The feeding of the 40,000

According to Microsoft, there are about 40,000 small or medium-sized dealer businesses of some kind in the UK. That's an astonishing number. Over the past decade, it's been assumed there are perhaps 5,000 or 6,000 companies that make up the core reseller community, and no more than 10,000 at most. But 40,000?

Like many other vendors, Microsoft has been trying to pin down the SME market for months and one way of doing this is by finding the people that service it - the smaller resellers. Microsoft's research has found this astonishingly large community.

And I can believe it. The PC market has kept on growing over the years and, in spite of the volatility for vendors and increasing consolidation at the supplier end of the market, we have seen new routes to market open up at regular intervals - direct sellers, mail order, catalogue, local assemblers, retail, online.

Surely it can't go on? Well, it seems it can. IDC is predicting a 14 per cent growth in western European PC sales this year and, although they'll be cheaper, that means there's a bigger market to address. That will lead to more business for trusted 'brand' players, but also for the local assembler and garage-based dealer, as well as the mail-order and catalogue firms.

But there are also some worrying signs in the channel. The number of vendors is contracting fast - in PCs there are only half a dozen significant players and in software there's only one.

These vendors are all chasing volume. They simply can't get around all of the smaller dealers and they'll be looking for distribution or reseller partners to help them. But distributors are under pressure - look at Datrontech.

Not only was there a glut of products this year, but there's continuing pressure on prices - and service is meant to come as part of the package as far as customers are concerned.

James Wickes, managing director of Ideal Hardware, writing in PC Dealer on 2 September, commented on the need for companies such as Ideal and Datrontech to work harder at reducing the cost of transacting business.

But he also stressed the importance of adding value because when value to the customer goes down, so do profits.

So distributors are also trying to cut their costs and improve their value-added services at the same time. That's hard work under present circumstances and it would be almost impossible to reach 40,000 people.

Yet we must rely on them to be successful.

These distributors are the ones that are best-placed to service the smaller resellers. But they are under margin and cost pressure - they are not in a position to launch initiatives aimed at helping the 40,000. And they are beholden to some degree to their shareholders who want to see profits every year, and preferably every six months.

None of the leading PC vendors seem to have any answers either. Until they find a way of reaching everyone, the SME market, which they are all so keen on, won't get the service it needs or wants.