Broadliners take on storage specialists

Analysis Ingram's fall from grace raises questions of effectiveness.

Ingram Micro's distribution agreement with storage vendor Seagate has ended after just six months, amid rumours that it failed to add value to high-end products.

Most broadliners now have storage divisions, but how successfully can they compete at the high-end of storage and networking?

To the vendor, broadline distributors offer bulk purchasing capabilities, inexpensive marketing deals and, most importantly, access to a potentially larger market.

'These days, it is necessary to find at least one big player,' said Michael Siebert, European channel development manager at storage vendor Tandberg Data, which recently added Computer 2000 to its list of suppliers. 'We used to deal with small distributors only, but broadliners are very useful for promoting our brand awareness.'

Some industry experts believe the balance of power among distributors has recently tipped in favour of the deep-pocketed multi-national as consolidation continues apace. Brian Pearce, senior consultant at IDG, claimed global distributors are moving away from the clearly defined US model towards the European model, with no clear-cut distinctions between wholesalers, distributors and resellers.

He added that this is causing national broadliners to concentrate on particular brands or lines, which in turn is forcing specialist distributors to become even more niche.

'Although the high end of the storage market is still fairly protected, this is the next target of the broadliners,' Pearce said. 'There are a great deal of small distributors eking out an existence and plenty of companies are therefore potentially up for sale.'

He failed to see any significance for the market as a whole in Seagate's decision to drop Ingram Micro. 'Napoleon used to shoot a general now and again to encourage others,' Pearce added.

Some specialist distributors dismissed the claim that they are being squeezed out of the market. 'We trade on the fact that we know about what we sell,' argued Ray Rice, CMS Peripherals business manager.

'Storage and networking is still the realm of the specialist.'

But he admitted that the difficult storage market climate required caution, particularly with entry-level products, where large distributors tended to focus.

'We need a low-cost distribution model at the low end because the broadliners have large economies of scale,' Rice added. 'But as we move up the range, customers appreciate the value-add of someone who understands what they are selling.'

And some broadline distributors are themselves wary of entering the high-end market. 'It's an area that needs significant investment in staff expertise,' said Sarah Allman, storage account manager at Enta Technologies. 'We have considered it, but for the present we are sticking with desktop storage systems.'

Peter Crane, marketing manager at reseller PSM Microcomputers, acknowledged the choice and brand awareness that broadliners provide, but disagreed that time was ticking away for the specialist.

'We rarely use broadliners in the storage and networking arena and almost always go to a specialist if we need specific advice. Broadliners are in danger of getting caught between a rock and a hard place because they slash margins for everyone by competing on price alone,' he argued.

Despite the current skills shortage across the IT industry, Crane believes the broadliners need to grow organically to succeed in areas such as storage, a sentiment echoed by IDC's Pearce.

'Buying a company may be like buying a cloud of smoke - all the staff may disappear as soon as you have hold of it,' he warned. 'It is possible for broadliners to succeed in high-end areas, but in certain cases, some have jumped the gun.'