug into any VMS, and perform up to expectation. The fact is that there are not enough consumers who can or will install or service the products to warrant a factory direct channel.

You want to see a protected channel? Sell a fire alarm for awhile. They will show you protection.

It is not the integrator who is protecting the channel. They don't control it; they don't set the price; they don't set the terms, supply, none of it. When the channel changes, so will the integrator or they will die.

Conformance is coming. Prepare thyself.

Printers all used to have their own communication code. Then HP came out with "ethernet".

Now cameras are all working on ethernet as well.

To be honest with you, it's past time for conformance. I think it's because protectionism is slowing down integration.

Even in PLC and Access Control.... it is coming.

But that's none of my business.

I'm sure in auto forums the topic comes up, "Why can't I buy my Ford or Toyota direct from the factory?"

I'm sure your also protesting this to the car manufacturers too, right?

This is a poor argument, IMO.

Car dealerships are another prime example of a protected channel that exists not for the consumers benefit. Look at all the opposition Tesla has received in trying to sell their cars. Also ask a group of friends who has had a really good experience at a car dealership, either during the initial sale or in followup service, you'll not likely find many people who love the car buying process.

So glad that someone else noticed that using the automotive industry - one of the most protectionist sales channels in our 'free market' economy - was not the best example when trying to defend the integrator position and their value in the physec sales channel.

I think Ethan is spot on in his bluntness: "The only reason to not allow a qualified person to buy a widget is protecting the channel. We can debate whether that's a good reason or not, but it's the only reason."

<insert appropriately-ominous music score>

The internet is a bad ass.

Like never before, it has the ability to help end users differentiate between those segments of the channel that add value to their purchasing transaction - and those that don't.

Old Timer Integrators: Those of you that are desperately trying to hold on to yesterdays margin schemes will eventually be run over by those that understand how customers of today perceive value.

I have said this in every conceivable way, now I am going to be as blunt as you. No one is arguing that the channel is protected. I do have a serious problem with the contention that it is the integrator who is doing the protecting. It is not. We don't have that much clout.

Auto sales is a poor example in fact. Auto dealers have a ton of political muscle on a national and state level. Integrators do not. I have been doing this for 30 years and have never once been invited to an "integrator" political action committee meeting. Maybe my invitation was lost in the mail.

I am still waiting for someone to address my previous two questions. One person states that integrators prevent manufacturers from selling direct. I asked him for an example. Name it please or stop saying it.

No one has yet to comment on my other point that if able to muster a product similar to Apple, manufacturers would indeed sell direct, beginning tomorrow. The only remark that was made was that conformity was on its way. Which one? ONVIF or PSIA? I have been hearing and reading that for quite some time. I know I am not stopping it. (I guess I should speed up the implementation at our next secret meeting).

And for the record, I would welcome it. When you make remarks like "old timer" you use that word in an insulting fashion. Here is another word for it; experienced. We made the system work quite well, managed to create jobs, employ people and do an awful lot of good work for our customers for years when we had the ultimate in conformity "holding us back" - analog. That's right, analog was the ultimate in universal standards. You think I am scared or IP conformity? Please. I welcome it. Been there, done that.

I am not desperately trying to hold on to anything. I am not afraid of change either. I have seen too much of it to be afraid of it. Over the years I have learned to embrace change, because it is coming as we speak.

I do get sick and tired of being "blamed" for the lack of creativity on the part of others.

And by the way, I don't mind putting my name on my remarks, ever.

Mark,

First of all, lighten up Francis.... when I use the term Old Timer Integrator I do not mean those - apparently like yourself - who have adapted to (and seek out to head off the challenges created by) the evolution of our industry.

Manufacturers only wish they had integrators - like you seem to be - that act as true ambassadors of their products.

If your business practices are focused on the concept of providing value beyond the install.... well, ....great! That is the ideal partnership between a manufacturer and their protected VARs. (R is what anyone can be, once they submit the appropriate paperwork; VA is what the manufacturer crosses their fingers and hopes is the case).

I do have a serious problem with the contention that it is the integrator who is doing the protecting.

Then why is it that Integrators always get upset when they hear of, or suspect, a manufacturer or distributor dealing direct?

Trust me, most manufacturers would prefer to sell direct to many end users. It would speed up the sales cycles, it would probably speed up the payment cycle in many cases, and they might even make a little more margin at times.

