Expert analysis for the high-tech industry

A brighter future for Europe’s IT channel

Alastair Edwards, Senior Analyst – Canalys

Presentation and channel panel

www.canalys.com/belgiumUsername: heysel

Password: channel06Available until: 30th June 2004

Return to a fast-growth industry

Canalys Titans Index

Source: latest reported fiscal results for Cisco, Dell, EMC, HP, IBM, Lexmark, Microsoft, Oracle, Sun © canalys.com ltd.

21.3%

28.9% 31.1% 29.0%

-6.6%

Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004

Share price growth18.6%

66.2%

132.4%

-3.6%

160.3%

Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004

Net income growth

12.2%

2.2%

5.4%

8.0%

13.0%

Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004

Net revenue growth

Year-on-year growth rates

Positive trend maintainedHow well do you think your business has performed

compared with the same quarter one year ago?Western Europe

© canalys.com ltd.

Source: Canalys Channel Panels, Q4 2002 to Q1 2004 (85–129 respondents)

Percentage of respondents

0% 10% 20% 30% 40% 50%

NotebooksSecurity

Intel serversDesktops

StorageProjectors

LCD TVsLaser printers

AIO printersHandhelds

WiFi networkingIP telephony

Linux serversInkjet printers

Wired networkingTablets

ScannersUNIX servers

Percentage of respondents

Notebooks and security fuel the channel

© canalys.com ltd.

Source: Canalys Channel Panel, March 2004 (45–94 respondents)

Which of the following product categories are selling above your expectations?

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Security Intelservers

Storage Linuxservers

UNIXservers

Belowexpectations

In line withexpectations

Aboveexpectations

Security is helping the channel growFor the following categories, are sales above,

in line with or below expectations in Q1?

© canalys.com ltd.

Source: Canalys Channel Panel, March 2004 (86–94 respondents)

Percentage of respondents

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Notebooks Desktops Handhelds Tablets

Belowexpectations

In line withexpectations

Aboveexpectations

Tablets are still a harder sell

© canalys.com ltd.

Source: Canalys Channel Panel, March 2004 (68–93 respondents)

For the following categories, are sales above, in line with or below expectations in Q1?

Percentage of respondents

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

WiFi networking IP telephony Wired networkinghardware

Belowexpectations

In line withexpectations

Aboveexpectations

Wireless is just ahead

© canalys.com ltd.

Source: Canalys Channel Panel, March 2004 (45–80 respondents)

For the following categories, are sales above, in line with or below expectations in Q1?

Percentage of respondents

The message to resellers is clear

Investment priorities

SecurityWireless Mobility

ExpertiseHeadcount

Mid-market sweetspot Applications/solutions

Compensation structuresExpansion

Business priorities

First with new technologyNon-traditional marketsAggressive not cautious

Retain key staffMove fast

Primary customer contactStay ahead of vendors

Upselling (options) Market coverage

© canalys.com ltd.

We are back in a growth market!Failure to act will see opportunities pass you

by!

We are back in a growth market!Failure to act will see opportunities pass you

by!

People

Training, accreditation, vendorand industry specialisation

Systems

Web tools,procurement,warehouse,

multi-vendor

Resellers – invest in people or systems

Low Medium High

Volumes and revenue

Contribution and margin© canalys.com ltd.

Reduced, or no, business dependency

on hardware

Partnerships

Reduced, or no, technical competence

Low

Medium

High

Global Multi-national Government Enterprise Mid-market

Enterprise selling models to converge

Channel coercion Channel consensual

© canalys.com ltd.

Collaboration

Corporate resellerDirect

Dell HP

SMB

Direct model success is over-hyped

© canalys.com ltd.

Sto

rage

==

==

Netw

orkin

g

==

==

Netw

orkin

g

==

==

EMEA 2003 revenue by channel 2003, 2004 trend

Deskto

p

Deskto

p

Server

No

tebo

ok

Server

Sto

rageNo

tebo

ok

==

==

Enterprise

100% direct

100% indirect

Many channels into the same customer

© canalys.com ltd.

PC industry Networking

Corporate Medium Small Micro

Created by: Cisco, Nortel

Notable distributors: Azlan, Westcon, Algol

Notable resellers:Dimension Data, Getronics

Voice

Created by: Avaya, Samsung, Inter-Tel

Notable distributors: Rocom, Nimans, MTV Telecom

Notable resellers: Omnetica, Damovo, NextiraOne

But often different buying point

Notable corporate resellers:Computacenter, Dolmen, Econocom, Systemat

Created by: Compaq, HP,Novell, Microsoft

Notable distributors:Tech Data, Ingram

Defining value-added distribution

Duplication of vendor and/or reseller responsibilities?Will role change during transition to industry standard computing?

