The Impact on Sales of Computer Products Prepared for the Global Technology Distribution Council...

Reality Research & ConsultingReality Research & Consulting®

The Impact on Sales of Computer Products The Impact on Sales of Computer Products Prepared for the Global Technology Distribution CouncilPrepared for the Global Technology Distribution Council

Distribution OutlookDistribution Outlook

Richard MarchRichard March

[email protected]@cmp.com

Distribution Outlook


MethodologyMethodology

Market projections are Market projections are based on purchase based on purchase source data from phone source data from phone interviews with 4,000 interviews with 4,000 North American (US and North American (US and Canada) reseller Canada) reseller organizations in July and organizations in July and August 2001. Data August 2001. Data reflects +/- 1.6 percent reflects +/- 1.6 percent margin of error.margin of error.

Product purchasing volumes are Product purchasing volumes are based on telephone interviews based on telephone interviews with 300 reseller organizations with 300 reseller organizations and 100 ASP and ISP and 100 ASP and ISP organizations in August, organizations in August, September and October 2001. September and October 2001. Combined data reflects +/- 5 Combined data reflects +/- 5 percent margin of error.percent margin of error.

Reseller comments are based on Reseller comments are based on telephone qualitative interviews telephone qualitative interviews with reseller organizations with reseller organizations conducted in November 2001. conducted in November 2001.



IT Products Value-Added Supply ChainIT Products Value-Added Supply Chain

IT Product Manufacturers: Computers, Software, Networking IT Product Manufacturers: Computers, Software, Networking

First Tier: Commercial and Industrial Distributors First Tier: Commercial and Industrial Distributors

Second Tier: Resellers, Systems Integrators, ConsultantsSecond Tier: Resellers, Systems Integrators, Consultants

End-Customers: Businesses, Public Sector, ConsumersEnd-Customers: Businesses, Public Sector, ConsumersNote:Note: Data in this study focuses primarily on business-to-business product purchases Data in this study focuses primarily on business-to-business product purchases made by “Second Tier” organizations from “First Tier” organizations, and business made by “Second Tier” organizations from “First Tier” organizations, and business issues between the “First Tier” and “Second Tier.” issues between the “First Tier” and “Second Tier.”



Market DynamicsMarket Dynamics

The volume of computer product purchases by resellers in North The volume of computer product purchases by resellers in North America is estimated at $119.1 billion for the period from October 2000 America is estimated at $119.1 billion for the period from October 2000 through September 2001. This reflects a decrease of 8.3 percent through September 2001. This reflects a decrease of 8.3 percent compared to the prior annual period from October 1999 through compared to the prior annual period from October 1999 through September 2000.September 2000.

Computer product purchases by resellers made through distributors Computer product purchases by resellers made through distributors from October 2000 through September 2001 is estimated at $71.5 from October 2000 through September 2001 is estimated at $71.5 billion. This reflects a decrease of 7.5 percent compared to the prior billion. This reflects a decrease of 7.5 percent compared to the prior annual period. annual period.

In 2000 and 2001, the estimated volume of computer product In 2000 and 2001, the estimated volume of computer product purchases made by resellers through distributors remained consistent purchases made by resellers through distributors remained consistent at approximately 60 percent of all computer product purchases by at approximately 60 percent of all computer product purchases by resellers. resellers.

Although an economic downturn resulted in a smaller market, the Although an economic downturn resulted in a smaller market, the overall distributor market share remained constant year to year. overall distributor market share remained constant year to year.



Market DynamicsMarket Dynamics

Overall value of distributors to resellers’ businesses remained Overall value of distributors to resellers’ businesses remained consistent in 2001 versus 2000. Asked to rate the value of consistent in 2001 versus 2000. Asked to rate the value of their primary distributor to their overall business on a scale their primary distributor to their overall business on a scale where 1 is “No Value” and 5 is “Extremely Valuable,” resellers where 1 is “No Value” and 5 is “Extremely Valuable,” resellers rated distributors’ value at 4. rated distributors’ value at 4.



Purchases by Resellers Made Through First-Tier Purchases by Resellers Made Through First-Tier DistributorsDistributors

Percent of total computer product reseller purchases:Percent of total computer product reseller purchases:

58% 60%58% 60% 60% 60%

In Billions of Dollars (North America)*

$77.3

$69.4$71.5

200120001999

*reflects January-September for each year and October-December of prior year*reflects January-September for each year and October-December of prior year



Reseller Purchases Financed with Reseller Purchases Financed with Distributor CreditDistributor Credit

In this $71.5 billion market,In this $71.5 billion market,

distributors financed $39.3 billion distributors financed $39.3 billion

in purchases by second-tier resellersin purchases by second-tier resellers

in 2001. This represents 55% of all in 2001. This represents 55% of all

purchases.purchases.

