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This article was first published in July 1999 Big is beautiful when it comes to the channel. Which means that Computacenter is the Catherine Zeta Jones of computer resellers. If it wants an account badly enough, Computacenter will go cheap - a couple of months back, it underbid an incumbent reseller to win a humungous Microsoft Select contract. I don’t know what Computacenter bid – but I can tell you the incumbent’s proposed mark-up was just £30K. On £8 million-worth of software. This is not a business for the faint-hearted. A couple of weeks back, Computacenter fended off Compel and ICL Multi-Vendor Computing (as well as 50 wannabes which failed to make the short-list) to retain the BT PC supply contract for another three years. And it has secured an option for two more years after that. BT is the biggest PC account in Britain – every three years it churns through an estimated 160,000 PCs. And then there’s the software, the peripherals, the maintenance, and so on. But with purchase running at £60 million a year or so, it still only contributes around five per cent to Computacenter’s UK turnover and a negligible amount to the reseller’s gross profits. My guess is that Computacenter makes more out of BT from vendor rebates and working the cash-flow than from GP. Then there’s some profitable services to sell on the back of the product business. This is explicitly stated in the press statement accompanying the BT win. Here we find the reselerlis teaming up with BT to sell software and services to the telco's customers. Computacenter lists ecommerce solutions, supply chain re-engineering and "innovative maintenance offerings" as areas where it will work with BT. Computacenter is building up its intranet design/ecommerce capabilities in-house. Called the iGroup, this team already employs 60 people, which already makes it one of the UK’s biggest web designers. Innovative maintenance offerings possibly has something to do with the recent £1.9 million cash purchase of secondhand computer broker RD Computers from Datrontech. This means that Computacenter will now do its own PC pull-outs, making some extra margin from end-of-life kit, and wrap it around some fancy asset management contract.RD Computers is an example of infill acquisition. It is a relatively cheap way of getting into the computer recycling and is a useful extension of Computacenter’s service portfolio. Networking is another logical extension of the company’s business. Computacenter has all the vendor badges in place and – last time I checked – pulls in more than £20 million annually from this part of the business. So, in market share terms, Computacenter is underweight in networking integration, where it is dwarfed by Workplace, Logical Networks and Siemens Business Systems. Computacenter would need a quick and big acquisition to become a major player here… and Workplace would be an obvious bid target. But to date that’s not been Computacenter’s style. It doesn’t like paying over the odds – and with South African money chasing any good networking channel company that moves – prices are well over the odds. And it doesn’t like buying big. It has moved into continental Europe, through three small purchases. The reseller it bought in France was fairly big, but bust, while resellers it bought in Belgium and Germany were both sub-£15 million turnover. But prospects for UK market share growth in product supply are fairly limited: vendors and customers won’t let it take 50 per cent of the corporate market, the company has no interest in getting its knees dirty in the SME market, and distribution has little strategic interest for or the company. This is why we can expect more European acquisitions. And this is why the temptation for Computacenter to buy high-margin, shareholder service businesses will become increasingly irresistible. ®

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