Will customers pay for value-add?

Storage already requires more value-add than most serversOther new, complex, enterprise technologies will emerge

© canalys.com ltd.

Reseller recruitment

Post-salessupport

Customer acquisition

Partner management

Marketing

Technical integration

Pre-salesassistance

High-valueinventory

Vendorinefficiency

New technologies

Migrating channel relationships

• Intense direct/indirect competition

• Resellers still too hardware-centric

• Vendors over-subsidising thechannel

• No vendor profit in channel desktops

• Duplication of channel/vendor role

• Corporate resellers poor at SMB attack

• Slow technology adoption

• Reseller channel less dependent on hardware

• Collaboration on enterprise accounts

• Technology innovators replace order takers

• Enhanced mid-market/ SMB attack

• Application centric: ISV partnerships

• Service provider model: hosting, remote management, BPO

• Improved indirect profitability for vendors

© canalys.com ltd.

Migration pointsChannel conflict Channel co-operation

Reduced product margin for resellers

Outsourced accounts

Technology/solution specialisation rewards

Communication, clarityand value recognition

Mid-market/SMB incentives

Focus onprofitable partners

Resellers must choose the best route

© canalys.com ltd.

Getronics

Telindus

RedCorpComputerland

Computacenter

BechtleShopmat

Alfashop

Systemat

Econocom

Value: cost-efficient sales/marketing

platform, run-rate volumes, low services

DimensionData

Value: account management,

fulfilment, multi-vendor accreditation

T-SystemsDolmen

DANGER AREA

LDLC-PRO

VARs

Online/mail order

Large account resellers

Value: solution/service-focused, technology

innovators: eg, in security, mobility, IPT

Franchises are an option for some

© canalys.com ltd.

Source: Canalys Channel Panel, March 2004 (103 respondents)

Can you imagine a business model where resellers convert into franchises to become

“HP stores” or “Microsoft shops”?

“Resellers will migrate to where they can make the most money”33%

“It works in B2C but not really in B2B and is unlikely to be successful”18%

“It’s a risk if overly dependent on one vendor”23% “It’s worth considering

and an interesting idea”26%

A sliding scale for resellers…

Vendor agnosticVendor

agnosticAccreditations/ specialisationsAccreditations/ specialisations

Full vendor franchise

Full vendor franchise

© canalys.com ltd.

Multi-vendor/independentMulti-vendor/independent

Dedicated sales

teams

Dedicated sales

teams

POSITIVESPOSITIVES

NEGATIVESNEGATIVES

Low

vendor

supportLow

vendor

support Little

differentia

tion

Little

differentia

tion

High investm

ent,

costly to

maintain

High investm

ent,

costly to

maintain

High

vendor/portf

olio

dependenceHigh

vendor/portf

olio

dependenceLow fle

xibility,

long-term

investment ri

sk

Low flexibilit

y,

long-term

investment ri

sk

Growing margin

pressure

Growing margin

pressure

Flexibility: s

upply

and solutions

Flexibility: s

upply

and solutions

Trusted

customer

advisorTrusted

customer

advisor

Technology

expertise

Technology

expertise

Preferred vendor

partner

Preferred vendor

partner

High vendor

support:

leads, Ts and

CsHigh vendor

support:

leads, Ts and

CsRecognised

specialist

Recognised

specialist

…but the future of reseller channel looks secure

Reseller account management role is recognised

Technology innovationnever stops

Vendors coming back to the channel (HP, IBM, Sun)

Channel commitment brings vendor benefits

Direct channel still inefficient and unreliable in Europe

Resellers maintain primary link to mid-market and SMB customers

© canalys.com ltd.

Distributors strengthen reseller channel (networks/alliances)

Resellers are critical to fulfilling growth in new technology spend Vendors lack reach and

understanding of SMB market

Now is the time to invest: skills/training, headcount, S&M

Returning to the earlier message…

© canalys.com ltd.

Investment priorities

SecurityWireless Mobility

ExpertiseHeadcount

Mid-market sweetspot Applications/solutions

Compensation structuresExpansion

Business priorities

First with new technologyNon-traditional marketsAggressive not cautious

Retain key staffMove fast

Primary customer contactStay ahead of vendors

Upselling (options) Market coverage

We are back in a growth market!Failure to act will see opportunities pass you

by!

We are back in a growth market!Failure to act will see opportunities pass you

by!

Expert analysis for the high-tech industry

A brighter future for Europe’s IT channel

Alastair Edwards, Senior Analyst – Canalys

Presentation and channel panel

www.canalys.com/belgiumUsername: heysel

Password: channel06Available until: 30th June 2004