PERSPECTIVES - Reseller viewpoint
A difficult market for dealers, but there are profits to be made if hthey look beyond selling hardware.
If the notebook market starts to be dominated by the direct,made if hthey look beyond selling hardware. off-the-page and retail routes in 1999, few dealers will mourn its passing hfrom their hands. Resellers find it almost impossible to make money from hnotebooks.
Debug sells to both corporates and SME businesses. Managing director Simon hHaigh says it's better for the sales staff to spend their time elsewhere. h'Selling notebook technology is neither the most riveting aspect of doing hbusiness in IT nor is it the most lucrative. With price points and margins hin their current state, you've also got to work extremely hard to make hmobile technology profitable,' he says.
Jonathan Chapple, chairman and managing director of corporate reseller hEquanet, says, in theory, there's more money in notebook add-on services, hbut that's not always the way it works. 'Most users won't pay more for the hextra benefits of portability. The user profile tends to be higher level, hwhich means they scream more loudly for help when things go wrong.
They probably get better service without paying more for it than desktop husers.
'Notebooks are a pain in the butt - more complex to use, to configure, to hsupport and to maintain - yet recoverable, added-value support charges are hprobably about the same,' he adds.
Mike Hill, managing director of SME reseller Greengage Computers, has hsimilar views. 'We try not to sell notebooks. They are more of a commodity hthan PCs, they fail more often, manufacturer support is worse and hconfiguration is more difficult. As far as I'm concerned, the hmanufacturers are welcome to sell them direct.'
Andrew Bryson, technical director of systems house CQ Technology, only hreacts to customer demand for mobile products. 'We don't really do a lot hwith notebooks. They're still very expensive in comparison to the hworkstation, yet more users tend to want to use them because of the hportability from home to office. We have no concerns one way or another hregarding this market - notebooks tend to be for mobile users or senior hexecutives and it's assumed that costs will be high.'
Many companies are now not even bothered whether they take a brand-name hproduct or not, he adds. 'There are a number of good products on the hmarket. We no longer have to solely rely on the big brands to get reliable hequipment. Notebooks are now also coming in more realistic sizes, with hfaster processors and higher capacity hard drives.'
Direct, off-the-page and retail notebook sales are taking off and while hresellers can still sell to the corporate market, the situation is hchanging, led by the more dynamic consumer, says Chapple. 'The distinction hbetween direct and indirect is blurring. Until now it has been largely hphysical, concerning supply chain costs such as people, stock, space, hcommunications, product handling and delivery.
'Virtual indirect trading models which suit corporate customers will heventually hurt traditional reselling business models. So far, most hvirtual indirect selling is consumer-orientated,' he adds.
The opportunities remaining in the business-to-business dealer sector have hless discernible edges, but there are some out there, says Haigh.
'We are beginning to feel a big pull from organisations looking to replace hincumbent mobile devices and, in many cases, even existing desktop htechnologies.'
Dealers must try to sell their expertise instead of pushing just the hhardware, he adds, but customers also need to put some trust in the hreseller.
'Corporate customers have to understand that their attitude to buying IT his as crucial as the dealer's attitude to selling it. They mustn't happroach the table with a specific, set-in-stone shopping list.
'Customers should trust in their suppliers' expertise and knowledge. It is hthe reseller's job to solve the mobility problem, not supply the hardware hand let the users try to solve the problem for themselves.'
In spite of the growing confidence of the IT buyer and the rise in direct hand retail sales, Haigh thinks companies are starting to ask for advice hmore often. Steve Clarke, general manager of specialist dealer-distributor hMobile Partners International (MPI), agrees and says many companies are hdefining their needs much more clearly now. This might change buying hpatterns.
'It's common sense,' Clarke says. 'You start with a set of business hproblems and then find a solution. This is a much healthier starting point hthan saying, I want to sell this laptop so how can I make it fit the huser's requirement?
'Companies, especially at the corporate end of the market, are much more haware of their options now. They are beginning to realise that they don't hneed to arm every employee with a full-blown laptop with a meaty processor hrunning Windows 95 or NT. Why bother when you can get away with providing hthem with a PDA running Windows CE at a third of the cost?'
Haigh agrees: 'A broader range of products, together with the wider hvariety of form factors and lower price points, means companies now have a hmuch wider choice. Corporate buyers are much more able to pick and choose h- instead of having to spend a minimum of #1,200 to satisfy even the most hbasic mobile user's needs. Products are now available at a third of that hprice. Not only are these products a more cost-effective option, but they hare often more user and application-specific anyway.'
In essence, PDAs and similar small mobile devices are what real personal hcomputing is all about, says Clarke. 'The information carried on the hdevice is absolutely user-specific and it can deliver everything the user hneeds in a cost effective, fully portable format. Moreover, the PDA can hdovetail perfectly with the user's desktop or laptop, so information hsharing is seamless. Companies are beginning to see the potential cost and happlication benefits and are buying into PDA technology in their hundreds. hI think we are going to see a significant rise in the numbers of PDAs sold hover the next few years.'
Martin Butler, product manager at ICL's reseller business, is slightly hmore cautious. 'People tend to think PDAs and notebooks operate in the hsame area of the market. Although their paths are beginning to converge, hthat's not really the case at the moment. Until late last year, the hWindows CE-driven machines were beginning to stagnate in the channel as hthere was no real volume demand. Form factors were restricting demand hfurther and CE was having some teething problems. It will be some time hbefore PDAs are in widespread use and, in the meantime, the channel needs hto educate the market before volume adoption will take place.'
However, Butler predicts an upturn later this year. 'Usage is becoming hmuch more application driven and while the new version of CE has remedied hmany of the problems of its predecessor, there have also been improvements hin other areas. Manufacturers are still playing with form factors and htrying to improve functionality. They are trying to extend battery life, hand features such as colour displays ought to add further appeal.'
