The next big, big thing has come and gone. But, oh look, here's something new. Web services. Forget Enron, Even Andersen. Forget that economies have been shaken and foundations decimated by the pursuit of the last "big thing." We, the collective geniuses that are left standing among the rubble of dot com's and ISV's and IT companies that placed their bets on the Come line of the Internet Tidal Wave, have a new answer to the bubble. And it doesn't even matter what flavor you choose ( .net/SunOne/WebLogic or IBM massive investment in this space) its all about bring apps to the web. Amazing. Forget ASP's, (Application Service Providers) VSP (Vertical Service Providers) and the ol' X Internet. No siree. Web Services. This is the real deal.

PRODUCT SPOTLIGHT

RHINOTEK

WHAT IF…You knew your customers would be repeat customers thanks to RHINOTEK Inkjet and Laser Cartridges?

Genuine RHINOTEK products will save your customers up to 48% on Printer Cartridges and are backed by a 100% Quality Guarantee. Rhinotek's INKJET and LASER cartridges always meet or exceed the performance of the Original Equipment Manufacturers for Brands such as; HP, Canon, IBM, Brother, Apple, Lexmark, Epson, and Memorex. Rhinotek offers great profit opportunities for reseller partners.

To become a RHINOTEK Partner please contact Larry Grella at rhinotek2000@yahoo.com, or visit our website at www.rhinotek.com.

PRODUCT SPOTLIGHT

Lexar Media

Digital Film Designed Specifically for the Professional Photographer
Today's professional digital cameras capture the highest-resolution images ever, at lightning-fast speeds. The large image files they produce, however, can load your camera's buffer and ultimately make you wait to take the next picture. For the professional shooter who needs immediate confirmation they've captured "the shot" or who wants to identify accurate exposure, levels, or bracketing range - Lexar Media's patented 12X and 16X write speed (1X=150KB/sec.) technology (1.5MB/sec. and 1.8MB/sec. transfer rate respectively) is critical. Ideal for fast-paced applications such as photojournalism, sports and fashion, Lexar Media's Professional Digital Film brings out the ultimate performance from your professional equipment.

Solid-state Design With Built-in USB Intelligence, 100% CompactFlash Compatible
Lexar Media's solid-state design provides the ultimate reliability in harsh shooting environments mandated by professionals throughout the world. With built-in USB functionality, Lexar Media's JumpShot connection kit can quickly transfer your large images to your computer quickly and easily - up to 25 times faster than a serial cable connection - providing you more shooting time. You also save camera battery life by eliminating inconvenient tethered downloads. Lastly, Lexar Media digital film is 100% compatible with the CompactFlash format, so it can be used with digital cameras and other digital devices that support the CompactFlash format, such as PDAs, video recorders and MP3 players.

Lexar Media Offers Great Profit Opportunities For Resellers Partners
Lexar Media is the only company offering a complete, end-to-end solution for digital photography. We are uniquely positioned in the marketplace, offering superior speed, capacity, ease-of-connectivity and guaranteed compatibility for all digital film types. Lexar Media products perform with all major digital cameras from leading manufacturers, including Canon, Casio, Epson, Fuji, Kodak, Nikon, Olympus, Sony and Yashica. Call today to find out how you can start making more profits with Lexar Media.

For information regarding becoming a Lexar Media partner, visit our Web site at www.lexarmedia.com, or call Tim Sullivan,(510) 580-2362, or email him at tsullivan@lexarmedia.com.

PRODUCT SPOTLIGHT

NEWS

SMB Resellers-The Five Keys to Success in Your Business
By Jill Kerr

Alliances—No reseller should stand alone. Even though you may be working out of your basement or bedroom, you can have the presence and clout of a large company. In such a specialized industry, no one person can know everything and be everything to everyone. That's why partnerships are so important. Seek out other resellers who have areas of expertise that you don't. Partner with them. Their abilities can only make you stronger. And you customers will be better served as well. Anthony Harbor, Harbour and Associates in Richmond, VA has mastered the art of alliances. "We have expanded our presence through partnerships with other ASCII resellers by combining skill sets and knowledge. In addition to providing consultants to fellow resellers for specific needs, we also have worked with fellow resellers to solve problems through collaborative troubleshooting of issues," he says. Seek out resellers in other geographies, too. Learn when you should say no to a distant customer and when you can have one of your alliance partners take care of that business for you. On that subject Harbor adds, "We are able to provide services and products to a client with a remote office on the West Coast through a fellow ASCII reseller with the level of confidence as if we had a West Coast location."

Networking—And I don't mean hooking computers to each other. I'm talking about getting out there and meeting people. Many resellers tell me that they're introverts and would rather be in the back room configuring systems. To that I say, pay a tech to do that. It's your job to be out there talking to customers and to other businesses like you. One ASCII reseller, Bill Schwartz, Mid Atlantic Computer Products in Highland, MD, joined a "networking group". Sponsored by Business Networking International (www.bni.com), these meetings take place all around the country. The networking group limits itself to one representative from each industry. The members get together once a week. During that meeting, each member gets 30 seconds to introduce himself and two people during that meeting will get 7 minutes to describe their business. The rest of the meeting is exchanging leads. Everyone in the group is responsible for finding leads for the other members. Imagine having 30 or 40 people out there generating business for you. Says Schwartz, "It's a great way to get new leads. We look out for each other. I had a customer who needed to have her laser jet printer repaired. I don't do that but I knew someone in the group who did."

