NEWS

Q&A with Icode's Bob Skinner
by ChannelMedia Editor Keith Newman

NPDTechworld Information Technology Industry Overview - Distribution November 02
Sales for November 2002 in the US Distribution channel tracked by NPD fell by 16.9% to $950million from November 2001 levels. November, which over the last few years has staked a claim to the weakest month of the year. saw a variety of factors including the widely reported continued weakness in corporate spending, a shift in business through distribution away from demand generation and towards fee for fulfillment services and the severely reduced expectations for the 2002 holiday shopping season, impacting volume this year, along with the usual seasonal slowdown. PCs, notebooks and servers were especially weak with overall revenue off by more than 37%, over $140 million dollars. Without the laggard effect of PCs, which have dragged down results throughout 2002, across all channels of distribution and types of customers, sales would have fallen only 7.1%.

Key Highlights

DESKTOPS

Desktops continue to sell at historically low levels, with November sales down significantly both year-over-year and also down 37% sequentially. Lack of demand, low margins, direct channel competition and considerable uncertainty among the destination channels over Hewlett-Packard's (the dominant supplier through this channel) future course of actions undoubtedly contribute mightily to the weak results. The silver lining in this cloud remains the relative strength of selling prices which have bounced around in the mid $900 range throughout the year without any real movement toward the downside.


NOTEBOOKS

Notebooks are of course subject to many of the same stresses on the segment as desktops but many of these issues are structurally weaker in this category. HPs status as dominant supplier is not applicable to the notebook where IBM, Toshiba and Sony all have strong product lines. In addition notebook sales volumes have not been nearly as weak in 2002 as desktops as configuration and usage trends have shifted to favor the notebook over the desktop.


SERVERS

Volume in servers through distribution has not been under quite the same level of pressure as desktops. However November sales show a considerable weakening in unit volume both from 2001 and sequentially, where the 23% decline from October is the worst result in four months. Like desktops though pricing pressure seems to have lessened considerably during the course of the year with November's 1.1% decline the best showing of the year and the fourth consecutive fall in the rate of decline.


PERSONAL DIGITAL ASSISTANTS

PDA sales have been under pressure all year as slowing sales of Palm OS based products and a lack of real choice on the Pocket PC market have combined to hold down volume levels. The increase in vendors for Pocket PC and the introduction of the direct channel in the mix may help spurt interest in coming months. Selling prices have remained strong through distribution channels as corporate customers express their preference for the more robust solutions offered in the Pocket PC market as well as the upper reaches of the Palm business.


INKJET PRINTERS

Inkjet printer volume fell in November as reduced holiday expectations and slow PC sales conspired to hold back sales. The bright spot in inkjet printers is the ongoing shift away from entry-level basic printing solutions to ones that focus on providing a more comprehensive solution to the opportunity offered by digital printing. This has helped drive sales of more expensive printers and created a much richer mix of products to sell in the category.



LASER PRINTERS

Laser printers suffered from the overall seasonal weakness in the channel but they continue to show the brightest sales prospects. Color sales continue to grow as costs come down and black white sales have been increasing in double digits all year as desktop printing makes a comeback, sales channels continue to grow and the price/performance in the upper reaches of the market brings in new buyers.


MULTI-FUNCTION DEVICES

A secondary reason for the decline in inkjet printer volumes is the tremendous growth in MFDs. Sales continue to explode in this category as both consumers and small business view the MFD as an all-in-one replacement for a printer, fax, scanner and copier with extremely attractive pricing and a equivalent features to the stand alone equivalents.


INKJET CARTRIDGES

Distribution continues to gain share in this high value, high margin category. The market growth in printing solutions has showed the destination channels the value in supplying ink (and toner) to their end users as an easy to add consumable, and one in which price competition is limited and value is related to the ability to deliver the product (especially to commercial users). This trend should tend to help distributors gain volume in supplies categories like these over time.


CD MEDIA

Unlike ink cartridges distribution has had more challenges in the blank media category. Aggressive retail pricing and lack of significant corporate adoption of CD burning has made this a low-interest and low volume category among distributors and their destination channels.


MEMORY CARDS

A rising tide lifts all boats and the tremendous overall increase in the use of digital media has helped spawn volume increases through distribution. In addition the growing popularity of the media, especially in the USB key segment, as a corporate methodology for file sharing should help maintain volumes in this category.


DATA CARTRIDGES

Tape sales were impacted by the overall seasonal weakness with an expectation that sales will remain consistent over time. Like ink cartridges, distribution and its destination channels has a safe niche in supplying tapes to customers who have purchased drives in the past. In a category with a bewildering number of proprietary formats and sizes the ability of distribution to stock wide and deep means that this consumable category will always require distribution support.


MONITORS

Sales results in the overall monitor category continue to mirror industry trends with LCD monitors growing rapidly and CRTs falling off, both as a result of replacement by new LCDs and the declining volume in the desktop business. Double digit sales increases in LCDs are offsetting concurrent declines in the CRT business to keep the overall market relatively stable.


LCD PROJECTORS

A wealth of competition, new form factors and new pricing structures continue to drive LCD projector sales across the entire IT market. Distribution remains a key channel in this segment as the ability to offer a wide variety of product, combined with relatively low unit volumes plays into distribution's strengths.


SCANNERS

Scanner sales remain weak as they are under pressure from MFDs at the low-end and are facing the same types of corporate spending weakness other categories are seeing at the high end. The jump in ASP comes as the shift in the distribution mix away from the low cost scanning solutions is accelerated by the industry trends.


