Editorial: Looking for pastures new

Editorial: Looking for pastures new

Australia's three largest IT distributors have put their convergence cards on the table following the news that Synnex is to launch a communications division next month.

The Melbourne-based outfit has expressed concerns about a slowdown in the desktop market and is clearly looking for other avenues to make the most of its logistic capabilities. Components will no doubt continue to be the mainstay of its business but it makes perfectly good sense to explore different opportunities - especially when they will provide better margins for all concerned.

Ingram Micro and Cellnet have also made it quite clear that they are pursing a three-pronged long-term strategy of distributing technology, communications and consumer electronics products. I am not suggesting for one minute they are the only players in the market to take this path, but it is significant that all of the big three are headed in that direction.

The question now for many smaller competitors will be whether or not they should look to introduce similar diversity or stick to what they know best. While bigger margins are always attractive, there are inherent dangers in spreading yourself too thin and playing in markets that are not your field of expertise. Nevertheless, it is a strategy worthy of serious consideration.

Diversification is also flavour of the month for some of the vendors in this week's issue. Lenovo is to significantly broaden its portfolio for a push into SMB and consumer markets (see ARN August 24 edition, page 6), while memory vendor, Kingston, attempts to go the other way and establish itself in the corporate arena (page 12).

The Lenovo announcement is an interesting one from a branding perspective. Some analysts and industry commentators had questioned the wisdom of IBM allowing Lenovo to retain the ThinkPad and ThinkCentre brands given that those names are so closely linked to the IBM name. The argument was that the Chinese vendor would naturally look to broaden out of the enterprise space, which would mean using cheaper parts in order to be competitive, and could weaken the reputation of ThinkPad and ThinkCentre. Because those monikers are so closely linked to the IBM name, it had been suggested that any reduction in quality would reflect badly on Big Blue among some end-users.

In solving the problem, IBM is going to take a leaf out of Sony's book. Widely regarded as a premium consumer electronics brand, the Japanese vendor wanted to play in the youth market but was obviously keen to retain the value of its own label. The answer it came up with in the Australian market was to point a completely different brand name, Aiwa, at the more price-sensitive end of the market.

For the other computer vendors, the arrival of Lenovo in the SMB and consumer markets is likely to be greeted less than enthusiastically. This will be particularly true in the notebook space, where competition is already ultra-competitive. Lenovo has inherited a large pool of dealers that buy its products regularly and a marketing machine that will get its name recognised wherever it wants to play.

If it can retain the levels of loyalty that resellers accorded IBM, its entry into SMB could see some of the other brands deciding to pack their bags and leave the Australian market.

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