Category Archives: Market Analysis

Adaptable distributors in prime position to drive growth

When it comes to analysing market trends for the IT distribution channel, invariably the devil is in the detail. Despite some worrying developments that immediately spring out from the latest CONTEXT ChannelWatch survey, a closer look reveals many reasons to be optimistic. All markets face challenges, and IT distribution’s bugbear today is the challenge from e-tailers. But this is a manifestation of an ever-evolving market. Remember the threat from direct? So those distributors who focus on new ways to differentiate and meet the changing expectations of reseller community, will be well placed to drive success going forward.

Under pressure
The CONTEXT ChannelWatch Report 2018 is developed from interviews with over 7,000 resellers to generate key insight now across 14 countries: Australia/New Zealand, Baltics, Czech Republic, France, Germany, Italy, Poland, Portugal, Russia, Slovakia, Spain, Turkey, and the UK. As such, it’s the best single piece of industry research out there for discerning key market trends and channel priorities.

This year’s report highlighted the fact that 30% of resellers polled said they bought up to 10% of their stock from these etailers, thanks to their ability to compete on price, product availability and general ease of doing business.

Yet the IT distribution market is healthy, and growing while meeting the challenge. Combined H1 18 year-on-year (YoY) revenues grew 5.1% —with all countries studied enjoying positive YoY growth.

Time for growth
IT distributors’ success is based on tactics such as focusing on solution-driven areas where they can add value by bringing their expertise to bear on complex offerings like cloud. According to predictions that this market will be worth $160bn by 2020, we estimate that if distributors can capture as much of this space as they do IT as a whole (21%), there’s a $34bn opportunity waiting. Already a new generation of “born in the cloud” distributors are bringing innovative new offerings to market.

The opportunities to differentiate don’t end here. There’s a huge range of value-added services which distributors can and are beginning to offer: from project management and logistics to licensing, technical support and much more. Yes, this will require significant investments of time and resource, especially in infrastructure and skills. But it’s increasingly what resellers are demanding of their distribution partners.

One message came across loud and clear from our interviews with global resellers, especially the smaller ones: they’d like a lot more support and training. This varied from country to country, but sales techniques, IoT and cloud (SaaS, IaaS, DaaS) and smart home skills were among those in demand. We also noted that resellers are placing an increasing emphasis on customer service. When asked what resellers liked most about their distributor, the provision of B2B customer portals jumped six places compared to last year’s survey to take the top spot.

The good news is that distributors are already investing in many new value-added services to help them differentiate. If they can find that sweet spot where the resellers recognises and is prepared to pay for the value-add of such services, rather than simply choose the lowest cost offering, there are great opportunities for growth ahead.

By JD

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The PC is dead; long live the PC

Quietly, almost without many realising it, the PC that most pundits had written off as an engine for growth in the IT markets has been making a comeback. And it’s not the sort of comeback with massive volumes, queues out of the door at Aldi or PC World as consumers snap up bargains at even decreasing prices. No, this is a story about businesses, large and small, buying increasingly better spec’d PCs to handle the increasingly complex digital revolution. Average unit prices are on the increase, and chipmakers are struggling to keep up with demand.

CONTEXT figures for the first two months of Q3 2018 tracking distributor sales of PCs to resellers throughout Western Europe illustrate the trend that industry forecasters say will push the market out of decline and into growth for 2019.  PC unit sales were up +3% year-on-year while revenues grew by +5%. Average selling prices (ASPs) were also up by +2% in early Q3 2018 to €573. But same as in Q2 2018, growth came from the commercial segment. While (despite the back-to-school impetus) consumer PC sales were still in decline, businesses bought  +7% more PCs than in the same period a year ago. This demand from business buyers was boosted by companies making the transition to Windows 10, the increasing shift to mobile devices, the general need for product refreshes, and there is no sign this demand is slacking off.

The PC resurgence seems to have caught chip manufacturers by surprise. J.P. Morgan reports that Intel isn’t making enough processor chips to meet demand and the Intel processor and chipset shortage will hurt fourth-quarter 2018 PC shipments by 5% to 7%. AMD, of course, is set to benefit and has had an amazing share price run of almost 200% this year, becoming the top-performing share in the S&P 500 index for 2018.

So expect to see more devices such as HP’s sleek, leather-clad and impressively slim new Spectre Folio. While from a price and specification point of view it is well placed, it’s not cheap. Alongside PCs such as Microsoft’s Surface, it’s just the sort of device today’s businesses are looking for as they gear up to tackle the digital age.

by JD

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Filed under IT Distribution, Market Analysis, PCs, Uncategorized

HPE Distribution Partner Conference

“In my end is my beginning” TS Eliot.
I think the best way to capture the recent HPE Distributor Partner Conference is to take the very closing words of the event from Paul Hunter, the Worldwide head of partner sales.

