Reseller Radar

DSG International is no more after the proposed name change to Dixons Retail was overwhelmingly voted in by shareholders.

At yesterday's annual general meeting (AGM), all proposed resolutions were passed including the re-appointment to the board of chief executive John Browett, chairman John Allan and FD Nicolas Cadbury.

The back to roots rebranding - approved by 97.74% of shareholders - was first revealed earlier this summer and designed to identify the group's core market focus.

At the time a spokesman at the retailer said "Dixons is an iconic brand....we wanted a simple solution" but insisted this did not signify a change in corporate direction and a precursor to the sale of the B2B operations.

There were rumours a year ago that Systemax were doing due diligence on DSGi Business, comprising PC World Business, Equanet and online brands but all has subsequently gone quiet on that front.

Phil Birkbeck took control of the business at the start of the year - following the departure of Jerry Roest in 2008 and interim bosses Martin Dorchester and James Walsh - but its commercial operations have not yet recovered. 

Dixons' reseller businesses are already a shadow of their former self and long term it is unlikely that they will remain within the group,

However with the exit of many of the B2B veterans and resellers noting a decline in competitive tenders situations against DSGi Business, who will give the business' bosses and its shareholders a return they'd approve?

Oracle has maintained a vow of silence despite (or because of) the recent changes to its channel and appears unlikely to break this for at least the next six weeks.

A deadline of 15 October looms for Sun Microsystems resellers to migrate from the Sun Partner Advantage programme to the Oracle Partner Network, 90 days after they were given notice of termination of the existing contract. 

After this date there is an expectation that Oracle will get more vocal with partners (and the channel press), to detail joint product developments and announce the recent changes to distribution.

As exclusively revealed by Reseller Radar, Oracle named Avnet TS and Arrow ECS as its two UK VADs following a request for information tender that was beset with delays due to the complexities of the decision.

All distributors involved in the RFI are still unable to talk publicly about the appointment as Oracle promised those that were de-selected (Interface in the UK) a grace period to digest the development behind closed doors.

This shows that Oracle does understand the importance of partnerships so maybe it is learning from the past mistakes that began the day it acquired Sun.

Bell Microproducts UK boss John Toal has committed to naming his management structure and key personnel by the end of this month, earlier than the deadline for EMEA set by the regional bigwag Graeme Watt.

Management at the Surrey-based distributor will meet over a burnt sausage at new parent Avnet's annual BBQ in Bracknell on Wednesday night.

Presumably the talk will be as much about their future jobs and market opportunities as rolls and ketchup.

Reseller Radar will keep you posted.

The rumour mill has been going into overdrive that current Oracle Sun distributor Interface and several other newcomers that were vying for the contract have not made the grade.

As revealed last month, Oracle had put out of request for information from current and potential distributors and rushed the process through until it came time to make the actual decision, which has now been delayed for weeks.

If accurate, industry talk suggests that Avnet Technology Solutions and Arrow Enterprise Computing Solutions have been given rights to the combined Sun and Oracle line cards.

This would be a shame for Interface - appointed in 2004 - which has carved a niche in Sun's channel by recruiting resellers to push the x86 range, though Oracle had already said it does not plan to remain heavily involved in the Windows-based server space.

This strategy was apparent in IDC's recent numbers for the UK server market, with Sun sales declining 15% in a space that grew by nearly 18%.

So maybe Interface - which is understood to have delivered some respectable Sun numbers during these tough times - is better off focusing its attentions on a vendor that is more interested in a true partnership than Oracle has appeared.

The decision is expected to be made public by Oracle next week.

Kelway chief executive Phil Doye is participating in the London Triathlon this Sunday on behalf of Breakthrough Breast Cancer but has left it a bit late in the day to raise money, a point he acknowledges.

"This late request is down to the fact that it is only in the last week that I reached the point where I think I might not drown on the swimming leg!"