The current sales channel in physical security is maintained because most manufacturers don't want to risk irritating the integrators. This is partly due to the fact that when you get right down to it, many products are ultimately interchangeable, and nobody wants to be the first to jump to direct sales and risk their integrators switching to brand B or C.

"The current sales channel in physical security is maintained because most manufacturers don't want to risk irritating the integrators."

Mark, I agree with that. There's enough integrators, and enough large ones, that would likely boycott products sold directly to end users on the Internet that most manufacturers are reluctant to do so.

You're looking for an 'example' and I can tell you that this is the gist of what I have heard from multiple manufacturers over the years, similar to what 6 says above.

"No one has yet to comment on my other point that if able to muster a product similar to Apple, manufacturers would indeed sell direct, beginning tomorrow."

By Apple, I assume you mean a great product that people could use directly without third party help.

Yes, I agree with you, presuming it was that great. But hesitate because integrators do have a fair amount of sales power. It's certainly now easier than ever for manufacturers to get end users to know about their products but integrators still represent the best feet on the street / high touch capabilities to get end users to pick specific surveillance products.

The current sales channel in physical security is maintained because most manufacturers don't want to risk irritating the integrators. This is partly due to the fact that when you get right down to it, many products are ultimately interchangeable, and nobody wants to be the first to jump to direct sales and risk their integrators switching to brand B or C.

Finally one honest manufacturer. "Manufacturers don't want to risk" is the phrase. Integrators are not protecting the channel. We don't have to. Manufacturers are doing it.

To John's point, will we be irritated? Of course. The next day we will go to work. Yes we will likely do it without that manufacturer, but so what? It was their choice, not mine. I won't bear them any ill will, but I won't sell their products either. I can't beat the factory. I have to feed my crew, he has to feed his. No harm, no foul.

"Many products are interchangeable". My point exactly.

When complete conformity does get here, whenever that is, the product line will look just like it did 15 years ago. Even 10 years ago, any analog camera would perform on anyone's DVR. The camera that offered the best performance was typically the choice of the customer. When conformity does arrive in the IP CCTV world, how will that be any different at all? It won't.

That will be decided by consumers, not integrators.

"Manufacturers don't want to risk" is the phrase. Integrators are not protecting the channel. We don't have to. Manufacturers are doing it."

Mark, be fair.

Manufacturers are 'doing it' because they feel a lot of pressure from integrators to do so. If so many integrators did not regularly fight and protest about selling direct, many manufacturers would have easily started selling direct off their site years ago. Ultimately, the pressure / impetus comes from integrators because integrators collectively have significant power over sales.

I will give you partial points there John. Integrators do collectively have significant power, they just don't know how to collectively use it. It has been my experience that if you put five integrators in one room you will have five very different opinions.

Do manufacturers feel pressure, of course they do. If they sold direct, we (I anyway) would not lead with their product, and depending on who it is, I might not sell it at all. For example, I will sell an Axis product if the customer so chooses. But due to the low margins, they are not my first choice or recommendation. I am sure others would respond the same way; but that is not new. It has happened before and will happen again. Manufacturers know how integrators will respond because manufacturers have sold direct before. They have also taken leads from integrators with not so much as a thank you. As someone mentions in another thread, no one appreciates someone else's hand in their pocket.

But that brings us back to my point. If a manufacturer built as strong of a product as they say they do, this would all be mute. The relationship should be and generally is mutual. Sometimes, depending on who the manufacturer or integrator is, it is symbiotic.

One point I would like to make before I let this go completely; There are those that think direct sales will be a windfall for consumers. I could not disagree more. Manufacturers (and I am not indicting them) will charge near or full MSRP and put it in their pockets. Why else would they disrupt the supply chain?

Well- I better chime in as a manufacturer. Mark is pretty dead on. We have a rather strict channel program that goes from us to Distribution to Integrator to End user. Pricing is adjusted in that model accordingly. Distribution doesn't really get a large Mark-up (we set it), we use them as a bank.

Marks comments from a thread way up above-

Manufacturers apparently do not want the hassles of establishing a supply chain just for that small percentage that want to buy direct. If that supply chain had a sustained economic reward at the other end, they would have already built it.

That about sums it up. I will be blunt- I absolutely protect my integrators. For a variety of reasons. But after years of working here, the smaller percentage of direct deal requests versus the VAST majority of the work done and supported by my integrators- there simply is no business model for it. And I am certainly not the only manufacturer like this, I have had this same conversation with multiple counterparts.

I know it sucks for the couple of consumers that are self performing. I have those. And I have always been able to handle those on a case by case basis to work out a great deal with an Integrator willing to pass some product thru on a "box" sale with minimum margins. There is always a way.

