UPS: Electrifying times

Ask most UPS vendors and they'll tell you that rather than being stalled by the IT slowdown, unit sales have grown in Australia, and in some cases doubled, over the past year. APC reports significant growth in shipments of SOHO and SME units while Invensys claims to have increased market share. MGE too has reported a 100 per cent increase in channel sales as a direct result of channelling its product through distributors.

According to Michael Mallia, general manager of sales and marketing for Invensys Energy Systems, Australia is performing better than any other region in the world. "Even North America is not getting the growth that we are here," he says.

The rise demonstrates strong growth in small UPS products, an unrewarding sector for resellers, according to James Fraser, national distribution sales manager for MGE UPS, because it is volume driven with low margins. Mid-range systems - single-phase 240-volt units alongside file servers - remain the most lucrative in the segment, mostly because of the services that suppliers can add around them.

By comparison, sales of large data centre systems, which carry price tags of anywhere between $100,000 to $1 million, have vanished almost entirely from the scene. The realignment of IT in the midst of the economic slowdown in 2000-2001 became the catalyst for this, but the simultaneous realisation of how data centres would, or rather would not be used, also put the brakes on.

The good news is that these ventures are starting to pick up again. Mining is starting to recover, particularly in Western Australia, and is expected to remain strong over the next three to five years. In the private sector, the focus on security and disaster recovery has blueprints for data centres being dragged out of the filing cabinet. APC's Australian managing director, Leanne Cunnold, says server consolidation is also helping to drive the need for larger UPSes.

"There are a couple of good projects on the horizon," says Mallia. Still, Fraser cautions that today's enquires from customers carry uncertain timelines; they may come to fruition six months from now or three years out.

It is also questionable what percentage of these deals will include the IT channel. Large UPS systems are typically sold direct or through electrical contractors because they are hardwired and require an electrical contractor licence to handle the high voltage. What's more, leading UPS vendors fulfil their own service contracts, although resellers can make a margin off the actual sale of the service contract.

Mallia says the reason for this is that UPS is to a large degree still an electronic-based technology. "People selling IT don't really understand electricity. Even though we try to make it as easy as possible, it is hard for non-technical people to understand unless they do it every day."

Fraser agrees, saying that MGE has had greater success engaging small distributors in defined market segments to promote its products than in the major IT houses.

"UPS is not in resellers' core product line-up of PCs, servers, et cetera. It sits on the fringe so they are not confident about how to size UPS systems or what services to offer around it," he says.

APC, on the other hand, continues to bank heavily on IT service providers integrating UPSes into the network, as opposed to leaving it to the electrical architects. While this strategy has proved successful for APC, its alignment with the IT industry has meant that its fortunes have varied. In light of the advances of MGE and Invensys in market share, many suggest APC may have slipped. They say its choice to push product almost exclusively through the major IT distributors (Tech Pacific, Ingram Micro, Express Data and Anixter) has tied its fate to the ups and downs of the sector in recent times, without the stability of other verticals.

Cunnold admits that APC's success is dependent on the fate of the IT market. However, she doesn't see this as a disadvantage. "APC took UPS out of the electrical contractors channel and tailored the products specifically for the IT integrator or PC user," she says. "We pioneered that shift."

With data centre projects starting up again, APC is frantically trying to scale up from its familiar desktop, servers and small data centre installations. But its path is hindered by some fairly tough competition from Invensys, Liebert (Emerson Networks), MGE and Chloride, which already dominate this space.

Meanwhile, the competitive environment has created an open slather on channel programs and resellers can get their hands on some handy resources if they're interested in padding out their toolkit.

MGE is attempting to build reseller confidence in quoting and selling UPS systems through its VAR Channel Program, an online service that gives solution providers information on installing UPSes, pre and post-sales support, fact sheets and pricing. APC has also recently launched its Reliability Upgrade Program.

UPS trends

* Longer UPS replacement cycles

* UPS centralisation creating larger VA requirements* Move towards rack-mount UPS form-factor* High availability needs, necessitating redundancy* UPS units in field that are more than three years old -- batteries nearing expiration* New equipment being attached to old UPS units, decreasing available runtime* Increased demand for replacement battery cartridgesSource: APC Australia.

Half a million UPSes in need of refresh

Despite the fact that sales of UPS (uninterruptible power supply) product generate around $100 million annually in Australia, UPS vendors seem to spend an exorbitant amount of time reminding resellers to tell customers to install or update their UPS systems.

This month, UPS vendor American Power Conversion (APC) launched a Reliability Upgrade Program after encountering an increased number of companies operating with old UPS systems that are near, or beyond, capacity. APC predicts that there are just over half a million UPS units installed in Australia that are more than three years old. The assumption is based on data collated by US research firm VDC data in December 2000 and, according to APC's Australia/NZ managing director, Leanne Cunnold, makes the timing right for resellers to get back in front of the customer and suggest upgrades. Forty per cent of calls coming through APC's helpdesk are related to battery replacements, system refreshes or upgrades, which is the basis for the introduction of the upgrade program.

"Users never stop to consider the life of the battery or the fact that now the UPS is protecting two servers instead of the one for which it was originally purchased," Cunnold says.

"UPSes are one of the first things to be taken off a company's IT purchase order if there's a budget restraint. If the company has an old UPS unit installed, there's a mentality of, ‘we've already got that' when in fact the customer should be asking, ‘does it still meet our needs today?'."

APC's Reliability Upgrade Program covers battery replacement kits, warranty extensions, onsite warranty service and management services, and software for customers with multiple sites of UPS systems. However, the real incentive is the trade-in option, which allows customers to trade in their old UPS - either an APC unit or a competing brand - and obtain a $16 to $730 price reduction on a new unit.