The EMEA ICT Channel Landscape

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					  The EMEA ICT
Channel Landscape

 By Jack Mandard – CEO compuBase
                            Channel Marketing Managers
                            Challenges….

           What are the general trends of our business
           Is the EMEA distribution manageable as a unique territory or
            not?
           What are the key countries?
           How to address a small country?
           Are channel organized the same way everywhere?
           How many partners? How many tiers?




compuBase 2007                                                             2
                               An Enlarged Target Market

                                                                                                Machine
                  Users                                                                        to Machine
  x10000
                                                                           Mobile                         •   Server,
                                                                                                              communicating
   x1000                                                                                                      objects…
                                                        Web
     x100                             Client
                                      server
        x10             Centralised                                                            •   Server Clustering, Mobiles

                         Systems
                                                                              •   Many Servers, Home computing
         1
                                                        • One Server per entreprise, many computers

                                      • One computer, many terminals


                 1970          1980           1990                2000                   2010                  2020

compuBase 2007                                                                                                                  3
                                      An Increasingly Wider
                                      Spectrum

                 Vendors         Distributors    Services        Resale       Retail


                                                  Integrators     Chain
                 Manufacturers                                                 Shops
                                   Broadliners
                                                    Hosting       Group



                     ISV                           Training      Resellers   Mass Market


                                                   Software
                                                                   Vars
                                                    House
                                      VAD
                  Assemblers                                     Managed       e-tailer
                                                 ASP - Managed
                                                                 Services
                                                    services
                                                                 Resellers




compuBase 2007                                                                             4
                 One, two, three tier
                 Channel Model

                              Directly addressed by vendor’s
                                     channel sales team



                              Animated by vendor’s marketing
                                   team but managed by
                                        distributors


                                Influenced by advertising and
                                 demand, addressed by regional
                                  distributors or larger resellers




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                                    A complex distribution


         Distributor
                                        Distributor
            Retail                                                     Master VARs
                                        broadliner
          Specialist                                                        -
              Or                                                          VAD
      Directly managed                  Regional
                                       Distributors

                                                                                             Direct
                                                                                             Sales
                                       Mass                         ICT
                                                                               Integrators
       Mass          Home Digital     Market          e-tailer   Specialist
                                                                              • IT
       market         Specialist        IT               @          For
                                                                              • Telecoms
                                     Specialist                  Enterprise
                                                                              • Solutions



                                            Entreprise                  Solution
                 Soho - Retail
                                           commodities
compuBase 2007                                                                                        6
                               Importance of Services to
                               Resellers

                   Services
                    20 %
                                                    Services 68%
                                    Margin
                                  contribution
                 •Resale 80%
                                                    Resale 32 %
                                With a 12% margin
                                     on resale

            Total Revenue                           Source of Net Margin


compuBase 2007                                                             7
                               Market impact
                 • B to B Resale activities as an additional service not a
                   core business.
                 • More and more IT partners consider themselves to be IT
                   experts who should rather integrate technology value
                   (future ROI) within the business environment than focus
                   on resale.
                 • Their TCS (Total Cost to Sell) as a key issue to monitor.
                 • Vendors' capacity to offer additional services as a Key
                   Factor of Success in a commercial relationship.
                 • Number of ICT & CE partners will continue to grow
                 • To address the full market IT Distribution will address
                   more and more channel of sales.
compuBase 2007                                                                 8
                               The largest worldwide
                               Indirect Channel Landscape.
                         > 350,000 ICT partners – 80 countries
                 > 25,000 vendors (Manufacturers & Software Publishers)
                                  > 5,000 distributors




                   • ICT market: IT, Telecoms and CE products
compuBase 2007                                                            9
                                                For the largest market in
                                                value / partners

                                                                          • Numbers about Europe vs. …




             2007                     WW                   Europe                    US                 ROW
    € Millions                                        Value          %      Value           %      Value         %
    All IT       1                  961,899         339,836      35.33%    355,961        37.0%    266,102    27.67%
    vs. 2004                        +14.6 %         +13.5 %                +14.8 %                 +13.7%