In 2000, distributors financed $32.7 In 2000, distributors financed $32.7

billion in purchases by resellers, billion in purchases by resellers,

representing 42.3% of all purchases. representing 42.3% of all purchases.

The increased volume of credit in The increased volume of credit in

2001 sought by resellers reflects a 2001 sought by resellers reflects a

shortage of capital amid an shortage of capital amid an

economic slowdown and a greater economic slowdown and a greater

reliance on distributors by resellers reliance on distributors by resellers

for financing.for financing.



Purchases Financed through Purchases Financed through Distributor CreditDistributor CreditWhat percent of all of your computer product purchases made from all distributors in What percent of all of your computer product purchases made from all distributors in the past 12 months were based on some form of credit extended by the distributor?the past 12 months were based on some form of credit extended by the distributor?

55%

42%

2001200

0

Conclusion: Distributors historically have served as the financial infrastructure of the two-tier

supply chain for computer products. This credit function benefits product manufacturers that are

unable to administrate financing for thousands of resellers, and, in turn, benefits cash-constrained

resellers with credit to fund product purchases.



4.0

4.0

1 2 3 4 5

Business Value of DistributorsBusiness Value of DistributorsConsidering such issues as access to product information, credit and ordering and Considering such issues as access to product information, credit and ordering and shipment of products, please rate the value of your primary distributor to your shipment of products, please rate the value of your primary distributor to your company’s overall business. (Rated on a scale of 1 to 5 where 1 is “No Value” and company’s overall business. (Rated on a scale of 1 to 5 where 1 is “No Value” and 5 is “Extremely Valuable”.)5 is “Extremely Valuable”.)

20012000

Conclusion: The value of the primary distributor to the reseller’s overall business is consistent year

to year, but the sluggish economy in 2001 has led to more specific evaluation and appreciation of

distributor services, resulting in higher importance and satisfaction ratings of the individual

distributor services provided.



Resellers Explain the Business Value of Resellers Explain the Business Value of DistributorsDistributors

““Those distributor services such as product availability, logistics and support Those distributor services such as product availability, logistics and support are all competitive advantages that we utilize as part of our business are all competitive advantages that we utilize as part of our business process. We find that product availability and the ability to provide products process. We find that product availability and the ability to provide products and support on time is something that our customers value.” and support on time is something that our customers value.”

““We think they (distributors) are continually improving their processes. They We think they (distributors) are continually improving their processes. They are doing more than they used to do. Things like on-line tracking of orders are doing more than they used to do. Things like on-line tracking of orders are improvements. There’s also the tech support and other services that they are improvements. There’s also the tech support and other services that they are adding that make a difference in our business.”are adding that make a difference in our business.”

“It’s service, quick response, the support on the product – all the technical support. When we do have issues, they call back in a timely response. The value to our customers is that I can guarantee I will have it (the product) to them the next day.”

“Right now, product availability and tracking of shipments are the big things. Knowing when it (the product) is going to arrive so I can schedule my staff to meet it at the customer’s site is critical. I can’t afford having people sitting around.”



Product Purchase SourcesProduct Purchase SourcesConsidering the following purchase sources, what percent of your company’s computer product Considering the following purchase sources, what percent of your company’s computer product purchases (including systems, software and networking hardware) were actually made and ordered purchases (including systems, software and networking hardware) were actually made and ordered from the following sources in the last 12 months?from the following sources in the last 12 months?

Distributor telesales repDistributor telesales rep

Distributor Internet siteDistributor Internet site

Direct through product manufacturer repDirect through product manufacturer rep

Local Reseller (Gray Market)Local Reseller (Gray Market)

Online retailer/catalog Internet siteOnline retailer/catalog Internet site

Product manufacturer Internet siteProduct manufacturer Internet site

EDI-based or XML-based distributor orderEDI-based or XML-based distributor order

38%

23%

12%

5%

3%

12%

7%

Conclusion: Although purchases through telesales reps account for the highest percentage, more

than one-fifth of purchases are now made through distributor Internet sites. This is consistent with

distributor efforts to encourage Internet purchases. Also, purchases made through online retailers

and catalog sites reflect significant volumes of products sourced by these online retailers and

catalog sites from distributors.



Product Purchase Sources – ISPs/ASPsProduct Purchase Sources – ISPs/ASPsConsidering the following purchase sources, what percent of your company’s computer product Considering the following purchase sources, what percent of your company’s computer product purchases (including systems, software and networking hardware) were actually made and ordered purchases (including systems, software and networking hardware) were actually made and ordered from the following sources in the last 12 months?from the following sources in the last 12 months?



