Changes affecting IT distributors abroad include the rise of business-to-business ecommerce and web development services firms, declining product margins and less favourable vendor terms and conditions, and the increasing outsourcing of services among solutions providers to distributors.
But the changes have not affected worldwide distributors as much as their US-based counterparts, partly because of unique business conditions and challenges.
"Like US distributors, we're dealing with thinner profit margins and the loss of price protection and co-marketing funds," said David Arnott, chief executive at Tech Pacific Holdings, an Australian distributor. "But we also have different problems to address."
Of huge importance to distributors worldwide is the growing importance of the internet and business-to-business ecommerce. Distributors said they are closely watching, for example, how regulators in the US decide the internet taxation issue.
Many note, too, that web-based and EDI links to suppliers and partners are increasingly important to their operations. "Electronic infrastructures are a cornerstone of our business," said Arnott. But internet usage among integrators in some Asia-Pacific countries is lagging, he added.
"In one country, we offered end-of-the-month rebates to solutions providers to place orders via the web," he said. "But we received less than one tenth of a one per cent response rate. Many customers are still not sufficiently comfortable doing business on the web."
Other internet-related developments have not manifested themselves as prominently as in the US. Among these are the sky-high valuations of technology stocks, and the flight of top executives from old economy to new economy companies offering attractive stock option plans.
"The stock option plans that are considered OK in Germany and the US are almost diametrically opposed in terms of how they are treated from a profit-and-loss and balance-sheet perspective," said Steve DeWindt, president at Internet2000 Communications Equipment. The company is a US division of Munich-based Internet2000, a distributor of internet software tools and services.
A trend emerging in the Nordic countries, as it is in the US, is solution providers' outsourcing of order-taking, financing and the invoicing of customers' orders to distributors.
Such outsourcing of deals should yield big efficiencies in product procurement, said Orjan Hakanson, chief executive at Scribona, a Stockholm-based distributor that has already signed an outsourcing deal with a Swedish solution provider.
However, Scribona and other Nordic distributors have not made the substantial investments in labour saving co-location and channel assembly programmes heralded by their US counterparts. IBM, Hewlett Packard and Compaq, for example, did not establish co-location programmes in Scandinavia because they lack manufacturing sites in the region, said Hakanson.
Selling in the Asia-Pacific region
Until recently, big PC makers also did not sell in large volume via distribution to the Asia-Pacific markets, said Arnott. Supplying about half of the market volume are local manufacturers that mostly sell direct.
Asia-Pacific's fragmentation by language, culture, politics and socio-economic differences also makes business practices difficult from country to country, Arnott said.
Excluding the region's largest markets - Japan, South Korea, China, Australia and India - most of Asia-Pacific's countries purchase fewer than 300,000 PCs per year.
The region's small markets have fuelled a highly competitive business environment, but also favour large distributors such as Tech Pacific that have a broad footprint and can leverage their larger economies of scale, Arnott added.
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