Tag Archives: IT distribution

Securing digital transformation a key opportunity for channel growth in 2019

Digital transformation offers huge growth opportunities for the channel in 2019. But recent events have also highlighted the importance of secure digital solutions, with over 59,000 breach reports already submitted to GDPR regulators since May 2018. This bears out some of the key predictions for the industry made in a new report from CONTEXT. With the right market intelligence to hand, channel bosses should be well positioned to navigate the challenges that come their way this year.

Securing digital growth
In our Technology and Channel Predictions 2019 report we point to the secure management of data as a key driver of channel growth in the digital transformation push. New stats from DLA Piper released last week confirm exactly this: that organisations are now much more aware of data security. The law firm claimed there has been an average of over 7300 breach reports each month since the legislation was introduced.

Another new report, from Thales eSecurity, reveals not only that organisations are motoring ahead with their digital transformation plans, but that they are struggling to contain the increased cyber risk that these projects are exposing them to. Complexity — for example in managing multiple cloud environments — was highlighted as the top barrier to data security. This is where channel partners can offer a real value-add, in helping their customers embrace innovation-fuelled growth but in a secure and compliant manner.

Some industry watchers, like Accenture, even believe that we’re now entering a “post-digital” world, where success will increasingly be defined by how innovatively organisations can apply technologies like AI, distributed ledgers and even quantum computing. The consultancy’s new report also highlights the importance of cyber security to the success of projects.

Brexit and beyond
As we mention in our predictions report, Brexit is the great imponderable for 2019. As I write this, the British government still seems a long way off providing the kind of orderly departure from the EU which businesses crave. As we warn in the report, a no-deal exit would cause a serious impact on trade between the UK and EU, forcing the former onto WTO tariffs and no doubt resulting in a major drop in the value of the pound. That’s why distributors on both sides of the channel who rely on cross-border supplies should have a contingency plan in place including enough stock to cover any initial period of disruption.

One distributor heeding this advice appears to be Westcoast, which recently told CRN that it had bought 3,000 extra pallet locations in two storage warehouses to stockpile a “large amount” of product. However, MD Alex Tatham appeared less than convinced about the preparedness levels in other parts of the channel. “It is amazing how many vendors have not got their own Brexit strategy organised — they haven’t woken up yet,” he’s reported as saying.

It goes without saying that Brexit isn’t the only challenge facing channel players in 2019. But although year-on-year growth in distribution won’t match last year’s 6.7%, we’ll still see positive growth for the year ahead. By tapping secure digital transformation and Industry 4.0 trends effectively, firms stand a great chance of weathering the Brexit storm and other factors like slowing demand in EU economies.

by Adam Simon

 

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CONTEXT predicts another year of growth for IT Distribution

After a strong 12 months, the team at CONTEXT is predicting continued channel growth for 2019, with digital transformation and the Fourth Industrial Revolution driving new opportunities, although macroeconomic headwinds including Brexit will inevitably have an impact.

These are the key findings from a new report we issued this week. Technology and Channel Predictions 2019 brings together insight from channel business leaders and CONTEXT experts to reveal the biggest issues and trends facing EMEA technology companies over the coming year, and country views from some of the major economies in the region.

The past 12 months saw year-on-year growth of 6.7% in distribution, accelerating quarter-on-quarter to reach 9.1% in Q4 2018. However, growth will start to slow in Q2 2019 and will achieve 3-6% YOY growth thanks to OECD forecasts of reduced demand in EU economies and the impact of Brexit.

We are urging channel players to ensure they have contingency plans and adequate stock in place in the event of a no-deal Brexit, and that they budget to cover any temporary downturns in revenues caused by social upheaval like the French gilets jaunes protests.

Although many distributors have been able to focus on organic growth during 2018, market consolidation is happening and could increase in 2019, driven in part by price pressure from etailers.

However, digital transformation offers a great opportunity for the channel to drive growth and differentiation this year. Those that succeed will meet growing demand for secure solutions, hybrid cloud, and hyper-converged infrastructure whilst evolving their own value propositions to align with new consumption models.

The Fourth Industrial Revolution will also bring continued growth opportunities in areas such as AI, IoT, 3D printing and autonomous vehicles (e-mobility).

by AS

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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

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The trends behind the headlines: register for the CONTEXT autumn webinars

IT channel businesses thrive on data. Whether you’re a reseller, a vendor or a distributor, only market data of the highest quality and accuracy will do when making those crucial business decisions. That’s why CONTEXT has become an essential partner for the channel over the past three decades. Our latest ChannelWatch Report offers unrivalled insight into key market trends and channel priorities — compiled from interviews with over 7,000 resellers across 14 countries worldwide.

Sometimes stories in the trade media are written more to generate clicks than provide considered market insight. So if you want the truth behind the headlines, register for our upcoming autumn webinar series. We’ll be offering a comprehensive review of the year from a reseller perspective, insight into emerging categories, and a discussion of how data analytics can provide much-needed visibility into the impact of the US-China trade dispute. Continue reading

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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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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.

HPE1

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.

HPE3

The dinner menu

by AS

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