Direct through product manufacturer repDirect through product manufacturer rep


Local Reseller (Gray Market)Local Reseller (Gray Market)

Product manufacturer Internet siteProduct manufacturer Internet site

EDI-based or XML-based distributor orderEDI-based or XML-based distributor order

31%

29%

12%

7%

2%

11%

7%

Conclusion: The volume of products purchased by ISPs and ASPs from distributor Internet sites

and distributor telesales reps is nearly equal, reflecting a higher reliance on e-business

processes by ISPs and ASPs compared to traditional resellers.



Pre-Sales Information SourcesPre-Sales Information SourcesConsidering the following sources of information related to purchasing, which one of these is your Considering the following sources of information related to purchasing, which one of these is your primary source for pre-sales product information in the purchasing process?primary source for pre-sales product information in the purchasing process?

Product manufacturer Internet site Product manufacturer Internet site



Product manufacturer repProduct manufacturer rep


45%

17%

15%

14%

10%

Conclusion: Product manufacturers are developing their reseller-dedicated sites as product

information sources. Distributors, conversely, are regarded as purchase sources by resellers.



Pre-Sales Information Sources – Pre-Sales Information Sources – ISPs/ASPsISPs/ASPsConsidering the following sources of information related to purchasing, Considering the following sources of information related to purchasing, which one of these is your which one of these is your primaryprimary source for pre-sales product information source for pre-sales product information in the purchasing process?in the purchasing process?

Product manufacturer Internet site Product manufacturer Internet site

Product manufacturer repProduct manufacturer rep




47%

20%

20%

9%

5%

Conclusion: These findings are consistent with the reseller segment: Product manufacturers are

developing their reseller-dedicated sites as product information sources. Distributors, conversely, are

regarded as purchase sources by resellers.



Product Category PurchasesProduct Category PurchasesConsidering the computer products purchased by your company for resale to end-customers, what Considering the computer products purchased by your company for resale to end-customers, what percent do the following product categories represent of your company’s total dollar product percent do the following product categories represent of your company’s total dollar product purchases in the last 12 months?purchases in the last 12 months?

Hardware systemsHardware systems

Components (e.g. memory, boards, cards)Components (e.g. memory, boards, cards)

28%

15%

Conclusion: Hardware systems are by far the the most frequently-purchased product category.

The sizable percentage of component purchases, however, indicates that a portion of resellers’

customers are upgrading systems at the component level instead of purchasing new systems,

which is related to the recession.



Product Category Purchases Product Category Purchases (continued)(continued)Considering the computer products purchased by your company for resale to end-customers, what Considering the computer products purchased by your company for resale to end-customers, what percent do the following product categories represent of your company’s total dollar product percent do the following product categories represent of your company’s total dollar product purchases in the last 12 months?purchases in the last 12 months?

Network hardwareNetwork hardware

Printers/monitors/projectorsPrinters/monitors/projectors

Application software (incl. Internet Tools)Application software (incl. Internet Tools)

Systems software such as network Systems software such as network

OSOS

Storage ProductsStorage Products

14%

12%

11%

11%

10%



Product Category Purchases – Product Category Purchases – ISPs/ASPsISPs/ASPsConsidering the computer products purchased by your company for resale to end-customers, what Considering the computer products purchased by your company for resale to end-customers, what percent do the following product categories represent of your company’s total dollar product percent do the following product categories represent of your company’s total dollar product purchases in the last 12 months?purchases in the last 12 months?

Network hardwareNetwork hardware

Hardware systemsHardware systems

Components: memory modules, boards, Components: memory modules, boards,

cardscards

Application software (incl. Internet Application software (incl. Internet

Tools)Tools)

Printers/monitors/projectorsPrinters/monitors/projectors

Systems software such as network OSSystems software such as network OS

Storage ProductsStorage Products

27%

23%

13%

9%

8%

9%

10%

Conclusion: Connectivity infrastructure needs among emerging ISPs and ASPs drive their

purchases of network and system hardware. As a result, ISPs and ASPs represent a separate

customer segment for distributors with product and support requirements that are different from

resellers.



4.1

4.0

3.9

3.8

3.7

3.5

3.4

3.7

4.2

1 2 3 4 5

Distributor Importance RatingsDistributor Importance RatingsConsidering the following reasons as to why your company purchases computer products from Considering the following reasons as to why your company purchases computer products from distributors, please rate the importance of each reason on a scale of 1 (not important at all) to 5 distributors, please rate the importance of each reason on a scale of 1 (not important at all) to 5 (most important).(most important).