Integrity—Small business customers can't afford to make technology mistakes. They will be lucky if they can make a major technology purchase just once. So it has to be done right. They'll look to you for guidance and information. You can't afford to steer them wrong. If you do a great job for a customer, they'll be yours for life. That's why you need to analyze their business and make the best recommendation for them - not just sell them the product that's currently being spiffed at distribution. Says Tony Liu, Pine Computer and Consulting in Los Angeles, "Listen to their needs and make appropriate recommendations that are best suited for the customer and not just most profitable to you." Adds Jeff Sherman, Warever Computing in Los Angeles, "The one key to making money is understanding your clients' businesses and making recommendations based on their business needs not on just the technology."

Intelligence—To be an effective reseller you need to be armed with information. How else can you "lead" your customers? In this industry, that's no small undertaking since the technology changes daily. Invest time in industry events. Read the industry trade publications. Subscribe to email distribution services that get the information to you when the news is still "hot." Says Bob Lamb, ESI Technologies in Athens, TN, "I need to know the industry direction before my customers. I want them to look to us for answers and if we can't stay current, what is our role?" But there's another side to the "intelligence" coin and that is being a detective. Use your small business customers for information gathering. When you're at a customer site, see what problems these businesses are facing. Figure out how you can solve those problems with a technical solution and sell it to them. Then go back to your other customers and offer them that same solution. "The one key to making money is to discover a need, fulfill it and exceed the expectations of the customer," says Joe Balsarotti, Software to Go in Clayton, MO.

Fortitude—No one would argue that it takes fortitude to make it as a reseller. It's a tough business and getting tougher every day. But being strong can have several meanings when you're selling information technology. Sure, sometimes the shrinking margins make you want to pull out your hair or cry! It takes a strong will to keep going in this business. But it also takes the kind of discipline to run your own race and not let the industry "run" you. When everyone else is lowering prices, consider raising yours. Sure you may lose some customers but you could also make more money on your existing customers. What do high prices say? Perhaps it says that you're the best at what you do. Isn't that how you think of a Jaguar or a Rolls Royce? Don't become a victim to the price game. This advice comes from Tom Doyle, Hoosier Accountant in Washington, IN, "Don't let your competitors set your prices. The competition is desperate and will soon be out of business because of low prices. Have enough guts to set profitable prices for service and hardware and stick to them. Nobody will pay you more than you ask, but there are customers that will pay you what you ask."

The resellers who will survive in this business must be technically capable but moreover they need to be resilient. The ability to change and adapt is critical to survival. Charles Darwin, who spent his life studying evolution, observed, "It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change." These ideas represent some of the best characteristics possessed by the resellers who I view as survivors in this business. They have survived for the most part because they, as well, are responsive to change. I hope these ideas will in some small way help you survive, too!

Jill L. Kerr is the President of The ASCII Group (www.ascii.com), the world's largest group of independent computer resellers with 2000 resellers in North America. She has spent the last 15 years helping resellers survive. You may reach her at mailto:jkerr@ascii.com.

NEWS

Handheld Refresh
By ChannelMedia Staff

The handheld battle is heating up as rivals introduce color models and more wireless technology is starting to become more prevalent in hybrid PDA devices as consumer seek small, sleek, all-in-one devices to replace the multiple devices many now carry. Sony hit the street at the end of March with a pair of color PDA's, the CLIE PEG-NR7OV and the PEG-NR70 that operate the Palm 4.1 operating system. The systems are faster than earlier models from Sony and others due to larger memory and faster processor, but the true differentiator for the two PDAs is their screen. Sony is using a 65,000 color LCD display with 320 x 480 resolution that has the ability to rotate 180 degrees. This allows the PDA to be lying flat and yet have the display up, just like a standard notebook, and with a QWERTY keyboard, the ability to input information is simplified. When not in use the display folds up to cover the built-in keyboard. With the NR70V there is also a built-in camera, a first in the PDA market as a standard feature. Both Clies also have a remote control feature that allows them to control consumer electronic devices such as DVD players and stereo equipment from 15 feet. The two will run between $600 and $500 and are expected in early May. The look will help set the devices apart from the pack as many PDA designs are starting to look very similar and users have a hard time telling at a glance between a Hewlett-Packard, Compaq or Palm device right now.

Earlier last Month Palm debuted a pair of color PDA devices, which while not as innovative as the Sony products that were to follow, have another strong asset to recommend them, price. Both are just enhanced versions of existing Palm products but color is now a feature at the mid-level. The $399 m515 is an enhanced version of the company's premium m505 line with a brighter screen that features adjustable backlighting and 16MB of memory. The m130 is an enhanced version of the m125 but now comes with the addition of 16-bit color. But color is just the start, users are looking for ever more functionality in their PDAs in an effort to reduce the number of devices they are fo0rced to carry and wireless has long been viewed as the solution to this problem. It has been advancing with little bursts but now seems to be gaining momentum.

