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Greed has replaced user needs, analyst claims

Greed has replaced user needs, analyst claims

Recent developments in the channel prove some of the bigger resellers and vendors are getting greedy, forgoing end-user needs for profits in their channel strategies, claims IDC senior analyst Bernie Esner.

Citing a string of lucrative acquisitions and deals in the past six months, Esner believes vendors and resellers alike are hungry for a slab of channel pie. The biggest and best example of this was Volante's proposed $30 million acquisition of AAG Technology Services, a move which Esner speculated could see the ASX-listed Volante challenge the systems integration arm of IT giant ComTech for market share.

Although not an experienced channel-specific researcher, IDC has been monitoring sales of PCs since their arrival as a consumer product in the 1980s and Esner has observed many changes to IT supply chains.

According to Esner, the days of the traditional distributor are also numbered. The traditional role of wholesalers has long been replaced by a new "distribution subculture", he said. "There's not just the Ingrams or the Tech Pacs, but white boxes have exploded in the channel as well.

"Traditional definitions of distributor get murky here. It's open slather for the whole PC, telecommunications and communications arena.

"VARs, systems integrators, e-stores turning into bricks-and-mortar stores - to me, these definitions have no meaning any more. The market is becoming more volatile and fragmented," he said.

"Australia's becoming a major PC channel, but how many PC channels does a population of 19 million need?" Esner continued. "Look at the big gorillas like Volante and AAG. Who's controlling whom?

"When we look at IBM, Compaq and Hewlett-Packard, I doubt they have all the right channels to distribute their portfolios. They have a dedicated brand management mentality. Compaq's perception of true ‘market connection' is so broad, despite their Connect stores.

"However, look at Harvey Norman - they're the true retailers who talk to the ‘ma and pa' customer and pick the right markets. PC vendors have a pure business mindset. We need to get [vendors] to think outside this common square. Vendors need branding of consistency and less [branding of product]," he said.

However, Esner warned there were two significant hurdles to get over before making the shift to an end-user focus.

"First and foremost, the challenge is profitability, then the risk of oversupply by resellers and vendors. So many of the same stores sell the same thing."

Current winners in the IT channel were white-box resellers, he believes, who comprise 35 per cent of the local PC business. Esner predicted the channel would see tighter market consolidation among high-end service providers over the next few years, forming small, specialised full-service integration teams for the SME market.


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