PERSPECTIVES - Vendor viewpoint
It's no good just being optimistic - vendors must think laterally if they are to make inroads into the UPS sector.
The UPS market is dominated by one company - APC. The consensus ofif they are to make inroads into the UPS sector. opinion is that it has about 90 per cent of the sub-3KVa market and there is little prospect of any vendor eating into that share. But that's not such a disaster because that segment is now a very low-priced and demand-driven one.
Most vendors will focus on sales of higher value units to boost their profits. Here, APC is not as omnipresent, but it is mounting a challenge this year following its acquisition of Danish vendor Silcon, late in 1998.
All vendors are, as expected, publicly optimistic about the prospects for the UPS market over the coming year. But the reality is probably slightly different. While there is some growth, it is only going to keep pace with the PC market and there is little chance that any of the other contenders will make a significant impact on APC, especially at the low end.
Chloride is one of the vendors that is putting its focus firmly on the mid to high end of the market. Bob Morris, channel manager at Chloride, says this is where the profitable business is and where the efforts of the channel need to be focused: 'That's where we perceive the real growth to be - in the medium-range data centre systems.'
But convincing the channel that it should attack this market segment with UPS products is the difficult part. Few distributors or resellers express real enthusiasm for the market and tend to react to demand rather than actively sell UPSs (see Distributor and Reseller viewpoints, pages 44 and 48).
Morris says that in trying to recruit dealers to the cause, you meet the whole spectrum. 'Some will only sell reactively and that's always going to be the case. But there are going to be a number of resellers that, if you give them a product that's going to allow them to make a return and some margin, will take an interest.'
APC is trying to encourage greater participation from the channel by selling the user benefits. 'There are always going to be resellers that offer very little value add, which is something all peripherals vendors have to face' says Paul Tyrer, UK sales manager at APC.
'Obviously, we have to educate the reseller base and what it's got to focus on are the key drivers for the customer,' he adds. 'They are dependent on IT and need high availability, 99 per cent uptime, a return on their investment and low TCO.'
But it still isn't easy to encourage resellers that don't specialise in power protection to be more active.
As a result, some of the biggest deals don't go through the channel.
Both Powerware and Chloride operate several routes to market. In Chloride's case, there are a handful of direct-dealing resellers - facilities management (FM) companies such as Balfour Kirkpatrick and specialist power houses such as Linnet Technologies and UPS Systems. There are some direct sales - for ratings of 500KVa and over, says Morris - as well as the two-tier channel.
Powerware runs four routes to market: through distribution; a select group of Vars; direct to large users (BT is a customer, for example); and to OEMs. The latter is its most lucrative market and it supplies UPSs to Compaq, 3Com, IBM and Lucent, among others.
APC is the only leading player to operate exclusively through the distribution channel - it has 14 distributors in the UK. With its domination of the low end of the market and brand leadership, APC's rivals have little choice but to operate multiple routes and attack the higher end of the business.
APC has also increased the pressure by striking alliances with many leading PC and networking vendors, either on an OEM basis or in strategic alliance. Its partnership with Cisco is a recent example.
All factors considered, the low end of the market is very much sewn up - there is no money in it now, nor will there be. The simplest 250Va products for desktop PCs now start at #50 or #60. The kind of UPS needed to support large servers - perhaps with a rating of 6,000Va and upwards - will cost #2,000 or more, so it is easy to see why the latter market is more attractive.
Prices are not likely to change very much, according to Gary Jameson, UK distribution channel manager at Powerware. 'I can't see prices coming down further, but I can see margins dropping because of small vendors being forced to compete.' He says dealers have to 'think margin' and focus on customers that they already know are interested in the idea of power protection.
Jameson believes the market will continue to grow, driven by the increase in convergence between computer and telecoms systems and the advance of thin client technology. Both will put more emphasis on the centre and make the prospect of a sudden loss of power more potent.
Competition is going to increase and there will be more Far Eastern vendors in the market with low-cost products. But they may not find it easy, he warns: 'Some vendors think that throwing a lot of money at it and being cheap will be enough. But it takes years of visibility before the UK market will even acknowledge you are there.'
Even though vendors are always looking for new ways to differentiate their server products, the UPS market won't go away. 'Built-in power protection will never happen,' he believes. 'It would make PCs too expensive, bring about warranty issues with batteries and make the units too heavy.'
Although it may not become a standard component of the system, UPS development is being driven by the PC and server vendors. 'We are always developing products mainly because our partners in the faster moving PC market demand it,' Jameson explains.
He adds that Powerware is working with Compaq at the moment. It has also developed what it claims is the only 1.5U Rackmount UPS in the world 'because 3Com asked us to', Jameson says.
APC, meanwhile, works with many of the leading systems vendors and it seems likely that this is the way vendors will operate as they strive to find new ways to increase penetration. There may be plenty of opportunity in the UPS market and plenty of growth left yet for the vendors, but getting the market interested is a long, hard slog.
THE KEY PLAYERS
APC (AMERICAN POWER CONVERSION)
One of the most successful and influential companies in the global UPS market, APC holds about 13 per cent of the European UPS business segment.
It provides a broad range of power management technologies for every kind of corporate application, from offline to online and line-interactive UPS systems.
APC is especially renowned for its N+1 redundant Symmetra Power Array.
In addition to its range of UPS products, it also manufactures a series of other power systems, including surge suppressors for data lines and peripherals.
The company believes power protection and management will soon become essential and integral parts of every IT system and is aligning itself in the market accordingly.