Research in Motion, developer of the popular BlackBerry e-mail devices has added voice to its offerings with the BlackBerry 5810, making it a combination phone and messaging devices. The company is just now testing the technology but expects to have it ready by mid-year. Handspring, which was one of the first with a combined phone/PDA has gone in the other direction and added e-mail to its Treo communicators. The Treo Mail will enable users to scan messages from their PDA.Expect all of these features, color displays, wireless connectivity, both voice and e-mail, to become standard features in PDAs by the end of the year as a few companies with vision and engineering capabilities will start to separate themselves from the now mostly me-too pack of PDA and smart phone developers and offer products that fit market needs more closely.

NEWS

Q. Handspring has just launched a new product, called TREO, that seems on one hand a logical product extension and on another hand, a radical change of product direction: Standalone personal organizer vs digital communicator. Is this a correct read?

A. Not really all that radical, just an evolution. It does everything your old PDA does and then adds cell, web access and mail. I believe all handheld's will get "connected" at some point.

Q. From a channel standpoint, how is this "change" being perceived: This is a service and a product, right? that creates a potential annuity back to the channel? Does the channel "get" the idea of selling this like a service vs a product?

A. Most of our customers are selling wireless products that require "activation" today although typically through a different merchandising team. In that change we need to get around the organization a bit but the PDA teams know us and I believe Handspring has built a reputation as an innovator so doing something ahead of the rest of the pack is anticipated if not expected. There are some channels that do not "activate" wireless products today, mainly in the distribution and general VAR channels. Within these channels a great opportunity exists to reach into new businesses. The "wireless data channel" is something that does not really exist today and its here that I see the biggest collision of traditional wireless resellers and traditional computer sales and distribution. That collision is going to be more of a big bang... the beginning of an evolutionary path.

Q. You are also expanding your channel - retail, wireless, var, etc. Can you share with us your strategy here? How big, broad (and bad) are you guys trying to be?

A. These types of products appeal to a really wide range of resellers and is the first "wireless data" product I really feel like more traditional wireless resellers can bring into their fold pretty easily. It also plays well into those folks portfolio who are selling CRM,SFA, syrncronization, mail, etc. along with a server. The net effect is that there will be expansion of our distribution to support these new types of customers who are outside our current distribution partners.

Q. Here's an off the wall question: If I was opening up a Handspring services business, how would you suggest I sell and market the product? Who would I target (hot customer base?) and make money (would I sell other products, services?).

A. I would first look at those 10 million or so active PDA users in the US and tell them that the product they have been waiting for has arrived. Then I would look at anyone who is using a cell phone and see if having email, messaging, web access and a PDA all on a screen and keyboard that's usable would be a benefit. Don't drag the notebook along. No more hassle with VPN's, trying to find a data jack in the airport lounge. Get your mail on the go when its convenient for you... plus web access, PDA and voice, all in a device that's small (and lighter) than your average wallet. As far as revenue opportunities, the wireless operators are pretty interested in getting new subscribers and pay accordingly. If you have the ability to sell, service and install custom solutions, there is even more money in this and today...little competition since these functions have note really been combined well in the past. The value-added players are going to have the biggest opportunity. These devices have been a consumer purchase model in the past... even though most customers use their products for biz. Cell phones, PDA's mostly bought at the local retailer and then reimbursed. With email and synchronization, the IT guys take over and that's when you need servers, maintenance, integration etc. This channel does not exist today- neither the carriers or resellers are really up to speed here and this space is going to be a great one.

Thanks Greg.

NEWS

Channel Digest

Struggling to regain its identity and a focus that will reignite sales growth, PC Connection, a leading direct marketer of information technology (IT) products and solutions, recently signed a definitive merger agreement under which it will acquire MoreDirect, Inc., a premier e-procurement supplier of IT products for medium-to-large corporate and government organizations nationwide. MoreDirect's Internet-based system enables corporate and government customers to efficiently source, evaluate, purchase and track a wide variety of IT products. For 2001, MoreDirect reported net sales and pre-tax income of $219 million and $9.2 million, respectively. The acquisition will be accounted for using the purchase method of accounting and will be immediately accretive to earnings. The boards of directors of both companies have unanimously approved the transaction and expect it to close within the next 30 days. Under the terms of the agreement, PC Connection will pay the shareholders of MoreDirect approximately $21 million in cash at the closing. Prior to the closing, MoreDirect will distribute from available cash balances approximately $9 million in previously taxed but undistributed earnings. In addition, PC Connection will pay additional cash based upon MoreDirect achieving targeted levels of annual earnings before income taxes through December 31, 2004. PC Connection will also escrow $10 million in cash at closing to fund a portion of these contingent payments. Certain portions of the contingent payments may be converted into PC Connection common stock at specified conversion prices between $20.80 and $40.00 per share.