“We are humble. We are winners. We have the strength in our portfolio of products.
The channel is growing faster than the rest of our business. Have a competitor in mind. It is now all about execution.”

Each player in the tech market has their own DNA – in HPE’s case long-standing relations with the channel and an understated but competitive approach to business. As the CONTEXT numbers show, they are the #1 in value distribution in Europe and Russia with 18.1% market share, and after two years of transformation following the demerger on one hand and the acquisition of new products they are doing everything to stay in that position. The end of the conference was a new beginning – the gauntlet was thrown down to the channel to pick up these products and run with them, and to focus on execution.

HPE senior management were open with one-to-one meetings, and a Q&A session at the end where they literally bounced ideas around the room through the use of a microphone wrapped in a soft ball.

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The HPE leadership team on stage for Q&A

They had commissioned proprietary research from CONTEXT which we shared openly with the delegates showing both the distributor perception of the strength of the HPE go-to-market proposition as well as the areas where they felt they needed more support.

For CONTEXT it was a privilege to be there and to meet distributors from across the world. Literally there was barely a geography that was not represented and so we were able to link up with people from Latam, Africa, and Asia-Pacific as well as Europe and the Middle East. We look forward to developing those relationships in the coming months and coming back with channel results from new places which we can add to our already global panel.

A personal favourite moment for me was the presentation by Bob da Vita of the Simplivity product. He managed to squeeze into 15 minutes what he would normally do in 1 hour minimum. But less is more as all of the 15 minute presentations demonstrated and I came away with a sense of the excitement of the hyper-converged infrastructure market, which we are following closely in CONTEXT. Indeed we are launching this month a new report on integrated systems using virtual categories and covering composable infrastructure, converged systems and hyper converged systems.

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Bob da Vita presents Simplivity

Finally, to conclude, an Englishman who was young during the 1960’s, cannot omit to mention the joy and delight of having dinner aboard the Queen Elizabeth 2, or QE2, the ocean liner now moored as a hotel in Dubai, which had its maiden voyage in 1969. The QE2 was known for its world cruises, and so it was a memorable and fitting place to hold the closing dinner for a global event, after three days of being together with distributors and HPE representatives from all nations.

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The dinner menu

by AS

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Connected Car Successes are following Smart Home Precedent

Growth in the connected car market is accelerating. The latest predictions claim that revenue in the US alone could top $37 billion by 2023, while globally, some have valued it as a $219 billion opportunity by 2025. Whatever happens, it’s undeniable that modern automobiles are as much computers as they are vehicles. That’s why we’ve seen a growing number of deals over recent months between car OEMs and traditional IT and OT providers. The latest is a tie-up between Google and Renault-Nissan-Mitsubishi.

As yet another connected “thing”, our cars are set to become an extension of the emerging smart home. And that’s why the user interface will be key to success or failure as we go forward. In the smart home space we’ve seen a whole ecosystem of new connected things spring up to make people safer, happier and more entertained within the confines of their own four walls. The key gadget that has caught people’s imagination has been the smart speaker, now garnering sales in the millions of units. Those distributors that have managed to ink deals with Google, Amazon and Apple are already benefitting as their AI assistants get integrated into more and more products.

At the end of August, Amazon announced it had integrated Alexa into smart home sensors, bringing with it a whole new slew of functionality. Now you can ask Alexa if there are any doors open before setting your security alarm at night. Or program for the lights to come on if there’s movement in a room downstairs. This is the future of home automation and will open the floodgates on innovation in the space, and similar functionality can well be imagined inside the connected car.

Joining the dots
The average connected car today is said to contain more than 150 million lines of code, plenty of wireless connectivity and multiple on-board computer systems to provide everything from infotainment, monitoring of emissions, and even control of key functions like steering. We’re still some way off fully autonomous vehicles. But our cars are increasingly packed with technology designed to help with things like safety, navigation, predictive maintenance, entertainment and even in-car productivity.

Kal Mos, Global Vice President of Alliance Connected Vehicles at Renault-Nissan-Mitsubishi, was quick to zero in on the benefits of teaming up with Google.

“In the future, the Google Assistant, which employs Google’s leading AI technology, can become the main way customers interact with their vehicles, hands-free,” he said. “With Google Maps and the Google Assistant embedded in Alliance infotainment systems, our customers will have some of the most advanced AI-based applications at their fingertips. And with in-vehicle access to the Google Play Store, our customers will enjoy an open and secure ecosystem of Android apps engineered for vehicles.”

