Falling prices blamed on commoditisation, the strength of the Australian dollar and margins being squeezed as vendors establish a direct presence in the market have all contributed to make 2003 a difficult year in distribution land.
Ingram Micro Australia managing director, Steve Rust, has pretty much seen it all before but admitted he had enjoyed the pressures of the previous 12 months. One of the biggest challenges he and Ingram faced during the year was the bold performance of the Aussie dollar.
“Having to manage the strengthening dollar was unexpected and created a lot of extra workload for us because we buy a lot of product in US dollars,” he said.
“It was a much more significant issue than it has been in previous years and required a lot of focus. It would be difficult to predict next year but our currency is tightly aligned to the US dollar and I can’t see it declining.”
As always, the behaviour of major vendors has important connotations for disties and dealers alike.
“We have had to deal with quite a lot of change in the channel during the year, with some vendor actions affecting our business,” Rust said.
“The HP channel restructure was quite messy in the first half of the year because there were more competitors following the Compaq merger.
But now they have cleaned and refreshed their channel structure in a way that makes it much more stable as we leave 2003.”
On a less positive note, Rust said many resellers had complained that HP going direct was having a negative impact on business.
He said the commoditisation of many products, with many prices falling by 20 per cent or more during the year, had put a strain on resources and meant the distributor had been forced to do more with less.
“Notebook, desktop and server prices have fallen sharply, which means we have had to sell more units to reach the same levels of income,” he said. “This has put a lot of pressure on our internal processes to churn through so many more units at a lower price to make the financials work. That will continue to happen in 2004.”
Reflecting on areas of strength during 2003, Rust said Ingram Micro had a strong components business in the first part of the year and SMB had been strong throughout.
He said the security, networking and storage (SNS) division had grown sharply as resellers started to understand the distributor’s offering in the wake of investment and communication through newsletters and seminars.
“SNS has its own brand in the channel now. It offers a full range of technical support services that include assisting resellers with configurations and working with end-users to install solutions under the instruction of the reseller,” Rust said.
Ingram Micro has certainly had a busy year in terms of adding new vendors to its SNS portfolio as well as establishing relationships with leading brands – Acer, Trend Micro, Red Hat and Kyocera Mita were among the most prominent signings.
“We are approached by a new vendor every day but have been selective about the ones we have brought on,” Rust said.
“We have signed additional vendors to provide a broader offering to the channel but also to respond to a fall in the average selling price. As a broad-based distributor, it is also important that we provide a range of alternatives and offer the one-stop shop approach to acquiring products.”
Rust said looking for and implementing efficiency processes had been one of the more interesting aspects of his working life during the past year.
He said some resellers had already interconnected their back office systems with those of Ingram Micro and that several others had expressed an interest in doing so to drive efficiency. The distributor had now employed a full-time e-commerce manager to look after that section of the business and, he said, the use of Web purchasing was also showing dramatic growth.
“We have also been shipping products straight out to customers on behalf of our resellers because there is no value-add for our partners to store them in a warehouse,” he said.
As for 2004, Rust predicted retail would be a strong market for IT, whitebox would be stable and enterprise would remain soft.
He said the trend of whitebox players building machines and mass marketing them would be an interesting one to watch and claimed the full impact of Acer’s Build to Order facility would not be felt until next year.
The mobility space was becoming crowded, a trend he expected to continue during the next 12 months, Rust said
One of the Australian channel’s most popular and respected figures, Rust spent 10 years as a reseller with HiSoft in the 1980s before taking the helm as managing director of Apple Australia. He also had stints at Bay Networks and Nortel before taking up his current role three years ago.
When he isn’t running one of Australia’s IT distribution powerhouses, Rust said he was very much a family man.
“When you are working in a pacy industry like the channel you find spending time with the family a great tonic,” he said. “I am currently learning how to be a grandad.”