In another signal of consolidation, PC Mall recently acquired the assets of Pacific Business Systems, a long-time direct marketer of computer products to business and consumers under the ClubMac brand. PBS reported sales of $84 million for 2001 and has posted 18 consecutive years of profitability. PC Mall expects the acquisition of PBS to be accretive to earnings for fiscal 2002.
Under the terms of the agreement, PC Mall has acquired PBS' customer database, accounts receivable, inventory, certain fixed assets and certain intellectual property and has assumed certain liabilities equal to the negotiated values of acquired accounts receivable and inventory. In addition to certain liabilities assumed, PC Mall issued PBS 300,000 shares of its common stock and has agreed to a capped three year earn-out, whereby additional consideration may be paid to PBS based on the future results of the acquired business. In connection with the transaction, PC Mall will also extend offers of employment to PBS sales and support employees. Mike McNeill President of PBS said, "We are very excited to be joining the PC Mall organization, one of the largest and finest direct marketers of technology products in the industry. We believe that access to PC Mall's sophisticated fulfillment infrastructure and database marketing systems and their extensive vendor relationships and product authorizations will help drive PBS' performance to the next level."

Frank Khulusi, Chairman, President and CEO of PC Mall said: "With the majority of their current sales derived from their outbound direct marketing sales-force, the PBS acquisition is aligned with the focal point of PC Mall's business strategy. PBS and PC Mall also use the same enterprise software which simplifies the integration of the two companies and speeds the realization of any potential synergies."

Mira. Mira On The Wall - Can XP Play in Your House?
A number of consumer electronics heavy weights have jumped on Microsoft's Mira bandwagon last month at the CeBit trade show in Hanover, Germany, a move that should help the software company of reaching its goal of shipping the 'smart devices' by Christmas 2002. However beta testers of early versions of the Mira technology have noted some interesting features that could raise the cost of the product to home consumers, something that would be an unwelcome addition.The latest to enlist are Philips Consumer Electronics and LG Electronics, which joined an already powerful group that includes Fujitsu, Intel, Matsushita Electronics, National Semiconductor, NEC and ViewSonic. In addition two companies, TriGem and Tatung, are already preparing Mira designs that their respective hardware OEMs can use to get the technology rapidly to market. Mira is Microsoft's vision of how to extend its Windows XP technology further into the home. It is a set of technologies that is intended to create 'smart-devices' that can be detached and used remotely from a PC. The idea is to use the remote-desktop and wireless-networking features of the Windows XP and Windows CE .NET operating systems to create interactive displays that can be used anywhere in the house. It then sees the technology expanding so that users will make their PC the center of a home entertainment center and even watch movies from PC screens.

Web Services, the panacea for all that ails enterprise computing, has a new convert. Vignette has added support for Web services to Vignette® V6, the company's flagship Web content management solution. Vignette is delivering a solution in the market today that allows virtually any content management process to be exposed as a Web service. Vignette is enabling organizations to more easily and more completely automate business processes that require real-time access to electronic content, such as requests for detailed product information, price quotes, employee benefits or customer service information. With Web services-based access to electronic content, Vignette is positioned to help customers develop Internet applications to help increase their return on investment.

Horizons Computer Learning Centers' Martin Bean has been named to chair domestic public policy efforts for CompTIA, the leading technology industry association. Bean, recipient of the 2001 CompTIA Eddy Award honoring outstanding contribution to the IT learning industry, is an experienced leader within the CompTIA member community. He has testified on behalf of the Technology Workforce Coalition before the Subcommittee on Oversight of the House Committee on Ways and Means.

According to the Dell'Oro Group's Q4 2001 LAN market share report, 3Com has moved into the number one market share position for "Layer 2, 100 Mbps Ethernet Switched Fixed Unmanaged" networking products. Particularly attractive to SMB customers, 3Com's OfficeConnect and SuperStack 3 Baseline families of switches deliver a rich set of sophisticated networking capabilities that are easy to use and specially designed to meet the needs of small businesses with no dedicated IT staff. "Ethernet switching is rapidly becoming the mainstream technology that small businesses implement," said Jarek Chylinski, 3Com's director of small business. "Small businesses worldwide are increasingly choosing 3Com's specialized small business switches to upgrade their networks from 10 Mbps Ethernet hubs to 100 Mbps switches because they are the most reliable and easy-to-use products on the market.

Data Point: eMarketer predicts that worldwide business-to-business e-commerce will total $823.4 billion by the end of the year, with strong growth continuing through 2004, when internet-based trade will reach nearly $2.4 trillion. Based on interviews with leading online exchanges - including Covisint, Exostar, ChemConnect, e2open and GlobalNetXchange - eMarketer reports that most exchanges experienced increased transaction activity during the latter months of 2001 and are now expanding operations in 2002. "Despite last year's difficult economic climate, many companies pressed on with their e-business initiatives, continuing to lay the foundation for e-commerce trade," says Steve Butler, Senior Analyst at eMarketer.

Salesforce.com, a provider of Web-based sales force automation applications, named Phil Barker as senior vice president of global services. Barker most recently served as vice president of professional services for Aspect Communications and also spent nine years at Oracle, where he served in a number of positions, including regional vice president. Barker will lead Salesforce.com's global consulting, implementation, and integration efforts on behalf of its customer base. Salesforce.com tripled its revenues for a second consecutive year in 2001, and has been cash flow positive since last November, according to CEO Marc Benioff.

iReady, a developer of Internet protocol processing, named Gary Thomas as president. Co-founder Ryo Koyama, who has served as president and CEO since iReady's inception, will continue as CEO and as a board member. Mr. Thomas spent 21 years at Intel where his positions included director of Intel Capital; general manager of the graphics components division; and director of engineering for the Santa Clara microprocessor division. Among its backers: National Semiconductor.

