Tag Archives: Enterprise IT

New for the IT channel in 2019: a look ahead with CONTEXT industry predictions

It’s been another fascinating year in the IT channel, and one characterised to a large extent by stability and reseller optimism. Distribution revenue was up 5.7% year-on-year in the nine months to 30th September, 2018, and the number of resellers partnered with distributors on the CONTEXT panel changed little from last year, with an increase in average spend per reseller. What’s more, in our ChannelWatch survey we recorded only four countries less positive about the next 12 months than when the survey was performed a year ago.

So, what can we expect of the year ahead? We asked our expert market watchers in three key categories. Continue reading

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Filed under Company news, Enterprise IT, Imaging, Market Analysis, PCs

Trump’s tariff war – the challenge for IT procurement departments

As the tech world prepares to take on the threat of an increase in US tariffs from 1st January 2019, we look at how the procurement function deals with macro-economic events which impact the cost of IT products. 7 years ago it was the Thai floods which caused a worldwide shortage of hard drives. The Thai market was the second largest producer of hard drives after China, and the floods impacted the supply of 30% of global production. The result was a large hike in prices, and delays in the production of PC’s. It was not all necessarily bad news for the manufacturers who were able to reset expectations and raise prices in a competitive market. But how do procurement departments navigate in a time of increasing IT product costs and how they can assess how real and long-lasting these changes are?

There is no shortage of such issues. Currently there is a shortage of Intel processors due to unexpected growth in the PC industry, according to Intel CEO, Bob Swann. For the earlier part of this year, (as can be seen on the graph showing ASP’s) the cost of RAM has increased significantly due to shortage of supply only stabilising in recent months.

RAM

Source: CONTEXT SalesWatch Distribution – Europe + Russia + Turkey

And last year there was a large increase in the price of graphic cards due to the increase in gaming PC sales and the use of graphics cards in bitcoin mining in Russia.

ASP

Source: CONTEXT SalesWatch Distribution – Europe + Russia + Turkey

In each of these cases the root of the price increase was a shortage of components. So the parallel with the threat of tariffs is very relevant, as the major impact of the currently announced tariffs is on components and raw materials – leather (the new HP Spectre Folio), glass envelopes and fans used in computers, screws, stainless steel, printed circuit assemblies, certain monitors, and, the item which has caused Cisco and Juniper to increase their prices, switching and routing apparatus. What no procurement department wants to hear the IT vendor say is “Sorry, the tariffs are causing increases in the cost of components which means we have to put the price up by 10%”.

So, we expect that there will be standoffs and all parties will try to work round these issues.

  • IT manufacturers will get creative in the coming months to plan as effectively as possible for the next round of tariffs and return to practices from another age which in an era of ever increasing free-trade may have been forgotten. Tariff engineering is one such term – the “adapting of an item [being imported] so that [the importer doesn’t] have to pay any levy.” Is this the time to engineer out the need for fans in a computer and to find another way of achieving the same goal?
  • Switching the place where a product is manufactured may also be a choice, but this needs long-term planning, and in all likelihood, the endgame of President Trump is not to create a long-term trade war but to get a new deal with China on their level of imports from the US, and with Mexico and Europe for revised car trading deals. Apple is one of the companies potentially under threat as 100% of their smartphone production is based in China. So far, through successful lobbying they managed to get the Apple Watch out of the first wave of tariffs. But will they be as successful with the second wave in January 2019 or will they have to consider relocating smartphone production?
  • IT procurement departments will be pushing for more and more visibility into underlying component costs. This will involve both open book cost visibility of vendors sharing their own procurement data, as well as recourse to 3rd parties who provide independent verification of price indices.
  • IT procurement will also want to track closely the impact of price movements over time – increases do not flow through the supply chain immediately whilst there is inventory at the old prices. Visibility into the supply chain is vital from sell-in to distribution (for those products which go through the channel) and then to end-user. When new prices flow through, the impact should be clearly identifiable at each stage. Then in the case of tariffs, which are likely to be short-lived, transparency about the removal of the price constraint is necessary for procurement.

One of the unintended consequences of the Trump tariff war, may be a greater collaboration and transparency between procurement departments and the manufacturers of IT products, and a consequent increase in efficiency.

by MK

For more insights, please join our webinar on the 6th December, titled Technology and the trade war – navigating your way through the tariffs

webinar

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Filed under analytics, Enterprise IT, IT Pricing, Market Analysis, Uncategorized

The Swansong of the HDD?

Storage components have come a long way since the first 3.75 MB HDDs were introduced by IBM in 1956. 2016 in particular has been a landmark year for storage components, as aftermarket sales of solid state drives (SSDs) through European distribution overtook those of hard disk drives (HDDs) for the first time, marking a trend which we expect to speed up in the coming years.

HDD manufacturers have recognised the growing importance of SSDs: in the last two years they have bought up several players in the SSD market or/and have started to produce SDDs themselves. As well they might. SSDs are already better in every technical aspect: they have a larger capacity, they are faster, and they are more reliable. Unlike HDDs, which have mechanical parts, there are (almost) no limits to the development of SSDs and their miniaturisation. Indeed, whilst HDD capacity appears to be capped at the 10 TB currently touted by WDC’s flagship model, Seagate unveiled a huge 60 TB SSD in August last year at the Flash Memory Summit.

Manufacturers have yet to give up on HDDs however, extending their lifespan by investing in such technology as Helium or SMR, and banking on the one very clear advantage of HDDs over SSDs – price. For now, the cost of a gigabyte of storage on HDD is about a quarter of that on SDD, and this makes it attractive to businesses who want to lower IT infrastructure costs as much as possible and do not  need the technical advantage of SSDs.

For businesses where time efficiency represents a potential cost-saving however, the move to SSD for their IT infrastructure represents a worthy operational investment, notwithstanding the cost premium. At CONTEXT, for example, we recently made the choice to transfer our main database from an all-HDD system to an all-SSD system by Q2 2017. By doing this we should save 10-15% in terms of time and resources. The savings will allow us to develop new projects but, more immediately, our reports will run faster. This means we can look to deliver our products more quickly, which is key for our clients – the earlier they have information, the more actionable it is.

Storage requirements for such things as back-up on the other hand do not need the latest speed and features, and in areas such as these HDDs will remain the go-to technology for the time being, but only as they remain the cheaper option.

Seagate is saying that HDDs will be around for the next 20 years or so, we suspect they may not last that long. Will they be gone earlier? We’ll be watching closely.

by GM

 

 

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