    Telecoms 1                      1,141,160        361,319     31.66%    233,369        20.45%   546,470    47.89%
    vs. 2004                         +11.2%           +7.2%                +8,4%                   +15.3%

    ICT1                           2,103,059        701,155      33.34%    589,330        28.02%   812,573   38.63 %

    # ICT Partners           2
                                    870,000                305,000             180,000                 385,000

compuBase 2007   1   Source EITO - 2 Source compuBase / CRN US                                                         10
                                      History of ICT Indirect
                                      Distribution …
       1.        A vendor has a good new product, very expensive and targeting large accounts.
       2.        The product is a success, the vendor develops its sales team.
       3.        A new market is born, the vendor receives overseas requests for distribution.
                 Overseas market specificities and size push them to use exclusive and non
                 exclusive distributors.
       4.        The vendor develops its own channel with dedicated agents.
       5.        Overseas distributors lack the financial structure to market the product, they work
                 with resellers.
       6.        Locally the vendor swaps from a strict direct model to a one-tier model, usually
                 dedicated to the brand.
       7.        Competition gets stronger, new product lines are launched, the offer gets
                 broader. Competitors try to speed up using indirect channel.
       8.        Export activities are stronger and stronger based on a successful one/two-tier
                 model. Locally, competition on price is now heavy, the vendor reduces its direct
                 sales activities and moves locally to the same distribution model as export.
       9.        The vendor and his competitors try to enlarge their market using new distributors
                 to gain new markets.
compuBase 2007                                                                                         11
                             Differences between US and
                             Europe Indirect Markets
       Facts:
        Most OEM Manufacturers located in US or Asia.
        Most vendors have initially developed an indirect channel in Europe or
          EMEA before developing locally.
        EMEA is an extremely fragmented market, 80 countries, 50 languages.


       Consequences:
        ICT indirect distribution in EMEA is older than Asia or US.
        Nowhere is the number of partners/number of inhabitants ratio higher
         than in EMEA.
        Marketing & Distribution costs are higher in EMEA than in US.
        Business Growth rates and market value are not homogeneous.




compuBase 2007                                                                    12
EMEA Channel Market



  Distributors
                                           Distributors

                                 Broadliner… VAD… MasterVar… MasterReseller….
                                 More than 5,000 Distributors EMEA !


    Type of distributors                                                        Peripherals specialists ...
                                                          Specialists in telecom and network products
                                                                              Consumables specialists ...
                                             General              Specialists in electronic components
                                            wholesalers                              Software specialists
                 Specialist IT                 31%                                Accessories specialists
                 wholesalers                                                           System specialists
                    69%                                     Wholesaler specialised in mobile products
                                                                                 Workstation specialists
                                                                           Specialised in office products
                                                               Wholesaler specialising in video games

                                                                                                              0   100 200 300 400 500 600 700 800 900




compuBase 2007                                                                                                                                          14
                            Hardware vendors &
                            Channel…

                  Hardware Vendors        53% of vendors are
                                          using indirect Channel
                   Sell     Sell direct
                 indirect      47%
                   53%




compuBase 2007                                                     15
                                               Hardware vendors &
                                               Distributors
                       Hardware Vendors
         Sell with
        Distributors
            43%                        Do not sell
                                                                   43% of all vendors
                                        through
                                       Distributor
                                                                   are using distributors
                                          57%


                                                                   80 % of vendors using
                                                                   a channel have also a
                                                                   distributor
           Hardware Vendors using a channel
                                                      Sell only
                                                     directly to
                                                     resselers
                                                        20%


                         Sell with
                        Distributors
                            80%




compuBase 2007                                                                              16
                                     Software Publishers &
                                     Channel…
              Sell      Software Publishers
            indirect                                             Only 21% of software
              21%
                                                                vendors are using an
                                   Sell direct
                                                                indirect channel and
                                      79%                       only 4% a
                                                                distributor….!