Another New Alliance: OSMR. ndustry leading hardware and software storage vendors today announced the formation of an alliance to launch the Open Storage Management Resources (OSMR) program. The alliance was created to help ensure product-to-product compatibility and deliver simplified Storage Area Network (SAN) solutions to market. The first certified SAN package available through the OSMR program, "E-Z SAN," provides up to 1.1 terabytes of easily managed storage and will be demonstrated at Storage Networking World 2002 in Palm Desert, April 2, 2002, booth PP11. The OSMR program is unique in that customers can purchase a pre-certified and tested hardware bundle and then choose from a variety of leading OSMR program software vendors' products to easily deploy key applications such as storage virtualization, auto backup/restore and volume management. Designed for workgroup and departmental level companies, the E-Z SAN hardware bundle and software applications are available now through Bell Microproducts' network of resellers. The E-Z SAN solution is available for immediate delivery through Bell Microproducts' network of resellers and solution integrators, with prices starting at $30,000.00.

"The OSMR initiative with E-Z SAN solution provides the flexibility of supplier choice along with assured interoperability among components, software and systems," said John McArthur, group vice president of storage research for IDC. "Solutions that are hassle-free and avoid the lock-in of proprietary alternatives are a big move in the right direction."

WRQ was selected by EDS to provide the Navy Marine Corps Intranet program with a standard solution for Windows-based host access and PC/UNIX integration. WRQ(R) is a member of the EDS-led NMCI Information Strike Force (ISF), collaborating with EDS and ISF team members to migrate more than 400,000 NMCI users to cost-effective information technology investments that are interoperable, secure, performance-based and designed to enhance the flow of mission-critical information. EDS chose WRQ Reflection(R) over existing and other market solutions because of Reflection's ability to satisfy the diverse needs associated with the complex infrastructure and large enterprise scale of the U.S. Navy and Marine Corps. WRQ will provide NMCI users reliable and uniform access to thousands of applications and important data used in logistics planning and deployment, engineering design, financial accounting, and other mission-critical activities. In addressing desktop standardization, Reflection also eliminates redundant costs and labor associated with supporting many disparate desktop applications being used to access host systems. Additionally, because WRQ Reflection has earned the Microsoft "Certified for Windows 2000" and "Designed for Windows XP" logos, WRQ can facilitate NMCI's migration to critical state-of-the-art technologies.

Sterling Commerce, a subsidiary of SBC Communications said that Thrifty Office Supply, a distributor of office products, is utilizing Sterling Commerce's EDI-to-XML bridge service, allowing them to serve key customers participating in e-marketplace and Web-based exchange communities while leveraging existing investments in EDI technology. The bridge service, offered through Sterling Commerce's electronic trading network, allows companies to share information and complete transactions electronically between established EDI business-to-business trading communities and Internet-based e-marketplaces and exchanges. By using its EDI-based B2B commerce infrastructure, Thrifty Office Supply can electronically send and receive purchase order and invoice information to e-marketplace participants without the need to invest in and support an additional B2B commerce infrastructure. "Sterling Commerce's bridge service enables Thrifty Office Supply to respond to key customer requests to participate in their e-marketplace initiatives, while also expanding our sales channels to potential new e-marketplace customers," said Jo Elda Aragon, President and CEO of Thrifty Office Supply. "Just as important, we're able to expand our B2B commerce efforts without investing in additional hardware, software and technical resources to support each new marketplace technology."

A new study, being released this week, shows that Nortel has taken over leadership of the IP phone systems market. According to the research report, produced by The Eastern Management Group, Nortel dominated the market for IP phone systems in the final quarter of 2001with a 23 percent market share, and unseated former industry leader Cisco Systems. In a companion research report, also being released by The Eastern Management Group, top spot in the sales of traditional phone systems, known as TDM systems, remained comfortably in the hands of Avaya at the end of 2001. In the fourth quarter of 2001, Avaya controlled 31 percent of the TDM business phone systems market, followed in second place by Nortel. IP phone systems are continuing to build traction in a market once dominated by TDM PBXs and key telephone systems. In the last three months of 2001, IP phone systems continued their meteoric rate of growth, and accounted for 20 percent of the total US market for business telephone systems. Other study findings point to a conclusion that VoIP may precipitate a shakeout within the phone system industry. One example of this is the inclusion of the Session Initiation Protocol (SIP) VoIP protocol within the latest Windows XP operating system. This single action places a SIP phone on every desktop, and provides users with a compelling alternative to traditional phone systems.

