Resellers express competition fears

Resellers express competition fears

Resellers have expressed fears that Ingram Micro's takeover of Tech Pacific could squeeze competition in the industry by forcing other distributors to join forces or risk losing market share.

Credit limits and service levels are also concerns for the 10,000 dealers it is estimated source product through one or both parties.

"They are two companies that hold such a major part of the industry," general manager of Leading Edge Computers, Ross Whitelaw, said.

"What's going to happen with their ability to deliver high levels of service and, more particularly, what's going to happen regarding the competitive situation in the marketplace?"

The answer, according to Plus Corp general manager, Sal Valenzisi, could well be further consolidation among Ingram Micro rivals determined to stay competitive. And this, in his opinion, could spell serious trouble for niche players.

"I think more distributors will have to consolidate because if they don't they'll just get knocked out," he said. "The market place is very saturated so the smaller ones only running one or two product lines, and who can't do the volume, will be squeezed."

NetOptions managing director, Richard McAlary, suggested price competition on some products would be affected in the short term until vendors added further distributors.

ARC Computers product manager, Patrick Barrett, said the takeover was typical of current industry dynamics. He cited the Solution 6 merger with MYOB as another recent example.

"With the IT industry the way it is, it's a game of 'if you can't beat your competitor, buy them'," he said.

Looking further ahead, NetOptions' McAlary said the merger would force several major vendors that had recently consolidated distribution partners to think again.

Manufacturers such as Acer and Toshiba, which already had direct relationships with smaller resellers, would be in a better position to cope with any further consolidation than HP or IBM, for example.

"Both players [Tech Pacific and Ingram Micro] are so dominant that it's going to call into question the culling of distribution partners that some of the vendors have recently gone through," he said. "Some of those will only be dealing with one distributor now.

"When there is a strong, multiple-party distribution system it supports a certain business model. If the distribution channel becomes smaller, it will support the Toshiba and Acer model."

The takeover has also raised concerns that long-term relationships forged with either company could be compromised in the chaos of the restructure.

"We believe Tech Pacific has some very efficient systems that work well for their customers, but whenever we have seen acquisitions like this in the industry in the past, you can combine two efficient and successful organisations and gain one inefficient and unsuccessful organisation," Leading Edge's Whitelaw said.

NetOptions' McAlary also predicted that for smaller resellers, uncertainty around credit limits would be a major worry.

"I assume many smaller players have a minimal credit level from both parties," he said. "Are the two companies going to carry those limits across?"

Tech Pacific CEO, Shailendra Gupta, has insisted resellers are just as likely to see their credit limits increased as they are to be reduced.

"We have every intention of retaining our business and I have no doubt in my mind that the current credit levels are absolutely necessary if we are to do that," Gupta said.

"There will be movement up and down [in the credit limits of individual resellers] but that does not necessarily mean [the total amount of credit] will go down."

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