The race includes a 1500m swim, a 10k run and a bike ride totalling 40k which should be a piece of cake for any physically able channel veteran.

For anyone that wants to see Doye suffer - Kelway has become quite a player in the reseller market with its numerous acquisitions - the event starts bright and early on Sunday morning in central London.

Alternatively, if you are feeling charitable you can sponsor him at http://www.justgiving.com/Phil-Doye

The benefits of the WEEE Advisory Board (WAB) in helping government make sense of the European directive far outweighed the £20,000 it cost the taxpayer to fund the group every year, according to sources familiar with the situation.

The WAB was scrapped last month by Business Secretary Vince Cable but this was one quango that had not grown fat on the back of public funding, in fact its expenses were primarily related to travel.

The UK public has bought into the coalition's austerity measures to cut the UK's debt and the budget deficit but given the relatively low costs and apparent benefits, axing WAB was a surprising move.

It had helped to develop codes of practise for designated collection sites by pulling together the concept of individual producer responsibility, a practicable tool for the government as required by the reclassified WEEE directive.

This was designed to reduce the cost and improve the process of recycling WEEE from householders and businesses, while increasing the amount of equipment being recycled.

WAB also worked on the development of the re-use standard for WEEE that is currently progressing with the Department for Business, Skills and Innovation.

This standard will be published in November under the catchy banner of PAS 141, with interest from Europe and the US. The WEEE directive encouraged re-use but did specify tests to ensure kit was ready for re-use.

Kit that passes the standard will be labelled, which should reduce the amount of illegal exports of WEEE to developing countries. This is likely to be the WAB's lasting legacy and will be copied across Europe.

Isn't the move by government a waste of a good initiative? WEEE will bear witness. 

For years the industry questioned how the unstoppable Texan juggernaut Dell was a dead cert to meet quarterly expectations on Wall Street, and now we have the answer - with a little help from its friend Intel.

The investigation into the relationship between the PC maker and the chip giant has unearthed some very interesting statistics; in every quarter between 2002 and 2006, Dell would have fallen short of sales targets had it not been subsidised by Intel.

The partnership was built on the understanding that Dell did not integrate AMD chips into its hardware.

In Q4 2004 Intel handed Dell $25m to meet a forecasted shortfall in Dell's numbers; Intel hand-outs accounted for 38% of Dell operating profit in 2006 and in fiscal Q1 2007 payments from the chip producer represented 76% of Dell operating income.

So paranoid was Intel about the relative performance of AMD's server chips that it even set up an "Opteron Fund" to financially reward Dell for steering clear of its rival.

However, Dell finally buckled to demand and in May 2006 introduced AMD Opteron based servers, which is the time that Intel slammed shut the corporate wallet resulting in a 36% fall in profits for Dell that quarter.

Dell has been fined $100m by the SEC for false accounting between 2001 and 2006 but the company admitted no wrongdoing, as is consistent with the regulator's standard practise. It has already made provisions for this settlement.

It rather beggars the question if the loss of rebates from Intel in part forced Dell to develop relationships with the channel to cut its own costs in the face of falling profits.

Michael Dell famously said that direct selling was not a religion, but it did a pretty good job of brain washing customers that resellers added little value to the supply chain.

But that is all history, as is Dell's almost metronome ability to meet quarterly targets that kept financial analysts in constant amazement.

The Department for Health (DfH) has finally broken its silence over the recently ended £80m Enterprise Wide Agreement licensing deal with Microsoft.

"The DfH has already invested so that NHS Trusts are able to have access to the latest versions of Microsoft desktop software. Future investment decisions will be taken at a local level in line with the proposals set out in the White paper published this week," a spokeswoman said in a statement.

It took nine days for them to respond, was that worth it? Funny that it came less than a day after the story was published.

Microsoft also kept schtum for the past week until the story was published.

Anyway, irrespective of the entities' reluctance to publicly comment on the deal, it is clear that the government continues to wield a sharp axe over any projects above £1m, and this could be a welcome fillip for SME resellers.