New QuickBooks Software is Designed and Priced for SMB's. Intuit introduced the first in a set of business management solutions designed for businesses with 20 to 250 employees. The new product, QuickBooks Enterprise Solutions Business Management Software, features greater capacity, improved performance, enhanced reporting and the ability to support up to 10 simultaneous users. It also includes the new business management tool, the QuickBooks Employee Organizer, which helps businesses easily manage employee information and comply with state and federal employee regulations. The product delivers on Intuit's Right for My Business strategy by offering a higher-end solution for larger businesses. "Customers no longer have to dread upgrading to a solution that's hard-to-use, requires extensive training, or is too expensive. Small business customers who have waited for a `turbo charged' business solution that's still easy-to-use, now have the answer," said Dan Levin, vice president of QuickBooks Financial Solutions

Arbor Networks today announced that it has joined the Cisco AVVID (Architecture for Voice and Video Integrated Data) Partner Program as a Security and Virtual Private Network Solutions member. Through membership in the Cisco AVVID partner program, Arbor's Peakflow DoS 1.6 provides a distributed, scalable, non-intrusive solution that enables large enterprises to quickly detect and counter network availability threats such as denial of service attacks and worm propagation. The Cisco AVVID Partner Program sets criteria for interoperability testing by independent third parties and is a co-marketing program enabling leading product and services firms to deploy innovative e-business solutions. The program provides enterprise customers with information regarding Cisco AVVID Partner products and services that an independent testing facility has tested, verified and found to interoperate with a specified version of Cisco networking technology in the SAFE security blueprint.

Black Box Corporation expects Q4 earnings to be between 71 cents and 72 cents, prior to a one-time restructuring charge. Corresponding net income as a percent of revenue is expected to be between 9.4% and 9.5%. Free cash flow is expected to be between $20 and $22 million. Revenue is expected to be approximately $160 million. Fred Young, CEO, said, "Coming into this quarter, we were expecting revenue levels consistent with traditional sequential trends. That has not happened. What has happened though, is that our revenue levels have remained constant for each of the past four months, starting from calendar December 2001. This is hopefully a sign of a bottom that we can build upon moving forward Relative to the expected revenue, we have successfully managed our business model to achieve traditional Black Box-like profitability and cash flow. Our financial strength will allow us to stay focused on our strategic growth initiatives. These growth initiatives are centered around our suite of industry leading "in-the-building" network infrastructure services for both data and voice applications."

RESEARCH

Bolstering Your Security Business
By Gartner Group

As companies look for ways to improve security and business continuity, they should consider outsourcing their infrastructure and make the external service provider (ESP) responsible for these issues, according to Gartner.
"When an enterprise is faced with the increased costs to improve security and business continuity, using an ESP could provide a better return on investment (ROI)," said Richard Matlus, research director for Gartner. "Most of these ESPs have already invested in sufficient security measures and have business continuity plans in place. Enterprises need to verify the vendors' capabilities and they need to address their security and business continuity requirements in the sourcing agreement."

Once an enterprise has established that a vendor can meet their needs, Gartner recommends that the security requirements should be reviewed and agreed to by the enterprise and the ESP. Then these security requirements, along with procedures for handling any security breaches, will be made part of the final contract. Periodic security audits should be included so that the enterprise will have the right to review the ESP's security procedures and make changes, if needed.

For business continuity, it is essential that the ESP have the proper procedures in place to back up any crucial data and the ability to recover the enterprise's systems. This requires the enterprise to set a default provision to establish a minimum recovery. When an enterprise enters into an outsourcing agreement, Gartner analysts said it should specify its requirements for recovery in the event of an incident and include a disaster recovery plan that addresses these requirements.

To ensure recovery, the vendor capabilities and plans for business continuity should be part of the outsourcing evaluation process and the cost/benefit analyses. Although the enterprise will still need to verify and monitor the vendor's disaster plans, this approach shifts the responsibility of business continuity to the vendor.
When the ESP does not have multiple data centers with the capability to handle disaster recovery, both parties should select a mutually acceptable third party to provide a disaster recovery site. They should negotiate a separate agreement that is acceptable to the enterprise, the ESP and the recovery provider.

"With the current pressure for increased security and business continuity, outsourcing various IT functions can be an attractive alternative," said William Maurer, vice president and research director for Gartner. "The key is that the enterprise must document its requirements and verify that the ESP has the capabilities to adequately meet its needs. The requirements and procedures to address security and disaster recovery must be included in the agreement, along with methods to change and amend the requirements throughout the term of the agreement."

RESEARCH

Dell Customizes Attack on SMB by ARS Research
By Matt Sargent
Senior Analyst, Mobile Computing

One of the cornerstones of Dell's success within the SMB (small and medium business) market is the ability to customize personal computers. Not only is the customization option easier for the SMB user, but customization also brings with it an interesting psychological dynamic; if a user customizes his or her PC purchase by adding a desired feature, and the price of that feature, to the base configuration (rather than having it already included in the base configuration) then he or she will tend to place a higher monetary value on that feature. Dell benefits by using this dynamic to dramatically up sell customers from low-end configurations to higher priced configurations. The SMB buyer benefits by getting a customized solution that is unique to his or her needs.

All IT purchasers appreciate the ability to quickly and easily configure a system rather than sort through a long list of model numbers. Customization of PCs has always been available to large corporate customers. However, until recently, the SMB market was only offered customization options from the direct PC sellers Dell and Gateway. Review, for example, indirect PC seller IBM's approach to selling to SMB. Without a customization option, the only way to select a notebook on IBM's web site is to sift through 21 unique ThinkPad A30 notebook models with less than intuitive model codes such as "265214U". An assessment of what differentiates a "265214U" from a "265246U", and why there is a $650 difference in price can be determined from the IBM web site, but it is certainly not as easy as simply configuring a desired system.

