Feeds

Distributors in turmoil: the winners and the losers

Simon Meredith reads the form card

  • alert
  • submit to reddit

Bridging the IT gap between rising business demands and ageing tools

Distribution is moving in two opposite directions – one is taking the big companies into a high-volume model with highly automated ordering and delivery systems, the other to a high value specialised model and one that will closely align with the reseller community. This does not mean that all the distributors in the middle who have a bit of volume and a bit of value and not much in between, will disappear; but some of them will. Here’s my brief summary of how I think the main players are doing, what they need to do in the future and how good or bad their prospects look. Computer 2000 Seems to be doing well with its business unit model and a big logistical operation behind it in Europe. Recent changes to support offerings only reflect the need for it to focus on providing cost-effective back-room logistics for the resellers and to cut out duplication between what it and the reseller can and does do. Aside from logistics, its strengths include the fast-growing In-Touch on-line ordering system and strong cost-control awareness. The business units help to keep that under control. As part of Tech Data group it has strong financial backup. Recent changes to management in central Europe are not too much of a concern – not to the UK business at least. But changes are bound to come as the two businesses look to maximise the use of resources and get closer together. It is in a strong position on the global stage. Computer 2000 now needs to capitalise on these strengths and consolidate its position – here and across Europe. Other distributors won’t lie down and in particular, it needs to avoid becoming the giant that everyone likes to throw stones at. Development of high-value businesses such as networking in which it has become very strong. Retail is also growing and the new management appointments there could be important. It’s programme for SME resellers could also be important as other distributors may not be able to service this market very well given their present difficulties. As long as it does not rest on its laurels and continues to adapt and develop, long term, and right now, Computer 2000 is certainly a winner. Ingram Micro The dust from the recent and massive changes to management and to redundancies needs to settle before Ingram can even start to make a recovery. The loss of the established channel people last year was probably the biggest long-term blow to Ingram and Meinie Oldersma undoubtedly has his work cut out. The recent departure of Simon Aldous will not have helped either. But Ingram does have a massive global organisation and resources behind it. The company also has the logistics capability. What it now needs – desperately – are good people and renewed confidence. This may mean some inspired leadership is called for in the UK and across Europe. But with jobs going and costs under pressure, it is hard to see where the people and the inspiration is going to come from. Ingram is too big to disappear though, it must surely make a comeback, but it will be a long hard road and, I suspect, there will be more fall-out before the company turns the corner i.e. more senior management changes and only moderate financial performance. In the short and medium-term, Ingram is not going to look like a winner. In the long-run it must surely pull through. CHS Like Ingram it is too big to go and has massive resources and logistics. But it will take time for the company to put its recent troubles behind it and rebuild. Out of the major broadliners, CHS perhaps looks most likely to be involved in a major merger or acquisition. If Computer 2000/Tech Data gets away from Ingram and CHS, it may be a battle between the two for the second spot on the global scale. There is probably no room for more than two pan-global and only perhaps three more pan-European distributors, thereafter the businesses will need to be nationally-focused. CHS needs to ring the changes and make the results clearly visible, if it fails to respond to the present challenges – both internally and in the market – it’s chances of surviving as a unit will diminish. Short term, CHS is losing, in the longer analysis, it’s future looks uncertain. Northamber It looks bad right now but we’ve seen this before and should not be deceived. Northamber is a shrewd company and it has been there longer than almost any other distributor as an entity. The profit warnings were not good but if, as David Phillips says, this is because Northamber is moving towards a higher-value model, then he has made his move early and may be able to turn the business around faster than some rivals. The only question for Northamber is whether it is going far enough in terms of changing its model as the lower-end is eaten up more and more by on-line trading. It is incredible that Northamber has resisted all temptation to be bought yet and if it cannot pull through this present challenging period successfully, it may be compelled to go down that road. However, do not bet against Northamber coming through it all in good shape and continuing to fulfil the role of the straightforward non-nonsense company that does only what it has to with the products it has to and no more. In the short term Northamber may look like it is down on luck, but so is everyone. It is a survivor and in the medium- to long-term will almost certainly come through. Datrontech A company that was too dependent on components business and too complicated is rapidly moving its dependency away from the old business into higher value areas and looking to simplify its business but selling off non-core activities. This is the right strategy for the immediate future but Datrontech will have to re-invent itself further still if it is going to stay in the fight as a major force. The distraction and difficulties of the Eastern European businesses has not helped, but they are now performing reasonably well. However, Datrontech can’t afford to rely on that region and must put its house in order at home as well. It then needs to look hard at the volume and value mix in its business because, if it is to compete in the networking arena, for example, it will face stern and increasing competition. It needs to decide what sort of business it is and put the building blocks in place now. Short and medium term, Datrontech will be fighting its way back but long-term there will need to be more changes. The company’s future as a cross-market-line player is certainly in question, as a focused player it may have a better prospects. Ideal Hardware In the short term, Ideal is the company that seems to have taken the biggest hit and it now has to get itself back on its feet and get back in there. Recent events will have dented its image and its morale but there is potential. Dependency on the volume disk drive business must go - the company recognises this and is acting. It already has on-line ordering and it needs to ramp-up the use of that system and cut cost out of its model. Redundancies will help start that process. It must move to higher value business and services and this is also recognised by the firm. Can it do that quickly enough is the question? Much is being made of the IT Network and what it might do but that may only be a holding position. The real money must be in the services area. If Ideal can be brave and make wholesale changes and implement them right away, its prospects must be good. The company has a good reputation, but it must shake off the core disk drive legacy now. In the short term there may be little good news from Ideal but if sister company IT Network can score an immediate success, it may regain some of its swagger. The most positive sign for the longer term is the candid recognition by management that things must change - and that they must change now. ilion It is just one damn thing after another at ilion. Senior management changes, the departure of Wayne Channon, takeover speculation and now, accounting irregularities, the loss of Cisco and suspension of two seniopr staff. What next? The recent blows will make it difficult for Illion and, if it cannot haul itself back into the market this time, it will once again look vulnerable to a takeover. The chances of an MBO must have receded with these recent events but that can’t be written-off. What ilion does have is a good team of people now. Although it has been quiet it has been getting on with the business - that’s what make the recent blows all the more crushing. To survive now, ilion must pick itself up and use its understanding of the networking business to claw itself back into profitability. If it cannot do that it will surely fall into the hands of a rival. But the recent quiet recovery of Azlan shows that it is possible. ilion has the people and the ability to survive as a network specialist, but perhaps with less strength and influence than it once enjoyed. In the short term there will be no really great news though and the longer it continues to struggle the more a sell-out looks on the cards. ®

The Power of One Brief: Top reasons to choose HP BladeSystem

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple ran off to IBM
But never fear fanbois, you're still lapping up iPhones, Macs
Nadella: Apps must run on ALL WINDOWS – PCs, slabs and mobes
Phone egg, meet desktop chicken - your mother
HP, Microsoft prove it again: Big Business doesn't create jobs
SMEs get lip service - what they need is dinner at the Club
ITC: Seagate and LSI can infringe Realtek patents because Realtek isn't in the US
Land of the (get off scot) free, when it's a foreign owner
Samsung threatens to cut ties with supplier over child labour allegations
Vows to uphold 'zero tolerance' policy on underage workers
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
prev story

Whitepapers

Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Reducing security risks from open source software
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.