Ability to determine product availability, Ability to determine product availability,

shipmentshipment

Lowest price compared to other sourcesLowest price compared to other sources

Relationship/trust with distributor sales repRelationship/trust with distributor sales rep

Post-purchase logistics (order tracking, etc.)Post-purchase logistics (order tracking, etc.)

Ability to aggregate purchasesAbility to aggregate purchases

Pre-sales information on a variety of productsPre-sales information on a variety of products

Post-sale tech support on multiple productsPost-sale tech support on multiple products

Credit extended by distributorCredit extended by distributor

Marketing and sales tools from InternetMarketing and sales tools from InternetConclusion: The high importance ratings of core business-to-business services provided by

distributors are related to the economy. Because of the slowdown, resellers are seeking greater

efficiencies in costs and operations to remain competitive. As a result, they are placing high values

on services that help achieve these objectives.



2.9

2.5

2.5

2.4

2.1

2.0

2.3

3.4

1 2 3 4 5

Distributor Importance Ratings Distributor Importance Ratings (continued)(continued)Considering the following reasons as to why your company purchases computer products from Considering the following reasons as to why your company purchases computer products from distributors, please rate the importance of each reason on a scale of 1 (not important at all) to 5 distributors, please rate the importance of each reason on a scale of 1 (not important at all) to 5 (most important).(most important).

Outsourced service for logistics and deliveryOutsourced service for logistics and delivery

Online configuration toolsOnline configuration tools

Training and certificationTraining and certification

Lead generationLead generation

Ability for on-line invoicingAbility for on-line invoicing

Outsourced configuration and assemblyOutsourced configuration and assembly

Ability to provide an “electronic storefront”Ability to provide an “electronic storefront”

Joint sales callsJoint sales callsConclusion: Services such as on-line invoicing and providing an “electronic storefront” are

somewhat less important than the core business-to-business services identified in the prior slide.

Also, the highly publicized failures of “dot.coms” have reduced the motivation among resellers to

radically transform their businesses into e-commerce operations.



4.0

3.7

3.5

3.4

2.5

2.3

2.0

2.5

4.1

1 2 3 4 5

Importance Ratings:Importance Ratings:Pre-Sales Services Provided by DistributorsPre-Sales Services Provided by DistributorsRate the importance of each reason on a scale of 1 (not important at all) to 5 (most important).Rate the importance of each reason on a scale of 1 (not important at all) to 5 (most important).

Lowest price compared to other sourcesLowest price compared to other sources

Relationship/trust with distributor sales repRelationship/trust with distributor sales rep

Pre-sales information on a variety of productsPre-sales information on a variety of products

Credit extended by distributorCredit extended by distributor

Marketing and sales tools from Internet Marketing and sales tools from Internet

Training and certificationTraining and certification

Lead generationLead generation

Outsourced configuration and assemblyOutsourced configuration and assembly

Joint sales callsJoint sales callsConclusion: In a sluggish economy the ability to provide competitive prices becomes more important.

Business relationships and trust also increase in value as resellers become more competitive through

stronger partnerships with their distributors.



3.9

3.8

3.7

3.4

4.2

1 2 3 4 5

Importance Ratings: Logistical Support & Importance Ratings: Logistical Support & ServicesServicesProvided by DistributorsProvided by DistributorsRate the importance of each reason on a scale of 1 (not important at all) to 5 Rate the importance of each reason on a scale of 1 (not important at all) to 5 (most important).(most important).

Ability to determine product availability, Ability to determine product availability,

shipmentshipment

Post-purchase logistics (order tracking, etc.)Post-purchase logistics (order tracking, etc.)

One-Stop Shopping, ability to aggregate One-Stop Shopping, ability to aggregate

purchasespurchases

Post-sale tech support on multiple productsPost-sale tech support on multiple products

Outsourced service for logistics and deliveryOutsourced service for logistics and delivery

Conclusion: Distributors have become service sources as well as product sources for resellers. The

combination of product purchasing, logistics support and outsourced services allows resellers to

strengthen their balance sheets and focus more on their core competencies such as solution sales

and support.



2.4

2.1

2.9

1 2 3 4 5

Importance Ratings:Importance Ratings:E-Commerce Services Provided by E-Commerce Services Provided by DistributorsDistributorsRate the importance of each reason on a scale of 1 (not important at all) to 5 Rate the importance of each reason on a scale of 1 (not important at all) to 5 (most important).(most important).