The EA collapse follows hot on the heels of the review of BSF, which was again dominated by the larger players that had the financial muscle to spending hundreds of thousands of pounds in bidding for projects.

The coalition has vowed to level the playing field for smaller suppliers, stating that it wants about 25% of public sector contracts to be awarded to SMEs.

Only time will tell if it's a genuine target, but then again the public sector is unlikely to offer up the sort of growth it has in the last 13 years. 

Get involved with the debate on the members page in MicroScope's LinkedIn group.

Microsoft is making some sweeping changes to Large Account Resellers (LARs) rebates and will outline its plans at the Worldwide Partner Conference in Washington this week.

In essence, Redmond is halving LAR fees from its new fiscal year starting 1 July 2011 on sales to large multi-national corporations and will raise the funds LARs can accrue from selling to SMEs.

It is not yet clear which end-user clients will be involved in the top tier or named list, for which LARs will no longer be compensated, those details will be presented behind closed doors at this week's event in the US capital, which has so far been dominated by the cloud.

The restructure mimics changes Microsoft has made to distributor fees recently, and is a path well trodden by the likes of HP and other hardware vendors.

At least Microsoft has learned lessons from past mistakes when it gave LARs too little time to swallow changes to the rebate envelope and was forced to delay them not once, or twice but three times.  

Perhaps it has given them too much time to realign the business in preparation for the rejig, maybe one or two will have decided that by this time next year the amount of money on the table makes the LAR accreditation less attractive.

The Government asking the IT industry to reduce its profit margin is a bit like asking a drug user to swap heroin for fruit pastels.

Most sensible people in Britain agree the £147bn budget deficit and £1tr national debt needs to fall and that savings should be squeezed out of every corner of the public sector with no ring fencing of departmental coffers.

Minister for the Cabinet Office Frances Maude is today meeting with 20 of the largest suppliers of goods and services to government including some household names from the IT industry including HP, IBM and BT.

Under discussion will be the massive scale outsourcing deals and other ways to expunge costly programmes that return little in the way of value.

However Maude says: "The government has not before managed centrally the relationships with the biggest suppliers to government. We have not used the massive collective buying power...to drive down the cost of common goods and services."

More than a few resellers will take exception at that comment given the work by Buying Solutions to create online auctions that cut the cost of commodity items to the bone and forced some at least re-consider selling to the sector.

The same auctions forced HP, well according to HP, to go direct to public sector customers as there was very little margin to involve a partner.

So in this more austere spending environment, what will happen when Maude sits down with these 20 chief executives to discuss in more detail the profit margins they (and their partners) expect to make?

Following its acquisition by 2e2, Morse CEO Mike Phillips has joined the ranks of industry veterans that are currently out of work, but in his case at least the hiatus is likely to be broken in the not-too-distant-future.

He stood down last week, roughly two years after undertaking the mammoth task of turning around the beleaguered firm that had sunk to losses in fiscal 2008, the trading year prior to his arrival.

The management at Morse subsequently implemented a cost reduction programme, hacked off the Investment Management Consultancy business as part of a restructure - selling off or closing the units. 

It started to show improvements in 2009 numbers with the revised operational structure making the product and services it sold clearer to staff and clients.

Morse even became the subject of an opportunistic bid last summer.

Even now, some parts of the operation have yet to be completely re-energised, particularly the Business Application Services division, but there was no doubt that the actions taken by management resonated with the financial markets.

During the first six months of Phillips reign, Morse's share price slid to 4.75 pence (December 2008), way below the 51 pence per share offered by 2e2 in April.  

Phillips has now stepped down and is "open minded" about the next position he takes on, but let's face it there are plenty of resellers out there in need of some commercial medication. The question is, will he remain in the channel?  

Drop me a line, on the QT, off-record, very much hush hush.

paul.kunert@rbi.co.uk

HP and the other major vendors frequently talk about the need for resellers to get involved in selling services given the perpetual decline in hardware margins.