Increasingly we will live in a digital world where the connected car acts as an extension of the smart home and vice-versa. And the smart home will heavily influence the connected car space. The habits consumers are already learning at home will need to be embedded into their vehicles if OEMs want to drive success. That’s why, alongside the Google announcement, we’ve seen:

  • BMW and Mini announce a tie-up with Amazon Alexa
  • Bosch develop an in-vehicle assistant dubbed “Casey”
  • Mercedes continue to develop its own in-car assistant tech as part of the MBUX system

It won’t all be plain sailing. A new study has revealed widespread gaps in awareness and even active hostility to the idea of autonomous cars. But change is coming. And it will bring with it new opportunities for the channel.

by AS

 

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IT Channel in Rude Health as Distribution Grows 5% YoY in 1H 2018

The IT Channel has had a strong start to the year with a combined H1 18 YoY growth rate in distribution of 5.1% and resellers in most countries more optimistic about the coming 12 months than they were a year ago, according to CONTEXT, the IT market intelligence company.

Our much-anticipated ChannelWatch 2018 report is compiled from interviews with a representative sample of over 7,000 resellers to provide key insight into market trends and channel priorities across 14 countries: Australia/New Zealand, Baltics, Czech Republic, France, Germany, Italy, Poland, Portugal, Russia, Slovakia, Spain, Turkey, and the UK.

It found that all countries are in growth this year following a slight decline in H2 2017 where year-on-year (YoY) growth was 4.6%. Some markets have expanded at a rapid double-digit YoY growth rate in 2018 including Russia (21.7%) and Portugal (10.2%).

The majority (63%) are optimistic about business in the next 12 months, with just 10% believing they’ll be worse off and less than a third believing things will stay the same. Only Germany, Poland, Slovakia and the UK are less positive about the next 12 months than when they were polled in 2017, with the latter’s pessimism likely to be linked to Brexit uncertainty.

Portugal, Spain, Australia/New Zealand and Baltics were the most optimistic countries.

The number of resellers has also stabilised: after a decline of 3% noted last year, the YoY drop this report was a near negligible 0.3%. It’s also a mature market, with nearly half (49%) of those companies surveyed being over 15-years-old and just 14% less than five years-old.

Business services was named by the largest number of resellers (14%) as accounting for over a quarter of sales and the vertical they expect most growth in this year. It’s number one in six out of 13 countries, although retail tops the list in Eastern Europe (Baltics, Poland, and Slovakia) and Turkey while manufacturing is the pre-eminent vertical in Germany, the UK and Russia.

by AS

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IFA 2018: Consumer Electronics Gets Smarter

The Internationale Funkausstellung Berlin (IFA) show claims to be the world’s largest consumer electronics show. With over 1,800 exhibitors and 250,000 visitors from 31st of August-5th of September, it was certainly a mind-boggling place to experience. Continue reading

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Filed under Market Analysis, Mobile technology, Smart Home, Smart Technology

Listening to the voice of IT resellers – the latest annual ChannelWatch Report

Each year CONTEXT listens to IT resellers to learn where they are and what they are looking for – where they are investing for growth, what they look for from distributors and vendors, and what they are doing to assure their future role in the IT industry. This is a vital, but difficult exercise given the diffuse nature of the channel.

The work of analysing these multiple voices is translated into our annual ChannelWatch report, a much-anticipated online survey providing detailed insight into reseller behaviour, opinions and attitudes. Offering a “bottom-up” view of evolving market trends and insight into the business issues experienced at the IT coal face, it’s a must-read for suppliers and distributors looking to consolidate, optimise and improve their indirect selling strategies, and complements the highest quality sales and pricing data at every point in the supply chain.

The story so far
The big picture is that the IT distribution market in 2018 appears to be in relatively good health. All of the 13 countries covered in the study saw positive year-on-year (YoY) growth in the first half of 2018, with a combined YoY growth rate of 5.1%. This compares to the previous six months in which some countries including the UK and Turkey slipped into negative growth.

From a reseller perspective growth is dominated by services and more firms are looking to adoption of new technologies in categories like security software, 3D printing and Smart Home. The General Data Protection Regulation (GDPR) also loomed large in the first half of the year for many players as the channel scrabbled to recalibrate internal operations to comply with the strict new EU legislation. However, it also offered opportunities for growth in a related category – security software.

That’s not to say the IT channel isn’t without its share of challenges, and resellers have been candid in their responses throughout the report. The main message for distributors is that their partners would like to see more support and training. This is especially true of smaller resellers who feel like their distributors are focusing perhaps a little too much on their larger clients.

More insight to come
This is just a very small snapshot of the insight and trends you can find in CONTEXT ChannelWatch 2018. Our interview sample of over 7,000 resellers covers the United Kingdom, France, Germany, Spain, Italy, Portugal, Netherlands, Poland, Czech Republic, Slovakia, Russia, Turkey, and Australia/New Zealand.

New for this year is the addition of CONTEXT reseller metrics to complement and enhance the survey responses, in order to provide an even more accurate picture of what’s going on. You’ll also find insight into specific trends such as the emergence of etailers as distributors, granular detail into which cloud services are proving most popular, and vendor channel marketing programmes.

If you’re looking to deepen your understanding of the IT market to aid decision-making and improve performance and growth, stay tuned as we launch the report in the weeks to come.

by AS

 

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Filed under IT Distribution, Market Analysis