Online configuration toolsOnline configuration tools

Ability for on-line invoicingAbility for on-line invoicing

Ability to provide an “electronic storefront”Ability to provide an “electronic storefront”

Conclusion: With the collapse of “dot.coms,” e-commerce services for many resellers are not as

important as core logistical and support services. An exception are large Internet-based resellers

such as CDW, Insight and PC Connection that rely on electronic storefront and virtual warehouse

capabilities of distributors to meet end-customer purchasing needs.



Financing TermsFinancing TermsWhat credit terms are used by your company to purchase computer products?What credit terms are used by your company to purchase computer products?

Net 30 daysNet 30 days

Credit cardCredit card

Cash on deliveryCash on delivery


End-user financing (through End-user financing (through

distributor) distributor)


Net 60 days or moreNet 60 days or more

Escrow AccountEscrow Account

OtherOther

85%

71%

48%

20%

13%

6%

12%

22%

27%

Conclusion: Use of a variety of financing terms reflects constrained cash-flow and reduced access

to capital among resellers related to the economic slowdown.



Number of Distributors Used for Number of Distributors Used for PurchasesPurchasesHow many distributors or wholesale companies did your company purchase computer How many distributors or wholesale companies did your company purchase computer products from in the past 12 months?products from in the past 12 months?

15

Conclusion: The number of distributors used for purchase is directly related to credit issues

discussed in the prior slides. As reseller needs for credit increase, they may exceed credit limits set

by existing distribution partners, which will force resellers to open accounts with new distributors.



Role of Primary DistributorRole of Primary DistributorWhat percent of all of your total purchases through distribution are made with your What percent of all of your total purchases through distribution are made with your primary distributor, the distributor used most?primary distributor, the distributor used most?

65%

Conclusion: Although credit needs may require resellers to increase their number of distribution

partners, the majority of purchases by a typical reseller organization are made through one primary

distributor. Business relationship issues such as trust between the reseller and the distributor sales

rep, as noted in a prior slide, are the key drivers in determining the primary distributor.



4.3

4.2

4.0

3.9

3.8

3.8

4.3

1 2 3 4 5

Distributor Satisfaction RatingsDistributor Satisfaction RatingsHow would you rate your company’s satisfaction with your primary distributor in the following How would you rate your company’s satisfaction with your primary distributor in the following areas, where 1 is not satisfied at all and 5 is extremely satisfied?areas, where 1 is not satisfied at all and 5 is extremely satisfied?

Timely info on product, pricing, availabilityTimely info on product, pricing, availability

Timely order confirmation and trackingTimely order confirmation and tracking

Accurate and on-schedule shipmentsAccurate and on-schedule shipments

Aggregation of multiple products and brandsAggregation of multiple products and brands

Ability to handle product returnsAbility to handle product returns

Access to necessary credit termsAccess to necessary credit terms

Access to informed account repAccess to informed account repConclusion: Satisfaction ratings with core, business-to-business services provided by distributors are

closely linked to the high importance values that resellers assign to these services. The ability of

distributors to provide timely and accurate order and shipping information are critical factors in helping

resellers retain customers in a challenging market.



3.6

3.4

3.3

3.0

3.0

3.7

1 2 3 4 5

Distributor Satisfaction Ratings Distributor Satisfaction Ratings (continued)(continued) How would you rate your company’s satisfaction with your primary distributor in the following How would you rate your company’s satisfaction with your primary distributor in the following areas, where 1 is not satisfied at all and 5 is extremely satisfied?areas, where 1 is not satisfied at all and 5 is extremely satisfied?

Pre-sales technical informationPre-sales technical information

Post-sale technical supportPost-sale technical support

Navigation, information and functionality of siteNavigation, information and functionality of site

Outsourced logistics and delivery of productsOutsourced logistics and delivery of products

Marketing and sales tools from Internet siteMarketing and sales tools from Internet site

Outsourced systems configuration & assemblyOutsourced systems configuration & assemblyConclusion: The increasing complexity of solutions such as voice/data and storage area networks

(SANs) that are sold by resellers require technical information on a cross-platform and cross-product

basis in pre- and post-sale environments. As distributors become the aggregation point for purchase

of these complex technologies, they also become the source of tech support and information.



4.3

4.2

4.1

4.0

3.8

3.7

4.0

4.3

1 2 3 4 5

Distributor Satisfaction Ratings – ISPs/ASPsDistributor Satisfaction Ratings – ISPs/ASPsHow would you rate your company’s satisfaction with your primary distributor in the following How would you rate your company’s satisfaction with your primary distributor in the following areas, where 1 (not satisfied at all) and 5 (extremely satisfied)?areas, where 1 (not satisfied at all) and 5 (extremely satisfied)?

