Gartner: Services key to survival for hardware dealers

Gartner: Services key to survival for hardware dealers

An analyst has urged smaller IT resellers and distributors to step up their services efforts and branch out from traditional hardware sales if they want to survive.

The warning follows the release of new PC shipment figures from Gartner, which attributed a surge in overall shipments to the introduction of sub-$1000 mobile PCs.

Hardware and systems group analyst, Andy Woo, said year-on-year growth for the local PC market in Q2 hit 20.1 per cent, more than four points above global PC growth. The key driver was mobile PCs sales, which leapt by an unpre­cedented 154 per cent.

While the figures showed vendors boosting volume, he suggested resellers and distributors would suffer from the tumbling prices.

"It is going to be tough for the channel," he said. "If vendors sell cheaper products, the channel is getting less. Unless you have some bargaining power, it is difficult to sustain profits."

To counteract this, Woo said resellers had to define their market segment and product line-up.

Another way to tackle the issue would be to supplement more traditional hardware items with complementary products like plasma screens that had higher margins, he said, but the channel would need to build up its services capability in the long run.

"It's not magic - the opportunity is beyond the hardware," Woo said. "You need value-added services like warranties, networking installation and servicing. Smaller channel players can't just sell hardware anymore."

But although margins had tightened in Q2, Woo said he expected the pricing war to lessen in the next couple of quarters as components pricing globally stabilised.

"We are seeing pricing moving up on componentry," he said.

"Even $10 is a lot in the PC game. So we will see some pressure from this. It will be interesting to see how fast vendors like Dell and Acer can further reduce prices."

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