NEWS ANALYSIS: Channel missing the tablet boat?

Watch out for the Android Squeeze and look to value-add services

As vendors fight an almighty war with Apple to find relevance in the massive tablet market, there is strong debate as to whether the channel is missing out on a lucrative business opportunity.

In the last month, HP dumped its TouchPad, and Google snapped up Motorola, which is just as well because Apple is suing, well, everybody it can over iPad patent infringements.

The tablet market has never seen so much volatility.

Since Apple sparked the tablet frenzy with the iPad in 2010, a number of vendors have released their own tablets typically running on the open standards Google Android OS.

Indeed, Android has steadily nabbed market share in the lucrative tablet space but the operating system does limit the way vendors can compete with Apple.

Telsyte research director, Foad Fadaghi, calls it the Android Squeeze.

Tablet vendors that use Android OS have to share revenues with partners, can’t make money from selling applications and therefore can’t afford to lower the prices of their products.

Meanwhile, Apple, with a closed platform and draconian distribution, doesn’t have all those hurdles to deal with. With an efficient supply chain, if Apple really wanted to undercut the competition in price, it can afford to, according to Fadaghi.

Despite the tablet market growing rapidly, Apple still has majority market share in that space even though the iPad still carries a hefty pricetag.

“Android needs to be cheaper than Apple in order to sell,” Fadaghi said. “Take smartphones for example: It wasn’t until prices for Android handsets came down significantly that the platform really took off.”

But the Android Squeeze compounded by patent litigations, which is becoming increasingly prevalent, it is hard for Apple competitors to make a decent margin let alone lower the price of their tablets.

While the vendors are battling it out in the tablet minefield, the channel seems to have been sidelined.

The favoured distribution model for tablets is to go direct while bundling devices with a telco service. Vendors have partnerships with telco providers, usually selling tablets with bespoke data plans through retail shopfronts.

This essentially cuts out the ‘middle man’; the IT channel players. This is not only happening with tablets but other products such as PCs and smartphones.

“Apple has a preference to go through its own stores and this is creating a ‘follow the leader’ scenario,” Fadaghi said.

“Microsoft already has a direct store in the US, Google might even come out with one and even BlackBerry has kiosks set up in the UK.

“The direct model seems to be taking over a little bit and it’s creating a threat for resellers.”

Expectation

The shortfalls of Apple competitors also present another hurdle for channel players, according to Designwyse managing director, Robert Kloester.

“The reason the Androids and Windows tablets are struggling is there is nothing they can do that the iPad and iPhone are not already capable of,” he said. “I would think it would be difficult for the broader channel to find a play in the space at the moment.

“The expectation is still that Android will overtake the iPad at some point, so there will still be opportunities for those channels if Android can get its act together.”

Mobility devices distributor, Tegatech, however, saw great opportunity for channel players now especially in the business-to-business (B2B) market.

“At the end of the day there is still a network of trust between the channel and customers, especially with the B2B guys,” Tegatech founder and principal, Hugo Ortega, said. “They don’t want to go to Harvey Norman and buy a bunch of tablets – the bloke at Harvey Norman wouldn’t have the same expertise.

“So no matter how much you cut the channel out, there are ways for us to play in that space.”

Tegatech has made it a mission to arm its resellers with in-depth knowledge of tablet products which can then be paired with value-added services.

It is not about just giving customers an alternative to the iPad, but actually analysing customer needs and giving them a package solution that fits best, Ortega said.

“You have to add value for customers to stick by you especially now since people are more fickle,” he said. “Before you could have gotten away with not adding value but those days are long gone; they were gone post-GFC anyway.”

What Ortega means by value-added services is providing software and hardware accessories with tablet devices.

One example of this is the distributor’s work with one of its resellers, TechnologyOne, in Queensland.

The pair have been working together to deliver turnkey solutions to municipalities, particularly councils, in the state. The solution might be tablets with preloaded business applications or barcode scanner and printer bundles.

“The channel needs to wake up and understand the tablet market volatility is not a threat but a profiting opportunity,” Ortega said. “It gives them the opportunity to get to know the products better and learn more about providing value-added solutions.”

Additional reporting by Matthew Sainsbury

CHANNEL CHOICE: Vote Now for your favourite in the three categories: Vendor, Distributor and Reseller. Voting closes August 8.

Tags Motorolabusiness-to-business (B2B)hp touchpadAndroidtelsyteTechnologyOneAppleHarvey NormantegatechmobilityMicrosoftsoftwaretabletsmobile solutions

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