So it was heart warming to see the US tech monster winning a place on the servcies rich Desktop 21 framework awarded by Buying Solutions, the public sector's largest professional procurement body that presided over the calamity that was CITHS.

The award was made in March but it has taken HP more than three months to formally announce this. Two other suppliers, Atos Origin and Fujitsu Services also made it onto the framework to provide a range of fully managed desktop services.  

These include - Access Devices, Role Specific Services, User Support Services, Common End User Services, Common Infrastructure, Common Control Services, Security Services and Request Services.

Service Desk, Desktop Break Fix/ Warranty Management, Full Print Services, System Integration, Servers on-site, Video Conferencing etc, etc.

You get the point, it is a pretty wide brief that only some of the largest resellers in the UK could fulfil.

HP has already driven away some of its top tier partners from selling its PSG kit , courtesy of the value system integrator (VSI) programme under which - initially - they were paid no soft margin for hardware provision.  

The vendor's inclusion on Desktop 21 is bound to alienate some - who were no doubt cheered by its failure to get onto CITHS.

But luckily for the cynics at least, ESSN is more channel friendly than ever.

Amid yesterday's slew of acquisition stories was the takeover of UK distributor Sphinx Group by market mover and shaker Arrow Enterprise Computing Solutions.

Consolidation is a natural evolution of a maturing market but many of the resellers that buy from Nottingham-based Sphinx are SMEs that rely on their friends in distribution for credit.

The number one reason most small businesses go bust is because their coffers have dried up and they are not able to cover bills as they fall due.

Arrow has recently talked about turning business away among some smaller reseller accounts because they were shopping around for the best price and showed no loyalty.

So will some resellers be concerned that Sphinx, another source of finance in the UK, now part of Arrow, have a different attitude to credit or place different stipulations on its provision.

Some smaller distributors build up detailed history and knowledge base of clients, as such they are often more comfortable with managing the risk on behalf of old customers.

Bigger distributors often try to minimise risk, a subtle but important distinction.

There is still a fair amount of credit in the channel, but will resellers that had seperate lines with Arrow and Sphinx still enjoy the same levels now that the firms have become one?

Drop me a line, on the QT, off-record, very much hush hush.

paul.kunert@rbi.co.uk

Some people - well me - are calling EET Nordics "the Acer of the distribution world".

Well at least half of the equation is right. It runs a very low cost operation, employing seven staff in the UK and running a central warehouse from Denmark that ships directly to the reseller or customer.

All sales are transacted online and resellers are expected to pay a premium for next day delivery, which is a trick that much of the UK channel has been missing out on.

Selling spare parts account for around 60% of UK sales - 30% at group level - and it has a nascent surveillance division - so is operating in markets that most traditional IT distributors do not. 

However, with a UK turnover of £2m in fiscal 2009 ended June and £4m this year, it has yet to match the sales trajectory of the Taiwanese PC firm.

The question is will UK boss Simon Smith, a UK distribution veteran who set up Actebis UK and operated as Ingram Micro sales director, be able to spearhead growth beyond its current levels?

Certainly this challenge, along with a more holistic lifestyle in Chiswick (yoga and herbal tea but no booze or fags), seems to have mellowed the man, who was once renowned for being a hyper-aggressive sales beast.

Drop me a line, on the QT, off-record, very much hush hush.

paul.kunert@rbi.co.uk

The embarrassing public court cases facing Dell and Intel will come as scant consolation to the hundreds of national system builders whose demise was sped up by the alliance between the two firms.

But they might provoke a wry smile.

While Intel may have given AMD $1.25bn worth of reasons to get over its anti-competitive actions, the European Commission is waiting for Intel to appeal the guilty verdict on its monopolistic behaviour.

There are also developments on the other side of the pond.

Dell has recently set aside a $100m reserve to cover any potential settlements with the SEC over a civil injunctive action related to historical accounting practises and its dealings with Intel.