Provides timely order confirmation & Provides timely order confirmation &

tracking infotracking info

Provides timely info: pricing, availability & Provides timely info: pricing, availability &

warehouse locationwarehouse location

Accurate and on-time shipmentsAccurate and on-time shipments


Provides aggregation of multiple products Provides aggregation of multiple products

& brands under single order& brands under single order

Provides access to necessary credit termsProvides access to necessary credit terms

Provides access to informed account rep Provides access to informed account rep

Provides necessary pre-sales technical info Provides necessary pre-sales technical info

– compatibility & support requirements– compatibility & support requirementsConclusion: High satisfaction ratings with distributor services signify an increasing reliance by

ISPs and ASPs on distributors as business partners, which is reflected in the high importance

values that ISPs and ASPs place on these services. This indicates that distributor services are

diversifying to meet needs from new business models such as ISPs and ASPs.



3.5

3.2

3.1

3.1

3.5

1 2 3 4 5

Distributor Satisfaction Ratings – ISPs/ASPs Distributor Satisfaction Ratings – ISPs/ASPs (continued)(continued)How would you rate your company’s satisfaction with your primary distributor in the following How would you rate your company’s satisfaction with your primary distributor in the following areas, where 1 (not satisfied at all) and 5 (extremely satisfied)?areas, where 1 (not satisfied at all) and 5 (extremely satisfied)?

Navigation, info & ordering Navigation, info & ordering

functionality on Internet sitefunctionality on Internet site

Post sale technical supportPost sale technical support

Ability for distributor to outsource - Ability for distributor to outsource -

logistics & delivery logistics & delivery

Marketing and sales tools from Marketing and sales tools from

distributors Internet sitedistributors Internet site

Outsourced configuration and Outsourced configuration and

assemblyassemblyConclusion: The reliance of ISPs and ASPs on Internet-based sources for information and purchasing

places more of an emphasis on the usability and navigation of Internet sites. The satisfaction ratings

imply that distributor Internet sites are meeting the increased demand from ISPs and ASPs.



3.8

3.7

3.4

3.0

3.0

3.8

1 2 3 4 5

Satisfaction Levels:Satisfaction Levels:Pre-Sales Services Provided by DistributorsPre-Sales Services Provided by Distributors How would you rate your company’s satisfaction with your primary distributor in the following How would you rate your company’s satisfaction with your primary distributor in the following areas, where 1 is not satisfied at all and 5 is extremely satisfied?areas, where 1 is not satisfied at all and 5 is extremely satisfied?

Access to necessary credit termsAccess to necessary credit terms

Access to informed account repAccess to informed account rep

Pre-sales technical informationPre-sales technical information

Navigation, information and functionality of siteNavigation, information and functionality of site

Marketing and sales tools from Internet siteMarketing and sales tools from Internet site

Outsourced systems configuration & assemblyOutsourced systems configuration & assembly

Conclusion: Distributor services such as access to credit and information are important to resellers in

building bids and responding quickly to business opportunities. The distributor’s ability to aggregate

access to these services saves resellers time, which is reflected in the satisfaction ratings.



3.8

3.7

3.5

3.1

3.1

4.0

1 2 3 4 5

Satisfaction Levels – ISPs/ASPS:Satisfaction Levels – ISPs/ASPS:Pre-Sales Services Provided by DistributorsPre-Sales Services Provided by Distributors How would you rate your company’s satisfaction with your primary distributor in the following How would you rate your company’s satisfaction with your primary distributor in the following

areas, where 1 (not satisfied at all) and 5 (extremely satisfied)?areas, where 1 (not satisfied at all) and 5 (extremely satisfied)?

Provides access to necessary credit termsProvides access to necessary credit terms

Provides access to informed account rep Provides access to informed account rep

Provides necessary pre-sales technical Provides necessary pre-sales technical

info – compatibility & support info – compatibility & support

requirementsrequirements

Navigation, info & ordering functionality Navigation, info & ordering functionality on Internet siteon Internet site

Marketing and sales tools from Marketing and sales tools from distributors Internet sitedistributors Internet site

Outsourced configuration and assemblyOutsourced configuration and assemblyConclusion: The venture capital funding that was plentiful for ISPs and ASPs in prior years dried up

in 2001, putting more cash-flow pressure on these emerging business models and emphasizing the

importance of access to credit through distributors.



4.3

4.2

4.0

3.9

4.3

3.3

1 2 3 4 5

Satisfaction Levels: Logistical Support & Satisfaction Levels: Logistical Support & ServicesServicesProvided by DistributorsProvided by DistributorsHow would you rate your company’s satisfaction with your primary distributor in the following How would you rate your company’s satisfaction with your primary distributor in the following areas, where 1 is not satisfied at all and 5 is extremely satisfied?areas, where 1 is not satisfied at all and 5 is extremely satisfied?