          Do not sell   Software Publishers
           through
          Distributor
             96%
                                                  Sell with
                                                 Distributors
                                                     4%




compuBase 2007                                                                          17
 EMEA Channel Market



IT & Telecoms Partner
                                     Europe
                                   305,000 ICT
                                     partners

                                                            Middle
                                                              East
                                                           11,500 ICT
                                                            partners

                                     Africa:
                                    19,000 ICT
                                     partners


          • An ICT partner is a company generating a majority of its business in IT & Telecoms
                                       or more than 300 K€ / year
compuBase 2007                                                                                   19
                 Northern Europe:
                 55,000 ICT partners

                                        Eastern
                                        Europe:
    Western                            45,000 ICT
    Europe:                             partners
   119,000 ICT
     partners


    Southern
     Europe:
    78,000 ICT
     partners

compuBase 2007                                      20
                               Major Differences Between Distribution in
                              the Big 5 and in the Rest of EMEA

       Big 5 :
            Multiple strong broadliners
            A few very big VAD (often bought by broadliners..)
            Many specialist distributors
            A three-tier distribution system
            A lot of specialized IT partners

       Rest of Europe
            One strong broadliner
            A few specialist distributors
            A two-tier distribution system
            Many Vars (The « we can do it also » resellers… )
compuBase 2007                                                         21
                          Major Differences Between Distribution in
                         the Big 5 and in the Rest of EMEA

       Other EMEA large countries
        One strong local broadliner
        Few specialist distributors
        A great number or master Var or Master Reseller
        A two-tier distribution system
        A lot of Vars


       Other EMEA small countries
        Overseas distributors
        Few strong Master Resellers or Master Vars who play the
         distributor role.
        IT dealers not specialized
compuBase 2007                                                     22
                             How Many ICT Partners?

          Europe                          IT + Telecoms + CE
                                              = 305,000
                                             IT + Telecoms
                                               = 250,000

                                                Pure IT
                                                150,000
    • The Top 5 countries represent
      70% of IT market value
    • Other EU 20%
                                       • 80% of locations are HQ
    • Other Western non EU 6%
    • Eastern represents 4%
compuBase 2007                                                     23
                                Where is the Growth?


                                         Other    Northern Southern   Emerging
                                Top 3
                                        Western    Europe   Europe     markets

                 IT Resale                                           

                 IT Service                                          

                 Software                                            

                 Telecoms                                            

                 Home Digital                                        



compuBase 2007                                                                   24
                       Business changes




  The companies declaring             The companies declaring
  Services as main activity,          resale as a main activity,
  represents more than 40% of         represents only 34% of
  the locations and are increasing,   the locations and are
  but specialisation is decreasing.   growing again thanks to
                                      CE products
compuBase 2007                                                     25
                                Changes are important
                 Over the last 5 years 29379 ICT companies have
                   disapeared - nearly 30 % of existing companies of
                   2002


                                                            Still in activity

                                                      0%
                                                      2%    Hardware Manufacturer

                                                            Software publisher ...
                                                      19%
                   71%           29%
                                                            Services ...


                                                      8%    IT & Telecom resale




compuBase 2007                                                                       26
                               Changes are important
                 Hopefully, we have detected 32 245 new companies




  • Software business suffers from concentration and the challenge to go to Indirect.
  • Non Specialist IT Services still up.
  • Resale to end user is growing fast thanks to CE products.
compuBase 2007                                                                          27
                 Germany

                       Concentration in process.
                       Business back on track
                       No centralised business but
                        stronger importance to the western
                        part.
                       A door to Eastern countries.
                       A door to Austria and Switzerland.
                       Strong mid size ecosystem.
                       Around 46 000 IT & Telecoms
                        partner.
                       21 000 available at compuBase.

compuBase 2005                                               28
                 France