However, in another outstanding case brought about in November, Andrew Cuomo, New York attorney general filed an anti-trust lawsuit against Intel and Dell which alleged the PC maker had delayed buying chips from AMD in return for rebates.

The lawsuit has revealed emails sent between Intel boss Paul Otellini and Michael Dell, in which the Texan complained his company lost sales to rivals that were using AMD processors.

However, Otellini was quick to remind him that Intel deposited more than $1bn a year in Dell's bank account which was "more than sufficient to compensate for the competitive issues."

Latterly in the suit, it emerged that Otellini sent another message to a colleague referring to Dell as "the best friend money can buy."

Intel realised the uncontrollable monster it had created in Dell too late in the day and as UK nationals including Elonex, Tiny, Time and Compusys sank, Intel's reliance on the whims of tier one brands rose.

Who is smiling now, Intel?

Drop me a line, on the QT, off-record, very much hush hush.

paul.kunert@rbi.co.uk

Vodafone's efforts to build an IT channel have floundered so it appears to be going for the next best option - to acquire its own networking integrator.

In the past month the telco behemoth has been liked with several firms including the reseller operation at Daisy Communications and DiData.

Fixed and mobile communications are converging and Vodafone is trying to buy up some fixed line competency.

Its historic involvement with the channel has been chequered; it employed Mark Whitby - now Seagate's European president- to develop global channel programmes for IT resellers but things never really took off.

"Vodafone put some money into the channel but it didn't see the returns on a short term basis and gave up," said one reseller source.

Activating contracts was considered long winded and complicated and many laughed when Vodafone reduced the process steps to nine, not three or four.

The sales model is another issue for IT resellers; giving away hardware with the tariffs was and to a large extent still is alien to IT firms, costly finance experts are required to help with this.

Any deal over a certain number of seats is also taken direct so resellers said they found it difficult to compete with the network operators and were confined to sell in the SME market.

Blackberry and O2 are certainly making strides to overcome these issues and are placing a lot of investment in the IT channel to help resellers build up specific teams but even these companies offer commission only on new business.

"You need two operators to make money," said one channel source.

With a growing number of notebooks and netbooks sold with connectivity, the channel is slowly responding. Sadly for Vodafone, as things stand now it will not be in line to benefit when those sales agents truly get to grips with the model.

Drop me a line, on the QT, off-record, very much hush hush.

paul.kunert@rbi.co.uk

The mantra of New Labour in the early years was education, education, education, now because of the uncontrolled spending habits of the previous Government, the current one has been forced into making cuts, cuts, cuts.

This week the new generation started swinging the axe and the IT industry started to get some details about the planned savings; £1.7bn from delaying or stopping contracts and a £95m reduction in IT spending.

It will also look to cut wastage, £600m to be specific, by unwinding quangos and as any education reseller will know, the plug was pulled on BECTA leaving an advanced tender process in doubt.

The new ICT Services framework kicks off in August but question marks hang over its future given this week's decision.

One education house has already spent 60 man days responding to the 125 page Pre-Qualification Questionnaire (PQQ) and anticipates that the cost of responding to the Invitation To Tender will cost in the region of £100,000.

The costly procurement process has prevented some SMEs from targeting Government business and has the potential to put others in real financial danger.

If the Tories are serious - as they previously pledged - about handing 25% of public sector contracts to SMEs, the coalition Government needs to seriously re-think the tender process for ICT contracts.

Drop me a line, on the QT, off-record, very much hush hush.

paul.kunert@rbi.co.uk

The channel is digesting - and will be for the next month - the ramifications of the Government's decision to axe BECTA but after the dust settles, will the industry really be worse off or did the quango justify its existence?

The procurement body was set up in 1998 - one year after Labour got into power - and has become one of the first victims of the coalition Government's attempts to cut costs; a BECTA free Britain is expected to be £80m better off this fiscal year.