Traditional indirect PC sellers (Compaq, IBM and HP) have avoided providing customization to the SMB market due to fears that such a direction would cause trouble at the reseller level. A direct customization model provides a customer with a solution that directly competes with SBM resellers. Given this issue, the indirect players avoided the subject for several years. In place of customization, they offered pseudo-customization approaches that used the channel as a configuration option.

Over the years, this channel configuration approach has performed marginally well for larger corporate accounts, but has not been the ideal solution for the SMB market. As Dell has continued to take market share in this category, the large indirect vendors have made the decision that enough is enough. PC manufacturers can no longer afford to avoid offering direct customization to SMB and the vast majority of them have finally initiated their own version of online customization. The latest to give in to the customization craze is IBM, now offering online configuration for both their desktop (Netvista) and notebook (ThinkPad) product lines.

IBM's new "build your own" process offers a surprisingly high level of customization, which actually surpasses Dell's configurator in terms of the amount of options available. Comparing the IBM ThinkPad T23 "build your own" options to the Dell Latitude C610 options, we see that both vendors offer the same number of options when it comes to basic specifications such as memory, screen, and hard drive. However, when it comes to accessories like storage and wireless networking, IBM has over two times the options than that of Dell.

Along with IBM, HP, Toshiba and Sony have all added customization options to their web sites in the hopes of attracting SMB users. Compaq appears to be one of the last holdouts in this area. Compaq does provide a customization option for its consumer systems, but does not provide a similar option for its SMB users. Compaq's commercial-focused Evo desktop and notebook PCs offer a "configuration" option, but this typically includes options such as software, warranty, and user-installed memory. True "customization" is clearly not available through Compaq's web site and a SMB user must compare and contrast each of the nine different Evo N600c notebooks in order to make a selection.

The fact that the traditional indirect manufacturers have begun to emulate Dell's customization model does not necessarily mean that Dell's share of SMB will immediately drop. The most important aspect of customization is execution. Quick and efficient delivery of product has been a hallmark of Dell and one in which others must strive to emulate. Trust has to be established and thus a vendor offering customization for the first time should enter with its best foot forward; an IT provider only gets one first impression and its value can forever be defaced if the initial experience is met with problems.

Whether or not PC customization will increase a vendor's share of the SMB is not exactly clear. What is clear is that all users, from large oil conglomerates to small law offices, can now benefit from this ease of use that the customization model offers. Additionally, while market share may not increase initially, the value of each individual purchase will likely rise given the fact that users tend to value option selections in which they have control. This development likely justifies a move to a more customized approach and will hopefully reverse the ugly trend of ever-shrinking margins.

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New Chips Spawn Growth in Server Market
Developing a Channel Perspective
By Steve Greenberg, ARS Server Analyst

PC vendors are betting that Intel’s new server chips will help them win the jackpot by gaining market share and boasting new opportunity and growth in the server market. As technology takes large steps forward and prices continue to fall to all time lows, the server market has turned into a true buyers market.

Competition in the PC-server industry has been quite active recently, a result largely due to Intel’s new MP and Xeon chip releases combined with other technologies allowing improved management and reliability. Although the new processors alone set new performance benchmarks for Intel based servers, manufacturers must employ other strategies such as improved system management features, a focus on TCO (Total Cost of Operation), partitioning, and improved hot-swappable components, which boost system reliability and
hardware capabilities, to distinguish a competitive advantage in the market.

Although competition in all server segments, including the low-end, midrange, and high-end segments, has been quite heated, the mid-range and high-end market segments are the areas with the most growth opportunity and are the center of attention for PC vendors. Not only have the new chips given Intel based server manufacturers such as Dell, IBM, Compaq, and Hewlett-Packard new platforms to compete amongst themselves with, but the chips have given them leverage to use Intel based solutions to fight Unix
competition from Sun and other vendors. In fact, Sun Microsystems, the overall leader for Unix servers in 2001, was pushed out of the top spot in the fourth quarter by IBM, which has revised its product lines to use Intel’s new high-end Xeon chips. For a long period of time, RISC-based servers were the dominant choice for Unix applications, but Intel’s new chips clearly have widened this gap.

The recent buzz in the server industry is due to the new Intel MP Xeon and Prestonia Xeon chips based on the Pentium 4 core architecture. The Intel MP Xeon chip is designed for multiprocessor servers running four or more chips, while the Prestonia Xeon chip is for use in servers running single or dual processors. Intel’s new Xeon MP chip runs at clock speeds nearly doubling that of the chip it replaces, the 900MHz Pentium III Xeon chip. In fact, the MP processors are offered ranging in clock speed from 1.4GHz, 1.5GHz and
1.6GHz, while the Prestonia runs at clock speeds of 1.8GHz, 2GHz and 2.2GHz. By utilizing the Pentium 4 architecture, Intel was able to attain these significant boosts in clock speeds. Compared to the Prestonia chip, the MP packs a few more features geared specifically for servers, including an on-chip Level 3 cache of up to 1MB. For resource intensive applications, such as online transactions, Intel claims the higher clock speed and memory associated with the new Xeon MP processors will help systems offer as much as a 40 percent performance improvement, compared with a Pentium III Xeon with 2MB of Level 2 cache.

