PC's really al loss leader
Well, now it's official. Profit margins on PC hardware are now so low that sales of PC's are really a loss leader, according to a report just published by IDC (www.idc.com).
The report says that, by 2004, PC's will account for just 32 per cent of total IT spending by businesses. Because of this, the IT research firm predicts that many vendors and resellers will start to view PC's as a little more than a platform on which to sell services.
Stephen Minton, IDC's research manager and the author of the report, said that the first two quarters of this calendar year have caused a lot of problems for the reseller channel.
Despite this, he said, value-added services will remain crucial to the survival of dealers in the years to come, especially against the backdrop of companies prepared to sell hardware on a loss leader basis, and use it as a platform to sell other things.
According to IDC, last year, PC sales led account for 42 per cent of IT sales in the US, compared to 38 per cent in the UK. And, given that US PC vendors now admit that there is little room in the channel for the old-style `traditional' dealers, this does not bode well for UK resellers.
IDC's comments are confirmed by other reports from the IT research firms, including Context (www.context1.com), where Jeremy Davies, the firm's senior analyst, said that supermarket PC sales are driving prices and profit margins down, both in the UK and in Western Europe.
This is not good news for traditional resellers, but it does indicate the problems that the slump in sales and margins, which started almost a year ago, have caused.
The future, therefore, lies in value-added reseller activity, even IF it means that box shifters will have to adapt to survive.
It's against this backdrop that Microsoft's continuing support for software rental - either on a monthly basis for traditional customers, or on a pay-as-you-go basis on the Web - shows a lot of promise.
Although software rental is still very much in its infancy, there are signs it is starting to gain wider acceptance by businesses of all sizes.
This introduces the possibility of more innovative dealers offering a rental deal of PC hardware and software to prospective business customers - i.e. PC and software access without the capital costs.
Leasing hardware is now rather old-fashioned in the UK reseller business, but it may take a software rental addition to such packages to make them attractive again.
Oracle defends its online sales strategy
Oracle claims that its latest move on the road to recovery, that of offering its salesforce automation software free of charge online, is not going to be a threat to dealers.
According to the firm, the idea is to grab market share from Siebel Systems by giving away modules of its software, including calendaring,customer order and sales forecasting on its new Web site at www.oraclesalesonline.com.
Oracle says that the new site gives customers direct access to the core sales applications of the Oracle E-Business Suite 11i. By early next year, the firm plans to offer additional services, such as sales compensation, forecasting, expense and travel management, under a pay-as-you-go scheme.
Robert Fleming, Oracle's marketing director, said that the Web site aims to appeal to companies who want to avoid price, maintenance and implementation barriers to salesforce automation applications.
"We launched the service in June and we have 400 customers already," he said, adding that the Web site can only be a good thing for the company, although he stressed that it does not conflict with dealers who add value.
PST says new Web-based service a success
PST, an excess inventory specialist with more than a decade's experience in the dealer channel, says its new Web-based inventory management service has been a great success.
According to John Broderick, the firm's CEO, reaction from the PC vendor community has been excellent.
"Having spoken to some of the leading vendors in the UK it has very quickly become apparent to me that there is an urgent need for manufacturers to have contingency plans in place before they take their products to the market," he said.
Broderick explained that, so rapid is the pace of change in the PC industry that it is impossible for vendors to get it right all the time. "Vendors need to know what they are going to do in the event of products not achieving the expected pull-through from the channel and exactly what action they are going to take in the event that the expected sales do not materialise," he said.
Novell starts training
After several months of apparent inaction, Novell has finally woken up to the fact that the e-commerce explosion is really happening. To catch up, the former networking giant says it plans to train around 8,000 Western European dealers in e-security by the end of the year.
To support these dealers, the firm is collaborating with around 60 `solutions partners' around the world including ActivCard, Bindview, Entrust, Network Associates, RSA Security, Netegrity, SAFLink, GemPlus, Vasco and Baltimore Technologies.
And to support resellers interactively, the firm is setting up an online training facility, as well as supplying new dealer partners with an e-security tool kit that includes an e-security assessment tool on CD-ROM, net security consulting methodologies and information on Novell Net Security solutions partners.
Lexmark launches trademark scheme for resellers
Lexmark has launched and enhanced a reseller program for its dealers, seeking to allay some reseller's suspicions that it is now pitching for most of its business on the Web and through the direct-sell outlets.
Steve Purdy, Lexmark's channel sales director, said that the new program was designed for "a fresh, formalised approach to the firm's indirect sales channel."
The program, which is available too all levels of dealer, includes access to a dealer account manager, product information, pre- and post-sales printer consultancy and, Purdy said, a high level of flexibility when it comes to working with different types and sizes of dealers.
In return for signing up to the scheme, Lexmark says that its resellers will be promoted on its reseller locator Web portal, as well giving them access to sales leads.
Oracle, 0044-118-924-000 (GB), http://www.oracle.co.uk;
PST, 0044-1628-782233 (GB), http://www.pst.co.uk;
Novell, 0044-1344-724312 (GB), http://www.novell.co.uk;
Lexmark International, 0044-870444-0044 (GB), http://www.lexmark.co.uk