Challenging the Status Quo: Intermediaries Under Scrutiny

The role of intermediaries in markets is changing fast. Today I’m going to focus on the real estate and IT sectors. These markets rely on agents, brokers, distributors, resellers, and others to facilitate transactions and provide services. But with technological advances, the need for these middlemen for sophisticated buyers and sellers is in question.

In real estate, legal actions against the National Association of Realtors (NAR) have also exposed conflicts of interest and anti-competitive practices, while in the IT sector, buyers are becoming more demanding, aiming to gain more control, negotiate better terms, and reduce their reliance on IT channel partners.

These factors mean that intermediate players in both the IT channel and real estate markets will be forced to change their business models and practices over time. But those of us sophisticated buyers in these ecosystems don’t have the time to wait. I argue that we should simply begin side-stepping these middlemen to force change for ourselves.

We’ve seen many industries challenge the traditional view of intermediary “value-added” services and promote direct interactions between buyers and sellers. By collaborating more, both sides can use information to negotiate better deals, achieve more flexibility, and increase control – all without the “help” of intermediaries.

The Problem with Intermediaries

Real estate agents and brokers connect buyers and sellers. They list properties, market them, arrange viewings, negotiate deals, and guide clients. In return, they earn a commission based on the sale price.

NAR is the largest U.S. trade group, with 1.5 million members. It sets standards, offers education, and supports industry interests. However, NAR recently faced lawsuits totaling $2 billion for alleged anti-competitive actions aimed at hiking commissions and limiting competition.

One lawsuit, the Moehrl case, accused NAR of violating antitrust laws with its commission rules. Another, led by the U.S. Department of Justice, accused NAR of limiting broker competition. These lawsuits have raised doubts about the fairness of the traditional commission system and the role of middlemen in real estate.

In today's IT market, intermediaries like distributors and VARs connect the largest manufacturers with customers and profit by marking up their input prices. Much like real estate agents, they justify doing so by claiming they offer unique services and tech knowledge, thereby increasing the quality of the buying process.

But today sophisticated buyers often don't see much value in the services IT distributors and VARs offer. One of the major problems lies in the rigid methods these entities use for multinational clients. They don't adapt well to changes or offer tailored solutions. This lack of flexibility makes it hard for multinational companies to operate efficiently and securely, limiting their control over material handling and ultimately slowing down large buyers.

Why Intermediaries Are Resistant to Change

It’s clear the real estate industry is undergoing a titanic shift. Buyers and sellers are now more informed and expect more value from agents instead of just being gatekeepers of information. Nor is it a mystery what’s occasioned these changes. The internet and digital tech have transformed how we access and share information across numerous industries. Websites like Zillow and Redfin simplify listing and searching for properties while offering detailed information and photos. Review sites like Angi and HomeAdvisor match consumers with service providers as well.

In the IT sector, the shift has been equally profound. In the last 20 years, businesses have become ubiquitously technology-enabled, if not outright tech-core. Previous product expertise (a la specs and implementation) was a large part of the value intermediaries delivered. But today the sophisticated buyers in this market have higher quality engineering resources than the IT channel. Buyers and sellers can research, compare, and build services and solutions effectively on their own. Direct access to information that was traditionally gated lowers costs and boosts efficiency.

Today, the information asymmetry that once favored these middlemen is decreasing very quickly, but many remain resistant to change. For sophisticated buyers, the need for an intermediary is becoming increasingly difficult to justify, as my recent experience in buying a property illustrates. While revealing just how entrenched intermediaries are in the industry, it also reveals that sophisticated buyers can independently navigate these waters, pointing a way forward for how the IT industry can circumvent intermediaries as well.

Buying a Property Without an Agent

My experience buying a property without an agent hit a snag right from the start. The agent for the first property I wanted to see insisted that I have broker representation. This fictitious barrier was annoying but not particularly problematic. By being persistent and reminding the realtor of my rights (and hinting at potential legal action if he continued to resist), I finally got to see the property. It was a win against protectionist practices and a first glance at what would be involved in shaking up the status quo.