                     Concentration in process
                     Business centralised around Paris
                     for HQ
                     Growing importance of the other
                     regions especially western region.
                     A door to South Europe, Magheb
                     and West Africa.
                     Around 35 000 IT & Telecoms
                     partner.
                     23 000 available at compuBase.



compuBase 2005                                            29
                 Italy

                        Largest granularity in business
                        Strong IT business in the north,
                         very weak under Roma.
                        Very small companies and SMB
                         oriented
                        Not concentrated
                        Isolated in Europe
                        At least 38 000 partners.
                        10 000 available at compuBase.




compuBase 2005                                              30
                 Spain

                       Strong granularity in business.
                       Two main poles of activity: Madrid
                        and Barcelona.
                       Small companies.
                       Dynamic market open to abroad.
                       A door to South America and
                        Morocco.
                       Many HQ for Portugal joined to
                        Spanish HQ.
                       At least 27 000 partners.
                       8 000 available at compuBase.

compuBase 2005                                               31
                 BeNeLux

                        High density of companies.
                        2 languages
                        Small companies.
                        Dynamic market open to abroad.
                        Brussells getting stronger thanks to
                         EEC.
                        Around 22 000 partners.
                        8 000 available at compuBase.




compuBase 2005                                                  32
                 Austria and Switzerland
                      •   Switzerland.
                          •   3 languages.
                          •   Strong IT & Telco business.
                          •   Small companies.
                          •   Some European Financial HQ.
                          •   More than 6 000 ICT companies.
                          •   2 100 available at compuBase.


                      •   Austria
                          •   A door to Eastern countries.
                          •   Weaker than CH.
                          •   Around 4 000 ICT companies.
                          •   2 000 available at compuBase.

compuBase 2005                                                 33
                 Nordic Countries

                              Medium and Small
                               companies.
                              Dynamic telecom market.
                              Around 25 000 partners.
                              12 000 available at
                               compuBase.
                              A door to Russia and
                               Eastern countries.




compuBase 2005                                           34
                                 Africa & Middle East

                                                30,000 ICT partners
                                                Market driven by local Master
                                                 Vars or Master Resellers
                                 11,500
                 7,000                           Northern and Western Africa
                                                 markets addressed often by
                                                 French distributors.
                 3,000                           Southern and Central Africa
                            2,000
                                                 markets addresed by UK or
                                                 RSA distributors
                         2,000                   Eastern Africa addressed by
                                                 Middle East distributors.
                         5,000
                                                 Fast in Growth rate but small
                                                 value Market.


compuBase 2007                                                                    35
                                Northern Africa….
                                                    Total # of partners: 7,000




           A market driven by local distributors
           and French distributors.
           Strong importance of governmental
           networking.
           Business focused on the
           Mediterranean border.


compuBase 2007                                                                   36
                               Middle East
           Total # of partners: 11,500


           A market driven by local
           distributors and UK distributors.
           Strong importance of
           governmental and family
           networking.
           Business focused on the
           Mediterranean border and Persian
           Gulf.
           Address also Eastern Africa




compuBase 2007                                 37
                          Is the One/Two-tier Model
                          Adapted to Emerging Countries?
       Yes
        Vendors need local actors to understand the market and
         business usages.
        A local distributor may address other areas in a country


       No
        Distributors business organization is different in emerging
         markets compared to well established markets.
          • Less point of sales in volume.
          • More multiple activity businesses.
          • Most local distributors are also resellers.
          • Most local resellers declared able to be a distributor.
compuBase 2007                                                         38
                             Conclusion
           EMEA market is not a fully fragmented market, but a multiple
            area market covering 10 different regions.
           Business management must be adapted to each region
            specificities.
           Country size and economy have a very strong influence on IT
            & Telecoms distribution organization.
           1 tier / 2 tier model is NOT a standard in emerging
            countries…
           Language and colonial history usually define the natural
            business flow.
           Addressing cultural and business issues requires local support.


compuBase 2007                                                                39

				
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