Timely info on product, pricing, availabilityTimely info on product, pricing, availability

Timely order confirmation and trackingTimely order confirmation and tracking

Accurate and on-schedule shipmentsAccurate and on-schedule shipments

Aggregation of multiple products and brandsAggregation of multiple products and brands


Post-sale technical supportPost-sale technical support

Outsourced logistics and delivery of productsOutsourced logistics and delivery of products

Conclusion: As noted earlier, the high satisfaction ratings on logistical topics such as ordering, tracking

and shipping emphasize the critical role that distributors play in resellers’ customer-retention efforts.



4.3

4.2

4.1

4.0

3.2

3.5

4.3

1 2 3 4 5

Satisfaction Levels – ISPs/ASPs:Satisfaction Levels – ISPs/ASPs:Logistical Support & Services Provided by Logistical Support & Services Provided by DistributorsDistributors How would you rate your company’s satisfaction with your primary distributor in the following How would you rate your company’s satisfaction with your primary distributor in the following areas, where 1 (not satisfied at all) and 5 (extremely satisfied)?areas, where 1 (not satisfied at all) and 5 (extremely satisfied)?

Provides timely order confirmation & tracking infoProvides timely order confirmation & tracking info

Provides timely info: pricing, availability & Provides timely info: pricing, availability &

warehouse locationwarehouse location

Accurate and on-time shipmentsAccurate and on-time shipments


Provides aggregation of multiple products & brands Provides aggregation of multiple products & brands

under single orderunder single order

Post sale technical supportPost sale technical support

Ability for distributor to outsource - logistics & Ability for distributor to outsource - logistics &

delivery delivery

Conclusion: The ISP and ASP markets continue to mature and develop into secondary sales

channels for computer products. As a result, the importance and related satisfaction ratings with

ordering, tracking, shipping and other logistics are high.



Distributor Role in Business Distributor Role in Business DevelopmentDevelopmentWhich of the following services provided by distributors does your company use to Which of the following services provided by distributors does your company use to help increase sales and/or enter new technology markets? (not asked in 2000)help increase sales and/or enter new technology markets? (not asked in 2000)

Phone or e-mail access to Phone or e-mail access to technology solutions specialiststechnology solutions specialists

Local Seminars or technology Local Seminars or technology product demonstrationsproduct demonstrations

Internet-based seminars and/or Internet-based seminars and/or discussion groupsdiscussion groups

Subsidies or co-op money for Subsidies or co-op money for technical trainingtechnical training

Subsidies or co-op money for Subsidies or co-op money for sales trainingsales training

82%

65%

42%

32%

24%

Conclusion: As distributors extend their service offerings, they are taking an active role in helping

resellers expand into new technology markets. Typically, distributors provide resellers with a

multiple-product “solutions view” of new technologies, which helps resellers build their overall

businesses. This, in turn, raises reseller sales volumes, benefiting the manufacturers.



Primary Customer BasePrimary Customer BaseWhat size company makes up your company’s primary customer base in terms of What size company makes up your company’s primary customer base in terms of largest percentage of sales in the last 12 months?largest percentage of sales in the last 12 months?

One to 20 employeesOne to 20 employees

21 to 100 employees21 to 100 employees

101 to 500 employees101 to 500 employees

More than 500 employeesMore than 500 employees

32%

32%

19%

17%Conclusion: Historically, small businesses (100 or fewer employees) have been the primary

customer base for resellers. Small businesses represent a more stable market for resellers because

the reseller typically acts as the outsourced IT department, which leads to a high incidence of

repeat business. Additionally, when the economy rebounds from the sluggishness of 2001,

computer product manufacturers expect small business will be a key segment to lead the recovery.


Conclusions Conclusions



ConclusionsConclusions

Although purchases through telesales reps account for the highest percentage of product bought by resellers, more than one-fifth of purchases are now made through distributor Internet sites. This is consistent with distributor efforts to encourage Internet purchases. Also, purchases made through online retailers and catalog sites reflect significant volumes of products sourced by these online retailers and catalog sites from distributors.

The volume of products purchased by ISPs and ASPs from distributor Internet sites and distributor telesales reps is nearly equal, reflecting a higher reliance on e-business approaches by ISPs and ASPs compared to traditional resellers.




Distributors have become service sources as well as product Distributors have become service sources as well as product sources for resellers. The combination of product purchasing, sources for resellers. The combination of product purchasing, logistics support and outsourced services allows resellers to logistics support and outsourced services allows resellers to strengthen their balance sheets and focus more on their core strengthen their balance sheets and focus more on their core competencies such as solution sales and support.competencies such as solution sales and support.