Another enhanced feature of both chips is hyper-threading technology, which allows a single chip to execute two applications or processes at the same time. Hyper-threading almost makes a single CPU system act as if it were a dual processor system. One of the benefits to using the hyper-threading technology is that servers with a single processor will be able to get some advantage out of applications that have been designed to run on two processor servers.

However, there is also a down side to the performance; there is still only one patch of high-speed cache memory and one connection to the rest of the computer. A true dual-processor server doesn’t face this problem. A clear benefit of hyper-threading technology is its ability to lower TCO in some instances due to software charges that are often based on the CPU count. Although hyper threaded chips are not an equal replacement for dual processor machines, they are much less expensive. Servers equipped with a single hyper-threaded chip differ from dual-processor systems in that two applications can't take advantage of the same processor simultaneously, rather only one application can be performed at a time. Scientific and business applications requiring large resources and high-performance will see the largest benefits from single hyper-threaded chips.

Vendors have taken great steps to adopt the new chips by either refreshing their current servers with the chips or by rolling out entirely new servers based on the chips. For instance, Dell was one of the first to offer the Prestonia Xeon chip in its PowerEdge 4600 server. Hewlett-Packard and IBM followed shortly and have since rolled out products based on the new chips. Intel anticipates that many companies will likely want to consolidate the duties of several servers onto one or two four-way machines, which could ultimately support large scale e-mail systems, databases, scientific applications, etc. However, these chips follow the recent introduction of the Itanium, which has not stirred as much demand as was originally anticipated. From a buyer’s perspective, companies also often don’t simply run out and buy the latest, most cutting edge server technology in the first few months of its introduction due to the associated high cost and effort
involved in procuring and maintaining a server. It is often the case that manufacturers anticipate this, and are patient as buyers wait for new chips to be tested in the field and assured of no glitches or bugs.

Since servers are becoming more standardized, companies must turn to other features to distinguish a competitive advantage. IBM, Dell, Compaq, and HP have implemented other strategies such as new service offerings, improved hardware capabilities, and system management features to separate themselves
from the competition. IBM has focused heavily on its project Eliza initiative, which is a major research initiative focused on developing systems that reduce the need of human intervention and can self manage. As
a result of the project Eliza features being incorporated into servers, systems will become more efficient, more reliable by increasing up-time, and will potentially reduce the number of IT staff required to administer a company’s network. Server partitioning, which was originally available on higher-end mainframe servers, is now becoming available on almost all server segments. Partitioning enables servers to become more efficient by dividing processing resources and balancing workloads. Another focus being widely implemented by server vendors is the concept of TCO, which manufacturers have been stressing in order to increase server sales. Not only are servers becoming cheaper for total cost of ownership over the long run, the upfront costs are also becoming cheaper than ever. Services and pricing remain key strategy in this market as well.

There is no doubt, that with time, servers based on Intel’s new Xeon processors will be enough for companies to justify the switch from older technology. Not only do these systems offer higher performance than systems based on older Pentium 3 Xeon architecture, but the management and reliability components manufacturers have added to them are making them more attractive to buyers. The battle between server manufacturers will expand from performance and price as a market driver, to system management offerings, reliability and scalability benchmarks, improved hardware components, and the strategy of stressing TCO. Not only do servers based on Intel’s new processors outperform older P3 Xeon based systems, but the total cost of ownership is lower. Since the new Xeon processors are based on the P4 core, which has already been in the market place for over a year, adoption for servers based on the new chips should be the opposite of the Intel’s 64-bit Itanium processor, which has been a disappointment.

RESEARCH

Changing Channels
Developing a Channel Perspective
By Steve Cross

To a hammer, everything looks like a nail. To me, everything looks like a channel. As a channel guy, I have a channel perspective.

Years ago, I was National Sales Manager for Insignia Solutions' retail products. It was a nice line of software, fairly successful. Insignia also had an OEM group that sold software to partners like HP, SGI, and others.

The OEM guys were very old-school, big company, adversarial types. Each OEM client was handled like some sort of "friendly enemy". Together, the retail team and OEM team discussed channel approaches. I felt like they could be much more effective if they used channel management techniques on each of the partner accounts, transforming them from friendly enemies to individually managed third-party channels.

A lobbied-for price reduction on the retail software from the Board of Directors came down, driving a sales surge of about 300% over the next 6 months. Looking at this success, I suggested applying that reduction to the partners using a channel pricing approach. The OEM contracts were locked in for 1 year, except for unilateral price reductions. The big job was convincing the partners to pass on the price reduction to customers, by talking about attach rate.

Luckily, the first partner approached was HP, who was very responsive to the pricing change, and immediately saw how they could profit from the price reduction. The Insignia OEM team then used marcom and promos to sell the reduction to HP's sales force, just like you would do a price roll-out in the channel. Of course, the idea of MDF for a partner was a little too radical for these folks. Even so, using channel management techniques, the OEM team at Insignia was able to nearly double their attach rate.

Sometimes a nail really is a nail.

Steve Cross works with mid-sized high tech companies to evolve their businesses. Since 1997 his clients have included Pinnacle Systems, Visioneer, Dazzle, Network ICE, Margi, Aladdin, Outpost.com. He was formerly sales vice president at Connectix.

Contact: steve@crosschannel.com 408-528-7211