Medium-sized businesses with expanding networked PC environments have provided a boon for the local UPS market over the last six months, creating substantial services opportunities for resellers that have expanded their UPS businesses outside the high-volume, low-margin commoditised retail market. Helen Yeatman reports.
On the back of strong PC and server sales, the Australian UPS market has reported positive results this year, particularly in the medium-to-large enterprise sector where businesses are consolidating their servers and adding new equipment that require additional power protection.
General manager of sales and marketing at Invensys Powerware, Michael Mallia, said the vendor’s 2003 UPS sales had been a lot stronger than the previous year and that the UPS industry, as a whole, has experienced 5-10 per cent increases in UPS sales.
“Invensys plays in every sector in the market, from retail through to data centre and industrial sectors, and demand has not been narrowed to one particular sector of the market but across the board,” he said.
Mallia said Invensys’ retail UPS business had probably experienced the biggest growth over the last six months.
He attributed this to the greater emphasis Invensys’ major retailers, Dick Smith and Leading Edge, had placed on power protection products.
UPS vendor, American Power Conversion (APC), on the other hand had been focusing on the high end of the UPS market.
APC Australia/NZ managing director, Leanne Cunnold, there were a number of key drivers currently pushing the need for higher KVA UPS solutions. Cunnold said one of the key factors driving the market was the steady growth in PC and server sales.
According to IDC, the general server market is also growing. The server market for 2002-2003 for Australia in terms of unit growth is 5 per cent and revenue is growing at roughly 11 per cent. IDC expects PC shipments to grow 6.3 per cent in 2003.
“If both the server market and PC market is growing, then you’re going to see a growing need for power protection for this equipment,” IDC said.
“There is a huge install base out there of older units where people have bought a UPS five years ago but since then, they’ve continued to add servers, switches and routers. So what’s happening is UPSes are now under-capacity — there are too many devices plugged in for the UPS to protect. This has brought about a whole round of UPS upgrades as these companies scale up their UPS capacity.”
Invensys’ Mallia agrees that server sales have been strong and are pushing the UPS enterprise market. “Server sales have picked up and this business follows server sales pretty closely,” he said. “Also what we’ve seen lately is, in the aftermath of all those security issues, a lot of data centres being relocated.
“In the last six months especially, a lot of data centres have been rebuilt and refitted out with new server and UPS equipment. I suppose they would’ve been planned about one or two years ago and now their plans are finally coming into fruition. Companies are starting to decentralise and are buying new facilities as well as new equipment.”
While the large data centre rollouts that the industry enjoyed in 2000 pretty much dried up, vendors and their partners were picking up medium-sized corporate and telco supply deals.
A couple of trends APC has been privy to are increasing demand for rock-mountable IT equipment like servers and UPSes, and a trend towards server consolidation which is driving the need for higher KVA UPS solutions — computer rooms with four racks upwards.
Subsequently, over the last 12 to 18 months APC has been frantically realigning its business units to take advantage of this market and released a new UPS product that offers wide scalability to suit growing companies — from SMEs to large data centre customers. However, this side of town is fiercely competitive and largely occupied by Invensys Powerware, Liebert (Emerson Networks), MGE and Chloride.
“APC’s InfraStruXure range starts at 10 KVA (kilovolt-ampere). It’s designed for people who are building out computer rooms and are looking for a scalable modular solution. It’s also aimed at customers that are looking to expand their IT infrastructure in the future but are unsure at what rate.”
Over the last nine months distributor, Express Data, has been working closely with APC to take the InfraStruXure products to market and to penetrate new areas of the UPS market where there are greater opportunities to generate services revenue.
“Our business has been pushing APC’s InfraStruXure high-end back-up solution,” communication division manager at Express Data, Gavin Lawless, said. “We’ve been making a push into this area, which for us is a move away from the traditional market for commoditised UPS products, and are trying to push ourselves higher up the food chain.
“Our business has always been about trying to find opportunities outside the commoditised area, opportunities where we can actually add value.”
Lawless said that its high-end UPS business was slow to start with but, within the last nine months, Express Data had picked up some lucrative UPS supply deals, particularly within the banking, manufacturing and insurance verticals.
The bulk of Express Data’s high-end UPS business comes from tier-one customers like Dimension Data, Alphawest and IBM GSA.
“These guys have the relationships with the Top 200 customers and those are the customers that are obviously the focus for a product like InfraStruXure,” he said.
Lucrative UPS hardware and service supply deals with large organisations are highly sought after by vendors and their partners because of the high service requirements of larger roll outs.
“Both APC and Express Data obviously see big opportunities in the services area, and the more complex the solution, the more room there is for services,” Lawless said.
Express Data has been generating additional UPS services revenue by selling APC services such as extended warranties, commissioning installation and onsite maintenance.
An advanced knowledge of electricity and its relationship with technology is required to service mid-to-high UPS devices, which is out of the scope of IT resellers and distributors. Subsequently, the majority of UPS vendors provide their own services using their own electrical engineers and their resellers earn a margin by reselling the services.
APC on the other hand employs third party IT service providers to carry out the services.
Cunnold said that location and experience in servicing power protection customers were key considerations when selecting an APC service partner.
APC currently employs around 12 authorised service provider partners around Australia and almost exclusively pushes its product through major IT distributors Tech Pacific, Ingram Micro, Express Data and Anixter.
While this strategy has seen APC subjected to the vagaries of the local IT economy without the stability of other verticals, it appears to be working in its favour. Based on IDC data, APC Australia grew twice as fast as the rest of the IT industry in 2002.
Cunnold also attributes this growth to its commitment to its channel partners and reseller programs such as its Reliability Upgrade Program which have enabled its channel partners to increase their UPS add-on sales.
“It’s designed for resellers to optimise the reliability of their customer’s IT equipment and focuses on battery replacement kits, warranty extensions, on-site warranty services, trade-ins (trade in an APC or non-APC UPS and upgrade to a later model), and the issue of management accessories,” he said.
Lawless suggested resellers that want to ramp up their UPS businesses would find opportunities out of the commoditised area, where they could gain incremental revenue through add-on sales.
“Find areas that are niche or that aren’t being done,” he said. “There are so many resellers out there that are doing just what the guy next door is doing and don’t offer anything different or don’t look beyond just moving boxes.”
Cunnold said there are currently professional services opportunities for resellers with remote management facilities that also have a large install base of power protection customers to provide remote management services for some of APC’s larger KVA ranges.
“There is definitely an increasing trend where customers want remote monitoring services,” he said. “Typically these resellers would have to have an installed customer base in the hundreds and would have to have a remote monitoring business already set up where they are managing other IT equipment and just add UPS to their services offering.”