VARs across the board have diversified in recent years to sell more software, enterprise architecture and services. Value has also become the watchword for the channel's middle tier, with the big players invariably wincing at the mere mention of the word "broadliner".
With the continued precipitous decline of the PC market and the rise of consumer technology - and employee influence - in the workplace (at least if you believe the media hype), does the enterprise PC channel have a future at all, and can VARs and disties support the provision of both client and infrastructure hardware under the same business model?
One man who thinks not is Fabian von Kuenheim (pictured), former chief executive of Magirus, who bid his farewell to new owner Avnet earlier this month. He believes that resellers and distributors will need to choose in the coming years whether they wish to pursue business in the datacentre or the desktop.
"Consumers are taking over the purchasing of devices and that means this business has become a consumer/retail-type business and will completely disconnect from the classical enterprise-focused datacentre business," he said.
With individual consumers assuming control of purchasing decisions for client technology, selling PCs will require completely different sales and marketing strategies from selling servers, believes von Kuenheim.
"I think resellers - and automatically also distributors - will have to adapt to this reality very quickly. They have to decide if they are datacentre-focused or consumer-focused, but they cannot be both."
Paolo Vecchi, chief executive of open source-specialised distributor Omnis Systems, counsels that, irrespective of the BYOD trend, the PC channel would do well to take a more consumer tack.
"If you look at the biggest [players] such as Microsoft and Google, their marketing and sales have always been primarily consumer-focused. I think many resellers and distributors could have benefitted from the same approach- it has always been the best way to make inroads into client computing," he explained.
Get big or get niche?
However, Jason D'Cruz, marketing manager at distributor VIP Computers, posits that implementing a BYOD policy is not simply a case of allowing your staff to bring in their tablets, sitting back and reaping the rewards.
"In the long run distributors will fare better by having all these solutions in one place," he explains. "There is too much of a risk of becoming too niche by focusing on just devices, for example, so the other important facets which also make up a successful BYOD policy, such as software, security [and others] will be overlooked."
"Distributors should remain solely focused on closing business sales and pushing business devices," he said. "The IT department is looking for a simple approach to manage security, admin and the inherent costs of rolling out a BYOD policy, so finding solutions that will help them achieve this is a totally different marketing message than targeting consumers with a device."
Will Newton, head of BusinessOne at SAP, claimed that increasingly "B2B2C is becoming a sales and marketing model of choice", where once B2B and B2C were wholly separate.
"I am certainly starting to see a consumer approach adopted by marketing and sales teams across the industry," he added.
Newton believes that distributors and resellers will ultimately have to treat their infrastructure and client business as distinct entities.
"While there is a clear overlap and the two have obvious synergies, it will become increasingly important for resellers and distributors to become specialists, particularly as the multitude of technologies and devices is only going to continue to grow," he said.
Andy Dow, marketing director at Computer 2000 (C2000), firmly believes that his business can continue to prosper selling both client and datacentre technology. He argues that the company's "collection of specialists" approach recognises the need for differing business models, while at the same time allowing the company to maintain economies of scale.
"The [C2000] model is absolutely honed to deliver client technology in the most efficient and effective way possible, whereas Azlan is absolutely equipped, manned and steeped in the value required for enterprise business. We recognise there is a different support structure but they can both survive within one distributor," he said.
Dow argued that distributors would diminish the levels of service provided to resellers and vendors by "adding more barriers".
"The whole concept of the ‘collection of specialists' is that [each unit] is as specialised as any specialist distributor - and maybe more so because they can use the infrastructure of a large distributor. Whether it is the individual users or the corporate entity buying [the technology], the distributor is there to service the channel.
"Client products are going to be around forever. The only thing
that will change is that the volume of those products will keep increasing. In the past, everyone had one computer. These days, for example, I have four devices on my desk. Client is an ever-increasing market and distribution is brilliantly placed to continue to be the source for that."
But Eddie Pacey, managing director of EP Credit Management and Consultancy and former credit director at Bell Micro, argues that "since 2008 it has been progressively more difficult to see these elements co-exist within manufacturing and, invariably, distribution". He explains that the two areas have historically provided top- and bottom-line growth, but in the client space the channel has increasingly become "usurped by stronger market entrants and more direct market routes".
"The dilemma for some distributors is how to unravel the historical blend without a deterioration in revenue and further erosion in margin, an area under extreme pressure given these are now between four and seven per cent and often rely in some cases on volume rebate to bulk up," he said.
"Any distributor with margins of less than five per cent should pack up and go home or simply turn to logistics and wholesaling as a business. The opportunity is there for those who bite the bullet and move on, and for those more specialised [distributors] who, sensibly it appears, never engaged in volume product."
But Pacey adds that "the pressure on the reseller is markedly less" as they may see the benefit in selling volume kit as a way to "buff up overall deal value" and cement relationships with customers. But continuing to pursue client revenue may be more fraught for smaller players, he suggests.
"It's less painful for the bigger resellers as they can obtain volume product direct but for the vast majority, this is not an option," he said. It is evident to me that those resellers who have made the decision and progressively moved to enterprise and services are now showing slower but more resolute and profitable growth after an initial decline."
How low can you go?
The IT industry hardly needs reminding of the challenges facing the PC arena, but even by the gloomy standards of the past couple of years, the market's performance in Q1 was dire. Indeed, the EMEA market declined 16 per cent, which is the biggest fall since Gartner began tracking shipments. And this comes after the two previous quarters also showed a sharp drop: how much lower can it sink?
"The EMEA market suffered from a fundamental shift in the role of PCs in the consumer market," said Gartner principal research analyst Isabelle Durand.
It is perhaps worth noting that the only vendors to perform at all well were Lenovo and Apple, which focus largely - exclusively in Apple's case - on the desktop rather than the datacentre. Much of the Lenovo business comes, of course, from the old IBM PC division, which Big Blue spun off in 2005 to focus on software, services and enterprise infrastructure.
HP tried to pull a similar move two years ago but was ultimately foiled by jittery investors. And now Dell wants to go private as it seeks to become a more profitable, solutions-led business. Is the writing on the wall for companies seeking to be end-to-end providers at all levels of the supply chain?
Eddie Pacey said: "IBM moved away sensibly well ahead of others, and it now looks like Dell may do so ahead of HP. This surge we all know as consumerisation and mobility is possibly the most significant seismic shift we have witnessed. This coincided with cloud, datacentres and outsourcing and a combination of the two presents both dilemma and, it has to be said, opportunity."
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