Editorial - Wake up and smell the boxes

Editorial - Wake up and smell the boxes

A friend of mine who owns a small, healthy residential design and construction business in Sydney's northern suburbs represents your typical SME customer.

The humble PC is the lifeblood of his company, allowing him to track such things as purchasing and payroll figures.

When he heard that the Government will provide a 100 per cent tax deduction on all new IT hardware and software required to become `GST compliant' you can imagine what happened; he went straight down to his local retailer to pick up a new PC and software.

Exactly what brand of PC and software he acquired is a moot point. The fact is he spent over $5000 on a complete upgrade to get the latest- spec Pentium III machine. And why not? It's the Government's shout.

If you multiply this example by hundreds of thousands of small businesses tucked away around the country, you begin to get the feeling the SME PC market is heading for a mini-renaissance this year.

In fact, I'd argue government rebate-motivated GST spending will account for a healthy slice of this year's profit margins in the channel.

After reading IDC's PC market predictions (page 16), I'm sure you will agree news of an SME PC sales boom is a welcome relief to thousands of struggling resellers and retailers.

It's interesting to see that despite all the time and money spent promoting the e-business world of the future, PC hardware and software remains the staple diet for the majority of Australia's small resellers.

As a result, news about essential hardware components will also continue to attract great interest. Our page one story about Intel CPU shortages is therefore important for a couple of reasons. Firstly, one of the greatest struggles facing vendor outposts in Australia is guaranteeing regular, reliable product delivery. Intel only has to hiccup in its distribution channel and thousands of PC assemblers, OEMs and resellers start twitching nervously. And if Intel and its distributor partners can't get logistics and manufacturing issues sorted we should all be worried.

Secondly, it illustrates the margin opportunities on offer by short-term price hikes. If it's in the right place at the right time, a CPU distributor can name its price. The flip side is this familiar scenario is becoming a real problem for PC assemblers and resellers building already-quoted boxes for SME customers. Any price spike takes a nice slice out of already anorexic margins.

Meanwhile, news of Compaq's success in the retail market with its Compaq Connect stores (page 1) is likely to be cold comfort for retailers and resellers. Yes, those retailers who are still with Compaq have recorded profit rises, but with eight Compaq Connect stores bringing home $1 million each after just four months on the street you have to ask (again) how long Compaq really needs its partners.

Many resellers have commented to me that `all PC makers will eventually go direct', and this news will do little to allay those fears.

On the upside, Compaq is demonstrating a company can apply a different business model to its retail channel and make it work. It also supports the GST-purchasing boom predications because customers are already willing to spend the money if they feel comfortable with the service on offer.

My tip over the next few months is you should take advantage of the PC-hungry market while it lasts. To use a clichŽ, it's time to make hay while the sun shines because there are some very dark clouds on the horizon.

Mark Jones is editor of Australian Reseller News. Reach him at

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