Manufacturers are increasingly siding with distributors that offer pan-European clout as they bid to cut costs and react to the accelerating pace of channel consolidation.
Blue Coat now works with just three distributors in the UK – Noxs (recently acquired by Westcon) Computerlinks, and DNS Arrow – all of which have pan-European reach. When equIP declined the vendor’s request to make a pan-European investment, Blue Coat decided to call time on the partnership.
Security vendor SurfControl went down a similar route recently when it selected pan-European giant DNS Arrow as its sole distributor after ending a product-based relationship with e92plus in the UK. This trend was replicated in the voice and data arena last month when Alcatel-Lucent appointed Westcon as its first pan-European distributor.
Nigel Hawthorn, vice-president of marketing for EMEA and service providers at Blue Coat, claimed that most mid-sized manufacturers are gravitating towards a pan-European distribution model.
“Over time, vendors will side with one or two big pan-European distributors and fill the gaps where they don’t do business,” he said. “Manufacturers may only be represented by two distributors in each country.”
Bernie Dodwell, European security manager at Westcon, said: “All of the big players such as Juniper and Trend Micro are looking to rationalise their distribution channel because dealing with one customer on a pan-European basis is much cheaper.”
Cost may be the most obvious reason for vendors to make the switch, but recent changes in sales-reporting regulations have also tipped the balance in favour of pan-European firms.
Hawthorn said: “New regulations on sales reporting mean that US companies can now only recognise sales when they leave the distributor. This implies that your distributors have to be good at reporting and only the big pan-Europeans have got their act together on this.”
But the trend is also being driven by shifts in the European distribution landscape, which has been rendered almost unrecognisable by a spate of acquisitions over the past 12 months.
Two of Blue Coat’s UK distributors – Westcon and Noxs – are set to complete their union this month, creating a networking and security behemoth with presence across the continent. Westcon also announced plans to acquire UK voice distributor Crane last week.
Germany-based storage specialist Magirus pulled off a similar move last April when it bought European security giant Allasso.
US components distributors Arrow and Avnet have also acted as aggressive consolidators in the European market – the former recently pounced on UK storage distributor InTechnology and pan-European Sun partner DNS, while the latter completed its acquisition of enterprise distribution giant Access Distribution in January.
Harnish Patel, senior vice-president for EMEA at SurfControl, said he expected to see more consolidation among software distributors in 2007.
“Ten years ago we saw consolidation in the hardware market,” he said. “We’re now seeing consolidation in the software space and that’s being reflected in the channel.”
But what impact will the flow of power into fewer hands have on UK resellers? Hawthorn said that resellers can only gain from the regionalisation of distribution.
“If the reseller has customers that want to deploy equipment in other countries, the distributor can help them handle it,” he said.
Dodwell said that large integrators with a pan-European presence, such as Telindus, Integralis and Dimension Data, are actually driving consolidation among distributors themselves.
“They want a single contract, one set of Ts&Cs and one supply chain so they can reduce their cost of sale and overheads, and have more influence with the distributor,” he said.
However, Paul Spencer, managing director of UK security VAR Axial Systems, was more sceptical.
“For pan-European opportunities, it would be valuable to have a supply source without having to strike up a relationship with distributors in each country,” he said. “But this trend could also restrict choice. If a particular distributor becomes too dominant, it removes the incentive to be competitive.”
Chris Durnan, chief executive of security reseller Peapod, was also concerned about the recent pace of consolidation.
“When a big pan-European company buys a security distributor such as Noxs, which is small in the UK, the question is ‘can we then work with that organisation?’” he said. “We want to focus on security. My concern is that the acquisition will have an impact on Noxs’ portfolio.”
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