An influx of vendors into the booming SME market is both a boon and a danger for the local PC channel, according to IDC.
On the one hand, tier-one vendors moving down and tier-two players moving up to the mid-market presented resellers with plenty of choice, PC analyst at IDC, Michael Sager, said.
"The hitch is that you have the IBMs and HPs of this world against Asus and LG in the same space," he said. "Fierce competition between vendors could make the increased margins available in direct strategies more attractive.
"Vendors such as Dell do well in SME because they cater to lowest prices," he said. "Certain verticals, such as retail, only care about price because they just want basic point-of-sale devices. Resellers in those spaces should be wary."
While resellers found it hard to compete on price alone, Sager said there were still verticals where warranty, services, support and additional hardware features would allow the channel to compete more effectively.
"A vertical like insurance broking needs other capabilities like warranty and support plus high-end capabilities and features to beat their competition," he said.
According to Sager, much of the current growth in SME was linked back to a slowdown at the top end of town.
"This is a much slower year than 2004 because government spending is generally low and large corporates have gone through refresh cycles," he said. "Consumer and education are keeping the market alive, but SME is still the strongest growth category."
Sager also advised resellers to strike quickly as the current refresh in SME was likely to end after the current quarter.