Haigh's view is that the handheld technologies have a place in the market, hbut not to the exclusion of all other competing technologies. 'The smaller hmobile devices, such as palmtops and PDAs, have created some very specific hniches in the mobile market. But they're not necessarily taking over the hold ones. The introduction of these technologies is sub-dividing the hexisting market as much as it is originating and fuelling the growth of hdifferent market sectors.'
He believes the best approach is still selling a system, not just a piece hof hardware. Dealers should be asking the corporate customer what it is htheir business needs to achieve through the acquisition of mobile htechnology.
Is it mobility? Remote access? Space saving? A combination of all these hthings? Going through this fact-finding mission is a simple, yet essential hlogistical process, but one that is all too often overlooked by resellers, hHaigh believes.
'What dealers have got to remember is that, as in most other hardware hmarkets, they are not going to make any margin by simply fulfiling their hcustomers' demand for notebook hardware. Supplying the product is just one hfacet of service provision.'
He adds that, as deployment is becoming much more applications-driven, one hof the most effective ways to really satisfy and impress the customer - hand make margin - is for the dealer to make himself and his expertise an hessential, integral part of the overall package.
Haigh points out: 'The serious customer will always look at a product or a hconcept differently - not as just a piece of hardware. If you want to add hvalue, solving the customer's problem has to be your number one priority - hnot simply seeing if you can upgrade the customer from a 350MHz to a h400MHz machine.'
THE KEY PLAYERS
SAMSUNG
Having recently announced a number of product releases in the European hregion, the company behind AST is now making a renewed bid for a slice of hthe European notebook market under the Samsung brand. Its product offering his divided into three main families, all of which are available with a hvariety of specifications and processors. At #1,149, the VL5000 series is hthe company's standard all-in-one notebook product for the entry-level huser. Then comes the SN6000 series, aimed at the mid-range and priced hbetween #1,600 and #1,800, while for the more sophisticated user there is hthe high-performance M6000 series for between #1,800 and #2,600. The hcompany believes that because it is an originator, developer and hmanufacturer of so many notebook components, it can offer better pricing hon the finished article. It is already a leading brand in Korea.
THE KEY PLAYERS
SIEMENS NIXDORF
The first of four companies with between two and three per cent of the hWestern European notebook market, Siemens Computer Systems (as it is now hknown) remains the largest and most influential European vendor in the hmobile market. From the sub-#1,000 Scenic Mobile 350 to the high-performance Scenic Mobile 800, the company offers a comprehensive hrange of notebook technologies including ultra-light, ruggedised and hdetachable keyboard specification models. The Scenic family features a hmodular design and a broad range of processor, memory, hard disk, external hstorage and screen spec options to enable it to be tailored to meet hindividual customer requirements.
A CASE IN POINT
MPC International moved out of the notebook market two years ago and is hnow a Var specialising in networking and systems integration. MPC, once hTexas Instruments' largest reseller, pulled out of the off-the-page hnotebook market when falling unit prices and non-existent margins began to hbite.
'Notebooks are not the speciality they used to be,' says Mehool hSanghrajka, managing director of MPC. 'The number of notebook specialists hhas declined - even in the past few months a number of notable names have hmerged or broadened out.' Despite this, the notebook market has continued hto grow, he adds, with sub-#1,000 models opening up the general consumer hmarket. But he believes growth in this space will only mirror overall PC hmarket growth.
'The concept of the desktop replacement has peaked. Users can now afford hto have two desktop PCs - one in the office and one at home - rather than hone notebook. Hardware costs have fallen and so have telecoms charges.
The internet has made communicating between desktops much simpler, so if hthe purpose of having a notebook is simply to transfer data from an office hPC to a home PC, then using a notebook to do this is no longer hnecessary.'
Sanghrajka thinks it unlikely there will be price parity with desktops in hthe foreseeable future, meaning the user will look at notebook hfunctionality as the main reason for purchase, rather than as a desktop hreplacement.
'Concepts of mobile working and hot-desking can be achieved through hdesktop operating systems, without the necessity for the user to carry htheir own technology.' Developments in operating systems and networking hare allowing users to work at any workstation that has access to the hnetwork. Users can hot-desk over the internet or down ISDN lines. The old hargument of 'I need a notebook because I work all over the hbuilding/company/campus' is being killed off by the functionality of the hOS.
Sanghrajka says notebooks have finally hit the mainstream and their hrealisable potential will depend on whether manufacturers can hdifferentiate the technology in them compared with standard desktops. The hlatest Windows CE machines will mean that buying a notebook for email on hthe move is no longer a necessity.
Also, the falling prices and management functions of branded notebooks hwill mean that clones are more likely to be OEMs of known manufacturers hand not from the manufacturers themselves. In fact, this is even true of hsome of the better manufacturers who simply re-badge units.
'The market will continue to fragment along the lines of personal horganisers, CE machines, sub-notebooks and traditional notebooks,' says hSanghrajka. 'This will inevitably spread the demand across all these hfragmentations and perhaps get users looking at a desktop and a CE or sub-notebook system rather than a notebook.
'I think the opportunity to sell notebook PCs lies in niche areas such as hgovernment funding for education and internet in schools. Apart from that, hit will become part of the general hardware portfolio that the channel hsupplies,' he adds.
Sanghrajka does not see the 'commodity nature' of the market changing. h'It's been there for more than two years and will continue. Because of hthis, direct vendors will continue to grow their business, as will e-commerce companies. Other non-direct manufacturers will also eventually huse e-commerce to sell these products directly, despite what they say hright now.'