Distributors historically have served as the financial infrastructure Distributors historically have served as the financial infrastructure of the two-tier supply chain for computer products. This credit of the two-tier supply chain for computer products. This credit function benefits product manufacturers that are unable to function benefits product manufacturers that are unable to administrate financing for thousands of resellers, and, in turn, administrate financing for thousands of resellers, and, in turn, benefits cash-constrained resellers with credit to fund product benefits cash-constrained resellers with credit to fund product purchases.purchases.




Although credit needs may require resellers to increase their Although credit needs may require resellers to increase their number of distribution partners, the majority of purchases by a number of distribution partners, the majority of purchases by a typical reseller organization are made through one, primary typical reseller organization are made through one, primary distributor. Business relationship issues such as trust between the distributor. Business relationship issues such as trust between the reseller and the distributor sales rep are the key drivers in reseller and the distributor sales rep are the key drivers in determining the primary distributor. determining the primary distributor.

As resellers assign high importance values to distributor services, As resellers assign high importance values to distributor services, their satisfaction ratings with these services are also high. The their satisfaction ratings with these services are also high. The ability of distributors to provide timely and accurate order and ability of distributors to provide timely and accurate order and shipping information is critical in helping resellers retain customers shipping information is critical in helping resellers retain customers in a challenging market.in a challenging market.




The increasing complexity of solutions such as voice/data and The increasing complexity of solutions such as voice/data and storage area networks (SANs) that are sold by resellers require storage area networks (SANs) that are sold by resellers require technical information on a cross-platform and cross-product basis technical information on a cross-platform and cross-product basis in pre- and post-sale environments. As distributors become the in pre- and post-sale environments. As distributors become the aggregation point for purchase of these complex technologies, aggregation point for purchase of these complex technologies, they also become the source of tech support and information. they also become the source of tech support and information.

The ISP and ASP markets continue to mature and develop into The ISP and ASP markets continue to mature and develop into secondary sales channels for computer products. As a result, the secondary sales channels for computer products. As a result, the importance and related satisfaction levels with ordering, importance and related satisfaction levels with ordering, tracking, shipping and other logistics are highly rated by ISPs and tracking, shipping and other logistics are highly rated by ISPs and ASPs.ASPs.




The value of the primary distributor to the reseller’s overall The value of the primary distributor to the reseller’s overall business has remained constant throughout 2000 and 2001. But business has remained constant throughout 2000 and 2001. But the sluggish economy in 2001 has led to more specific evaluation the sluggish economy in 2001 has led to more specific evaluation and appreciation of distributor services, resulting in high and appreciation of distributor services, resulting in high importance and satisfaction levels with individual distributor importance and satisfaction levels with individual distributor services provided.services provided.

The high overall business value of distributors to ISPs and ASPs The high overall business value of distributors to ISPs and ASPs reflects the ability of distributors to address the information, reflects the ability of distributors to address the information, purchasing and service requirements of these new businesses. purchasing and service requirements of these new businesses. As ISP and ASP business models mature and their market share increases, distributor-based financial and e-business services are likely to increase in value to ISPs and ASPs.




As distributors extend their service offerings, they are taking an active As distributors extend their service offerings, they are taking an active role in enhancing resellers’ operating models by enabling expansion role in enhancing resellers’ operating models by enabling expansion into new technology markets. Typically, distributors provide resellers into new technology markets. Typically, distributors provide resellers with a multiple-product “solutions view” of new technologies, which with a multiple-product “solutions view” of new technologies, which helps resellers build their overall businesses. This, in turn, raises helps resellers build their overall businesses. This, in turn, raises resellers’ sales volumes, benefiting the manufacturers.resellers’ sales volumes, benefiting the manufacturers.

Historically, small businesses (100 or fewer employees) have been the Historically, small businesses (100 or fewer employees) have been the primary customer base for resellers. Small businesses represent a primary customer base for resellers. Small businesses represent a more stable market for resellers because the reseller typically acts as more stable market for resellers because the reseller typically acts as the outsourced IT department, which leads to a high incidence of the outsourced IT department, which leads to a high incidence of repeat business. Additionally, when the economy rebounds from the repeat business. Additionally, when the economy rebounds from the sluggishness of 2001, computer product manufacturers expect small sluggishness of 2001, computer product manufacturers expect small business will be a key segment to lead the recovery. business will be a key segment to lead the recovery.

The Impact on Sales of Computer Products Prepared for the Global Technology Distribution Council...

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