Tag Archives: PCs

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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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 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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Russia Goes Graphics Card Mad as State Crypto-mining Efforts Increase

Has Russia become a nation of gaming fanatics? At first look it appears so: CONTEXT figures from the graphics card market show growth of 250% year-on-year in distribution sales for Q1 2018. That’s an increase of €7m to €30m to reach second in Europe behind Germany.

These figures came after an already strong 2017 year for graphics cards across Europe. The market grew by 90% year-on-year for Q1 2018, according to our distribution sales-out data. Nvidia GTX 10 series sales account for 75% of the European year-on-year market growth and Asus has the vendor top spot. Power, performance enhancements and new features have caught the eye of consumers, who waited a relatively long time to change out their older graphics cards as previous 800 and 900 series for Nvidia disappointed in terms of real gains.

But this isn’t the whole story.

A crypto-mining revolution
While graphics cards are a key component in gaming PCs, they’re also vital to the mining of crypto-currency. Can you guess which country is embracing crypto-mining with great enthusiasm? That’s right, Russia.

The truth is that mining for digital currency is an intensive task requiring large amounts of energy to power computers and cool machines. In fact, the process globally now consumes the same amount of electricity every year (33TWh) as Denmark, according a one recent report. Russia is at an advantage in having a cold climate in many parts of the country, plus cheap energy: ideal conditions to build farms of graphics cards to mine crypto-currency.

This isn’t necessarily being done by private enterprises and entrepreneurs with an eye for a quick buck. State-run bank Sberbank recently admitted buying a huge number of graphics cards, even apologising for the shortage which caused prices to double. Russia certainly wouldn’t be the first nation state to embark on a crypto-mining spree to swell its state coffers: North Korea is also said to be investing significant resources into operations in order to skirt international sanctions, although many of its efforts are said to be illegal, relying on botnets of compromised computers to mine currency.

In fact, most of the European markets have seen triple digit-growth in graphics card revenue on the back of rising crypto-currency valuations. So how is the market responding?

Last year we saw the launch of a new “mining” series of graphics cards tailored specifically to this new use case. However, interest has been disappointing and we’ve not seen anything in our distribution sales-out numbers to compare to the growth of standard models. The GTX 1060 and 1070 remain the number one cards for crypto-mining in their power/price combination.

It will be interesting to see how the market evolves this year. Clearly, graphics cards makers believe there is some mileage in developing tailored solutions for the new crypto-mining market, and will be disappointed to see how little impact they’ve made early on. Some will argue they shouldn’t change a winning formula. But either way we’re likely to see some stronger marketing efforts for the new “mining” series going forward.

by GM

 

 

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35 Years and counting… stories from the IT frontline

In this latest post, CEO and co-founder Jeremy Davies reflects on the IT infrastructure challenges during the first few years at CONTEXT.

One of the reasons why working at CONTEXT in the early days was exciting, was that our work combined the business side with deep interest in emerging PC technologies. Balancing budgets and wanting to keep ahead of the curve was both challenging and fun. Continue reading

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35 Years and counting… stories from the IT frontline

To mark CONTEXT’s 35th year anniversary, co-founder and CEO Jeremy Davies reflects on the state of computing during the early days at CONTEXT.

Starting a small business means adapting your needs to serious budgetary constraints. You need that 20MB hard drive, but can you afford it?

Towards the end of the 1980’s, the PC revolution was in full swing, but computers were not cheap. IBM’s PC came in at around £3,000 in those days, equivalent to £6,300 in today’s value. Margins were high double digits compared to today’s meagre low single points. At one point it is said that UK Apple dealers were making so much money, the Cupertino company asked them to stop the ostentatious displays of wealth and invest in their businesses. Continue reading

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35 Years and counting… stories from the IT frontline

To mark CONTEXT’s 35th year anniversary, co-founder and CEO Jeremy Davies reflects on the early days of the IT industry and the beginnings of CONTEXT.

It’s now 35 years since CONTEXT began tracking the IT business. That’s quite a thought in itself. The fact that we have been able to create a business from scratch and – despite all odds – still be here, thriving, 35 years later.

But what’s even more stunning is to have been a witness to the changes that have taken place since those pioneer PC days. And what has kept us in business has been that change: not only have we watched it but we lived it, taking an active part as a small and growing business, embracing the latest technology as it unfurled and integrating the new as we built the platforms and processes needed to track the burgeoning IT industry.

So, a few facts to illustrate. In the 1980’s, magazines were king. Vendors advertised in Magazinemagazines, prices, specifications and even dealer lists. To track prices, one had to track magazines. This intensely manual job resulted in output that every month saw huge physical printed files sent out to subscribing customers. If you wanted to know specs and pricing, you opened a folder and leafed through pages of printed text. A huge step forward was achieved when data files began to accompany the printed “books”.

Surveying dealers was another challenge. To create our master dealer list in the UK, we got hold of the Yellow Pages directory, and telephoned every entry that had the word “computer” in it. We asked three simple questions: Do you sell microcomputers? Which ones do you sell? Which ones are you authorised to sell?The calls were done by a dedicated in-house team who, after building the list, started contacting resellers every two months, asking for sales figures. These were manually entered into paper spreadsheets, and the calculations done – you got it, manually. Printed reports then appeared every two months detailing these aggregated and projected sales of PCs, Printers and Software.

This is not to say there were no computers involved from the beginning. There was one. It was an Osborne 1 portable computer, running CP/M on a 4.0 MHz Zilog Z80 processor and 64 KB of RAM. Twin 5.25” floppies and a 5” screen completed the picture. As work volumes grew, we invested in our first IBM twin floppy PC. And then came hard disk drives… but that’s another story!

CONTEXTKensingtonoffice

CONTEXT’s first office was at 9-11 Kensington High Street, which is now a hotel

 

 

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