Reviewing the winds of change
A few weeks ago, I wrote about the struggling vendors and flourishing dealers I saw in the market. The ball has well and truly bounced back up the channel. While resellers deliver skills and help solve user problems, vendors and distributors - reliant on business models that manufacture and move units - have been suffering.
The consolidation is continuing as well - Siemens Nixdorf selling its German factory to Acer, Tech Data buying into Computer 2000. And that won't be the last of it. There are only a handful of important PC vendors now and there may even be future consolidation within this group. For IBM, services are becoming more important. For Compaq, the enterprise is the target. Dell needs a partner with a services arm - maybe Wang/Olsy.
Hewlett Packard is strong in the enterprise and in printers and tape drives.
Who needs to actually make PCs?
Companies that make PCs and lose money doing it, may eventually pull out and let someone like Acer make them. Unisys, AST and now SNI have done it already. Why not one of the big boys?
Can you imagine a day when IBM may not make PCs? It's difficult, but it is possible. Vendors are increasingly using the channel and, in time,they may do nothing more than design the machine and provide brandname marketing and the warranty.
Meanwhile, companies like Computacenter and GE Capital are eyeing the global market and Tech Data is buying into businesses - the higher levels of the channel are consolidating as well. We are on the brink of a major period of transition just below this level in the channel. The major PC vendors are signing up build-to-order and fulfilment deals with the major hybrid resellers and I believe we will now see a rapid disintermediation of the broadline distributor from the PC supply channel.
This trend will also affect the components market - monitors, keyboards, disk drives and memory - which will be bought by hybrids. And software, already heavily licensed, will go straight from a server in the warehouse into built boxes.
As a result of all this, distributors must think again about their business models. They have to become pure large-scale box movers, or deliver skills that can be used or resold by resellers. With products, it's a question of scale and logistics and big companies therefore have the advantage.
This is going to put a lot of pressure on second-tier distribution because many companies at that level simply won't invest in the skills and services or create models that will enable collaborative working with reseller businesses.
Resellers meanwhile, will be buying most of their products and fulfilment from broadliners or hybrids. And if product sales decline for a distributor before it has got its skills levels up and has the channel's co-operation, then it is going to be in trouble.