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Online purchase of IT hardware rises as channels get more fragmented in the SMB space, says AMI

New York, New York – June 10, 2010 – Small businesses (SBs, or firms with less than 100 employees) in the US are increasingly relying on online channels to purchase computing hardware and packaged software solutions. This is a far cry from the days when retail stores and channel partners were the only relevant channels that catered to SBs. Channel partners and retailers still have the highest share of SB spending on basic computing products (such as PCs, printers, peripherals, etc); these channels, however, are slowly losing share to direct market resellers (DMRS) as well as online vendor direct.

There are many factors why more SBs now prefer to buy their IT products online, including:

• The SB PC and printer market is almost fully penetrated (especially in mature countries like the US), so most new purchases are replacements. SBs are therefore more informed and knowledgeable about their needs, making online channels a more efficient buying experience versus visiting a retail store.

• Low prices and customizable configurations available online create a straightforward purchasing experience for SBs.

• Traditional hardware resellers—value-added resellers (VARs)—are shifting their business model towards services due to low margins in IT hardware, which allows DMRs and other low-cost online channels to grab that share of the market.

• In addition, the economic downturn forced many SBs to look for channels that offered lower costs for new purchases and upgrades.

The above trends are more unique to the US and EMEA markets. In APAC and other emerging countries, SBs still prefer to buy from local IT stores (or, storefront VARs) and channel partners.

“Local computer/electronic stores, also known as storefront VARs, still have a strong presence in emerging markets,” says Avinash Arun, Manager of the Channels Practice at AMI Partners. “IT maturity among SBs in emerging countries is low (compared to the Americas and Western Europe), and therefore these firms especially need external support for sustaining their IT environments. The local stores serve the purpose of both a retail store and a channel partner: a small business owner or IT manager can walk into their neighborhood electronic or IT store and have a ‘touch and feel’ experience, while receiving essential service and support for installation, maintenance, troubleshooting, etc.”

The slide below compares the market size and channel share for PCs in Mature vs. Emerging countries. In the PC market, the ‘retail’ and ‘direct channel’ are much larger in mature countries, while ‘channel partners’ (mostly storefront VARs) dominate in emerging countries. 

Another channel that’s slowly gaining traction in the SMB computing hardware space is the telecommunications provider. Telcos, which have been the predominant channel for Internet and telecom products and services, have been expanding their presence in the IT market over the last couple of years, especially within mobility and hosted services.

“The telco model is shifting as we speak and AMI expects telco market share to vastly increase in the IT markets over the next five years,” adds Mr. Arun. Telcos are leveraging their vast customer base to provide add-ons, such as notebook PCs, netbooks and software solutions, bundled with broadband and voice services. This enables small and medium businesses (SMBs) to purchase a greater number of IT and telecom services from a single provider.

New Study

New York-based Access Markets International (AMI) Partners, Inc. has launched its new Global Route-to-Market (RTM) Forecast Model. This model analyzes the size and flow of ICT investments through the five key channels: Vendor Direct, Channel Partners, Retail, DMRs, and Telco’s/Internet Service Providers (ISP’s). Each channel is sized by 6 Regions, 27 countries and 8 SMB sub-employee bands, for over 70 ICT categories, and is forecasted to 2014. The RTM model enables ICT vendors to gain a competitive advantage by understanding the channel size and the changes in channel share over the short and long term. It also helps ICT vendors to invest in the right channel mix for each type of solution and customer segment.

For more information about AMI’s Global Route-to-Market (RTM) Forecast Model, please contact Avinash Arun at aarun@amipartners.com.

For more information about AMI-Partners, or our global SMB research, call 212-944-5100, e-mail ask_ami@amipartners.com or visit www.ami-partners.com.