My attempt to view a second property revealed the lengths intermediaries will go to avoid embracing new ways of conducting business. The selling agent strongly suggested that they should also represent me, but one of the main reasons I didn’t want to hire an intermediary was to cut out the commission the agent representing me would earn (which would be added to the overall price of the property). I rejected a dual-broker setup outright, but my proposal was ignored despite offering a fair price. The property later dropped significantly in price (below my offer), but the selling agent still wouldn’t entertain my bid, illustrating his willingness to “cut off his nose to spite his face.”

My third attempt at purchasing property without an intermediary was ultimately successful but exposed just how resistant the industry is to change. The seller's agent agreement demanded commissions from both the buyer and the seller in the case of a self-representation buyer – effectively turning the financial advantage of working with someone representing themselves into a financial penalty for the seller. But in my case, the seller wanted a quick transaction and agreed to pay both commissions instead of renegotiating the contract with their realtor. Clearly, it will take some time for the real estate industry to extricate itself from the self-serving interests of intermediaries.

Buying in the IT Market

My experience buying a property without an agent reveals the challenges of representing your own best interests in an industry committed to protecting intermediary incentive structures – not unlike the IT market today. The parallels are striking. For example, over the past decade, multinational corporations with data centers and offices scattered across the globe have sought to simplify their IT procurement process by consolidating their hardware purchases through a single, secure U.S. transaction. Doing so would let them manage their integration needs in one country, ensuring that their technical environments are consistent and compatible in every location while centralizing material handling and enhancing security.

Despite requests like these, IT channel intermediaries remain unmoved. They cling stubbornly to their outdated models, seemingly unwilling or unable to adapt to the evolving needs of their sophisticated clientele, refusing to listen to and accommodate their clients' needs.

However, sophisticated buyers with access to information and de-bundled services can challenge the role these intermediaries play in the IT sector. By cultivating vendor relationships, large IT buyers are exploring direct sourcing and other strategies to cut costs while increasing their flexibility and autonomy over their procurement decisions to ensure better outcomes for themselves. But they're not just cutting costs—they're reshaping their operational strategy to ensure better outcomes for themselves. These evolving dynamics present not just challenges but opportunities for sophisticated buyers who are willing not just to question the channel but bypass it entirely.

What the Future Holds

The conclusion is clear: As a sophisticated buyer, you should not wait for a magical transformation among middlemen that is unlikely to come. Instead, you should assert your autonomy by circumventing these intermediaries. It's time to independently construct your own InfraOps systems. Such a step is not just about asserting control or reducing costs—it's about progress and leadership in the use of technology. Only by side-stepping the IT channel intermediaries can you truly advance toward the efficiency and efficacy that your business demands.

As the IT sector evolves, intermediaries may still have power over less experienced or smaller buyers. But for sophisticated buyers who adopt an InfraOps outlook, purchasing hardware will become as easy as buying any other commodity, allowing them to treat IT hardware procurement with the simplicity and clarity it warrants, stripping away unnecessary complexity and expense.

Embracing change and cultivating self-reliance are the linchpins of future success. Both buyers and sellers must educate themselves and actively participate in shaping a more efficient marketplace. For those in IT, this means drawing from the InfraOps principle of “Increase your Sovereignty,” a tenet reflected in my experience buying property. In both realms, asserting control over critical decisions and business functions is key.

This sovereignty is about more than just autonomy. It is about using expertise and the freedom to influence important areas of your enterprise. As buyers and sellers are discovering, direct control is not just advantageous but essential if you want to achieve the best outcomes possible for ensuring security, supply chain integrity, sourcing flexibility, and speed of progress.

By pursuing greater sovereignty in our InfraOps and real estate transactions alike, you unlock new opportunities for efficiency, cost savings, and strategic flexibility. This proactive stance lets people and businesses avoid traditional intermediaries, challenging the status quo to create a better future. Your efforts to control and demand transparency will not only help improve your business outcomes. They will also create a fairer, more efficient, and ultimately better marketplace.