Of course BECTA has come out fighting following the news, with chief executive Stephen Crowne defending its output.

"Our procurement arrangements save the schools and colleges many times more than BECTA costs to run," he said on its website.

The problem for Mr Crowne is that his £220,000 a year wage bill and the circa £112m budget that BECTA enjoyed on an annual basis is symptomatic of the excessive spending patterns that now need to be curtailed by our Oxbridge friends in power.

BECTA was founded to manage the procurement of technology in schools and seek out costs savings by developing frameworks with bigger economies of scale but did the savings justify its own budget?

BECTA employed 240 staff and 120 contractors. It spent £1.5bn via its procurement agreements since 2002 and reckons it rung out £55m worth of cost savings for schools, local authorities in the past year.

Despite this, I suspect the £100m plus budget could be better used on the front line.

The discontinuation of BECTA may cause a short sharp intake of breath from resellers that are involved in the bidding for this forthcoming ICT services framework but even if they did make it onto the supplier list, there was no guarantee of business.

Using the framework agreement is not compulsory for schools and BECTA had no power to enforce them so it may have been a good idea that was poorly executed.

With a raft of positions in BECTA that were due to be filled, it looks like resellers were not the only ones that didn't get a sniff of the planned cuts.

So it's bye-bye BECTA, but the next question is what does the future hold in store for BSF or indeed the Home Access scheme?

Drop me a line, on the QT, off-record, very much hush hush.

Welcome to Reseller Radar, a blog that aims to inform, provoke and raise a wry smile. After more than a decade spent at MicroScope analysing the channel, it is clear that reseller market is at an inflection point.

The role of the traditional reseller has been under close scrutiny for years but the recession has acted as a catalyst for change in terms of the way that customers want technology delivered and the method of paying for it.

The ubiquitous cloud has engulfed the IT industry and while some resellers have embraced it and have or are pushing through the requisite changes to their business model, others are scared to death of it.

Microsoft this week ran the first of many reseller workshops to give them a better understanding of how the Business Productivity Online Standard Suite (BPOS) will impact their business.

The fear factor of the fundamental shift from chunky upfront revenues paid at the start of the project to making the same money over the lifetime of a contract is a tangible challenge.

It changes the entire dynamics of a business with costly field sales teams and if you have not re-engineered your business to take out cost to deal with the issue it will be painful.

Of course Microsoft is not suggesting resellers move wholesale to sell apps hosted in the cloud, after all most customers are slowly migrating applications to the cloud and maintaining some on-premise software.

Under BPOS, resellers can expect 18% of the value of the contract to be paid upfront by Microsoft and 6% per month of the monthly fees but then there is obviously a raft of support contracts, management fees and customisation work.

The concept of the cloud has resonated with customers looking to cut down on capital expenditure in favour of op-ex, and is more flexible, allowing firms to expand and contract service requirements as their business changes.

Just as important is the changing relationship with the customer; resellers that do a good job in advising the client on cloud can potentially embed themselves with that business for the long term, shutting out the competition.

There is a good reason to maintain dialogue with the customers to become a trusted advisor and technology advocate, not just a product salesman; building proof of concept and showing the impact on the customers' p&l accounts.

Bizarrely the cloud may also help smaller resellers overcome concerns that larger businesses or public sector organisations may have previously held - in BPOS Microsoft invoices the client so the client is buying the services from Microsoft.

This may give the customer piece of mind yet the reseller remains the intermediary that moves the customer from a legacy estate to a services-based IT model.

In its next financial year, Microsoft is expected to add CRM, Office and even System Centre Manager to BPOS, meaning that the functionality will expand. Announcements are expected at this year WW partner conference.

The question is, will you be knocking on customers' doors with a cloudy, hackneyed sales pitch about products or will you build a clear longer term strategic relationship with them?

Drop me a line, on the QT, off-record, very much hush hush.

paul.kunert@rbi.co.uk