Last year the UPS market boomed - telcos and large ISPs embarked on a frenzy of construction, dotting the countryside with co-location data centres. Well, not any more. Many of the telcos have disappeared and an even greater number of ISPs have become extinct, taking with them the one-off money-making projects that kept UPS vendors' coffers full.
Amid this flurry, the channel held firm. "The IT channel is our bread-and-butter stuff," says Michael Mallia, of UPS vendor Invensys Systems.
Still, the disappearance of some lucrative revenue streams has seen UPS vendors searching for other sources of revenue, sparking a flurry of mergers and acquisitions over the last 12 months. Invensys figured the easiest way to descend from its corporate-sector perch was to purchase the success of Sola, whose UPS products are doing well at the retail level. Invensys also consumed Total Power Solutions (TPS), one of its distribution and integration partners, which had dabbled briefly in the manufacturing of electronic power products.
Meanwhile, General Electric has taken over IMV and started building UPS products into white goods, hi-fis and home appliances. Bouke Siebenga, division manager for GE-IMV energy systems at Nilsen Technologies, which is the sole Australian distributor for GE-IMV, says the move is representative of the UPS market branching out and applying itself beyond traditional applications.
Tripp Lite's tenuous existence in the Australian marketplace has been terminated, with Asia-Pacific manager Don Seaton pulling Tripp Lite out of Australia in mid-November, just 18 months after taking it on. Seaton blames the company's US headquarters, which refused to assign a service partner or commit any marketing collateral. He says the attention of a local sales force boosted the vendor's revenue in the region by $US90,000 on the previous year, however a lot of deals fell through because resellers wouldn't buy a product that wasn't supported.
"It would have been far too costly to do [the service aspect] myself," says Seaton, a statement that Chris Gemmell, managing director of Ultimate Power Solutions, Tripp Lite's NZ-based distributor, emphatically disagrees with.
Gemmell, who has carried the Tripp Lite brand for nine years, engages a third-party technician to look after the service side of her business as well as taking a hands-on approach personally. She says there is good margin to be made in providing services around UPS and spends much of her time in training seminars, educating the channel on how to sell UPS solutions.
"The biggest problem is that resellers don't include it in their quote," says Gemmell. "I'm tough on them. I tell them: Did you know that if you don't include UPS in your quote and something goes wrong you could be sued?'."
Gemmell can't stress the importance of this enough. "We get customers approaching Ultimate Power Solutions directly for a UPS solution. When I ask them why they didn't go to the reseller they say, We didn't think they knew anything about UPS. Ultimate Power Solutions only sells through the channel so I tell the customer what products they need and redirect them back to the reseller. Then I ring the reseller and make them aware that they're leaving money on the table."
Leanne Cunnold, managing director of UPS vendor APC Australia, is another fan of channel education. Unlike antivirus or security, she says UPS is something that every reseller can take on board, from enterprise-level SIs to the mum-and-dad corner store.
"UPS gives [resellers] another incremental revenue stream within their existing accounts without having to prospect for new business. What's more, it makes their customers' systems more reliable so their satisfaction increases," Cunnold says.
"A $2000 home PC is still an investment. The expense of it breaking down and getting it repaired increases that investment fairly swiftly and that's something every customer wants to avoid."
Newcastle-based Computer Wizards is one small dealer that has taken Upsonic's UPS products on board with great success, coupling it with antivirus as part of a protection offering. Traditionally a "box dropper", Computer Wizards realised it was banging its head against a wall by trying to squeeze a living out of PC sales and repairs.
Tripp Lite's Seaton urges resellers to be aware of the links between security, storage and UPS. "UPS is really going to boom because people are really looking at the security side of their infrastructure. In this respect, September 11, as bad as it was, did the UPS market a huge favour," he says.
Still, with all the opportunities the current market presents, it is still a tough market. "You've got to hunt around and do a lot of cold calling," says one Upsonic salesperson.
Indeed, it is the lack of aggression on the part of the channel that most frustrates the UPS sales process. "Resellers just don't want to educate themselves. Gone are the days of hunters and gatherers, they're really looking for an easy sell," complains one vendor.
Often clinching the sale is as simple as changing the terminology associated with it, according to Ultimate Power Solutions' Gemmell. "Call it a business continuity solution as it has a positive ring to it. Don't sell them disaster recovery," she says.
A great inhibitor to reseller awareness is that a lot of the statistics associated with power disturbances and the havoc they wreak in IT infrastructure get buried. "Eighty-five per cent of all CPUs that need to be serviced have power-related problems," Gemmell says. "Software is particularly susceptible to power fluxes. With Windows 3.1, for example, we put UPSes on all our systems running it and we haven't had a problem since."
Seaton says this frailty is not confined to PCs but extends throughout the network to point-of-sale systems and printers.
"As products get more technical, they also become more sensitive and susceptible to power problems because they've got more bobs and bits in them," he says. "Fisher & Paykel is starting to bundle power protection products with its fridges and in the first year has saved up to $US5 million on service call costs alone."
James Fraser, distribution sales manager for MGE UPS Systems Australia, says the deregulation of the power industry in Victoria from February 2002 should be a major concern for businesses and consumers. He feels it marks an era of increased power outages and disturbances as private companies cut costs to win customers, thus leaving less funds to spend on the maintenance of the power network.
"We had a power outage earlier this month in the Melbourne CBD that lasted a couple of hours," says Fraser. "Most of the big companies sent people home, not only because they couldn't work but also from a safety point of view. The cost of this kind of outage would run into the hundreds of thousands, easily."
Fraser's concern is echoed nationwide and is one that Invensys' Mallia believes will spark a resurgence in UPS sales. "Power companies are more focused on profits and less on maintenance. But of course they're not going to tell the consumers that - that's where resellers come in."
The problem is not confined to business users either. Up until recently, the town of Mullumbimby, in Northern NSW, had its power supplied by a local power station. The power was clean and constant. In the deregulation process, the supply contract was taken over by a Queensland power company and the local Mullumbimby plant was promptly shut down. Nowadays, Mullumbimby is subject to regular blackouts, often for prolonged periods.
And things are likely to get worse. Seaton claims that buried in documents that neither the government nor the private power suppliers want the world to see are stark confessions that Australia's national power network is 15 years behind where it should be. "We got complacent with our network, it's old and the problems we have now are just going to get worse," Seaton says.
The shifts in the UPS industry over the last year are expected to continue in 2002, according to most. The breadth and diversity of UPS installations is driving vendors to lend more support to their local resellers and offer more complete solutions. APC made three acquisitions throughout 2001 to complement its offering: a precision air-conditioning firm, a cabling company and a rectifier manufacturer.
Meanwhile, US-based Opti-UPS is in the process of establishing a warehouse, sales, help-desk and service facility in Melbourne after its former distributor Chips & Bits was bought out by Queensland-based IT Wholesale. Greg Jan, regional director of Opti-UPS Australia, says the vendor expects to reap $A1.5 million in its first year. It has already signed Synnex as a distributor and is currently searching for other regional disties and networkers.
"The coming year will see the loss of some companies, either withdrawing from the marketing or being consumed by others, but it won't be any of the big guys" says MGE's Fraser.
"The UPS industry has never thought about going backwards and it won't start now," agrees Mallia. "The need will always be there."