But cutting out my integrator base, the guys/gals that I require to get certs, training, invest time and effort selling me on a daily basis? Not only does that make bad business sense, I find it completely unethical. Just saying. Call me Old School or protectionist or whatever.

Those of you that are desperately trying to hold on to yesterdays margin schemes will eventually be run over by those that understand how customers of today perceive value.

Customers of today perceive value the way they always have. Overestimating the value of tangible physical goods and underestimating the time and knowledge needed to utilize those goods fully.

The protected channel was a way of overcoming the consumer's myopic materialism by essentially embedding some of the compensation for the services directly in the goods themselves.

Because of the internet marketplace that compensation is no long available to those who would provide them, and so soon will they no longer exist to provide them.

So when a consumer wants a professionally installed security system, they may have to use Joe from Best Buy. But hey, it's what they wanted, right?

wrong.

This customer will have quite a few VARs to be able to choose from.

There just won't be as many actual choices once those that focus on the VA weed out the ones seeking simply to protect their position as the R.

So you think eliminating a major component of profit and revenue from the integrator profession will make only the hardest working ones stay around?

Try it with doctors, lawyers, waiters and plumbers.

See who sticks around and works for less.

Oh, I know they will provide value and so will get paid accordingly well.

But by whom? The elated end-user, high after winning their Pyrrhic victory over the fat cats in the middle? They are going to turn around and be ok with paying what seem to be HIGHER hourly rates than ever before?

I hope I am wrong, but I'm not blind either.

NOTICE: This comment has been moved to its own discussion: What Happens To Integrators As Product Profits Disappear?

As an integrator I thank you. Great reply. We spend a lot of time and money training and certifing employees. This would not be possiable if we were just wire pullers.

I started as a wire puller. Made good money. Honest money. Didn't need channel protection. Can't outsource or virtualize honest labor. Integrators like to look down on wire pullers. Integrators like to have fancy lunches and scribble on Visio drawings to "add value" to justify hardware markups. How about I buy my own lunch, make my own drawing, and buy my hardware direct. Who am I kidding... I ain't competent enough to make this plug go in there, and this SQL that, and VLAN and blah blah... RAID 5 or SAN and now I'm just confused. I'm gonna just go crawl back under the bridge with a bottle of Maddog 20/20 like a good cable boy.

I think this is an interesting and useful discussion. Obviously where you stand depends on where you sit.

We are a (fairly new) manufacturer of an end-to-end cloud based site camera system - a niche within security. We happen to have a product that was designed for "self installation", can can be delivered without an integrator.

However, as we enter this market, we struggle with many of the same issues illuminated above. Here is how I think about this:

1. Integrators provide several (potential) sources of value to the End Buyer.

  • Reach - direct interface to customers.
  • Trusted Expert - a "neutral" 3rd party that customer can rely on for decisions about how to go
  • Design & Installation Services -
  • One-stop-shop - if the customers wants/needs components from multiple manufacturers, the Integrated can make it one-stop shop.
  • Post Sale Support - Obviously manufacturers like this IF IT IS DONE WELL. Otherwise it is a liability, since our brand depends on customer interaction with the product, which can be strongly impacted by support quality.

2. From our perspective as a Manufacturer:

Reach - yes, this is valuable to us. Direct internet sales helps but does not replace for customers that want a "local" contact. However, past experience shows many integrators do not market well, and do not always provide great follow up on sales leads.

Trusted Expert - this is valuable to us - if they are indeed trusted, and an expert.

Design & Install services - Even for products that are designed for DIY/self install (as ours is) there are always customers that want help.

One-stop-shop - this is valuable to manufacturers in general - TO THE EXTENT that the integrator quotes us in their product! To the extend products are interchangeable, this is where the integrator gets their power over the manufacturer. At the same time it truly is a value-add for the End Buyer.

3. In general, as a manufacturer, we want End Buyers to be able to acquire our products in the most convenient way for them (and with considering the most profitable way for us).

So, I put this question out to the Wisdom of the IPVM:

If you were a manufacturer entering the market with a product that could be end-user installed, would you sell direct, through integrators, or both ?

Parts-and-labor jobs are going to dry up, because it's going to get harder and harder for integrators to hide what their margins are. If it can be installed by an end-user, I wouldn't even bother trying to attract integrators because a lot of them are going to collapse or radically restructure over the next decade. Go directly to the end users from the outset.