NETWORKING DEVICES

Networking products remain the one of the few large volume categories where sales have not declined dramatically. While demand for the most expensive hubs, switches, etc remains weak, companies are beginning to see value in providing more workers with wireless network and Internet access. While this does drive sales of base stations and some other expensive equipment we see tremendous unit volume increases as the need to equip each individual user with wireless connectivity drives unit volume of less expensive devices.


HARD DRIVES

Drive volume remains challenged as the weakness in PC and server sales cuts in dramatically to the demand for hard drives at distributors and through their destination channels. Pricing, which had been falling precipitously seems to be stabilizing as sequential pricing jumped 12% from October's levels.


CDR/RW DRIVES

While not in as bad shape as in other channels the rewritable CD market remains challenged in distribution. Rapidly falling prices have not spurred demand as the majority of the distribution market for CD drives remains the notebook market and that market is not price sensitive. While revenue is down as a result of the falling prices, unit demand remained steady in November, as it has all year, as a result of the consistent sales demands of the notebook aftermarket.

*Unit= pack
**Unit= actual units

(This data is preliminary data and may change when final reports are issued. All comparisons below are made to year ago same month numbers unless otherwise noted.)

Distributor Track provides access to the most comprehensive information ever available on product sell-through in the commercial IT market. Now technology manufacturers, resellers and members of the financial community can support crucial business decisions with the help of aggregated sales data from distributors. This information includes never-before available sell-through customer segmentation data from members of the Global Technology Distribution Council (GTDC), the leading trade association representing IT distribution.

For more information, please contact Neal Bonner at NPD Techworld at neal_bonner@npd.com or 703-376-6255.

This is your source for the latest, greatest news. Plus, it's free. All from your friends at Vision Events and Newman Media. Click here to subscribe.

NEWS

Attention SMBs: Will Your IT Vendors Be Around After 2003?
James Browning, Gartner

Many vendors view small and midsize businesses as new revenue sources to help offset a poor economy and saturation of the large enterprise market. SMBs must determine which vendors will exist when the economy improves.

Where Have All the IT Vendors Gone?

We continuously advise our small and midsize business (SMB) clients not to simply adopt the same technologies, vendors, products and services used by large enterprises. Those that do, risk paying up to twice as much for IT products than if they standardized on SMB-focused solutions from IT vendors. To show a commitment to SMBs, IT vendors must segment the market and create products and services tailored to the unique wants and needs of SMBs. Vendors must not assume that their strengths and competencies in the consumer or large-business market will help them win and sustain sales among SMBs.

Before coming up with the short list of potential vendors for their IT requirements, SMBs need to ensure that the vendors they select are in it for the long haul. By 2004, 60 percent of the vendors currently targeting SMBs will exit in failure or just abandon the market (0.8 probability). Many IT vendors fail to understand the unique requirements of SMBs, which vary dramatically within the community. Success among SMBs takes time because of the significant investments required in product and channel development. Some vendors won't take the time to build the appropriate relationships or develop the necessary products and services to penetrate the SMB market, which will lead them to exit the SMB market because of poorer-than-expected return on investment. Other vendors are just testing the waters in the SMB market and, when the economy rebounds, will reset their focus and efforts to large enterprises. The other factor that will reduce the number of SMB-focused vendors during the next three years will be the dynamic of market consolidation. For example, through 2005, 60 percent of the North American SMB enterprise application suite providers will either fail or be involved in a merger or acquisition. But SMBs can't sit idle during this market change. To compete successfully in the future, SMBs will require more comprehensive business management applications, which not only integrate internal functions, but extend the processes they encompass outside the enterprise to key business partners and customers.

The defection of these vendors from the SMB market will leave many SMBs with suboptimal support and uncertain upgrade paths for certain technologies, declining business benefits and a sense of disillusionment about the entire technology industry. SMBs need to evaluate whether a prospective vendor is truly committed to their segment of the market. For example, one solid indicator of a vendor's dedication to the market is evidence that it has been strategically servicing the space before 2001, prior to the economic downturn. Investigating the vendor's track record with established customers in offering tested size- and vertical-specific solutions is important. SMBs should also be cautious of any vendor that generates less than 25 percent of its revenue from SMBs. SMBs should also be cautious of vendors that compete on the basis of cost vs. value as a way to gain market share. If the vendor doesn't have a strategy to develop low-margin revenue into more profitable relationships, it is likely the SMB offering will be retired in time. Few vendors have the ability to squeeze margins and commoditize IT products and stay in business.

What SMBs Are Planning (and Not Planning) for in 2003

SMB IT departments are being pulled in many directions. They are being asked to improve the total cost of ownership of their established infrastructures while, at the same time, being asked to identify IT solutions that can help support increased demand from customers and business partners to do more business electronically. They are being asked to refrain from spending at a time when vendors are introducing affordable technologies that have traditionally been cost prohibitive. And they are being asked to justify all budget items based on delivering high and immediate business value. Difficult choices must be made by SMB organizations in 2003. They must decide between critical and nice-to-have IT investments. They must decide which projects should proceed, which should be put on hold and which should be terminated. While investments in infrastructure will continue, they will be in managed phases vs. major. IT vendors are expecting significant adoption of certain technologies and are expanding their offerings accordingly. However, these expectations may be challenged, especially as it relates to uncertain SMB adoption rates during the next year.

When it comes to outsourcing a paradox exists among SMBs. Year over year, regardless of the state of the economy, when looking to reduce costs, SMBs identify ESPs and consultants as areas where they can cut spending. However, while planning for every new IT project, they realize that they need help deploying and managing their IT initiatives. SMBs need to perform an honest assessment of their IT architectures and competencies and determine what they can do in-house and what is best done through outsourcing options.

NEWS Choosing a New Platform: Part II By Ian Frazer, Vice-President Business Development Corporate Mentoring Solutions Inc.

Sponsored by:

Editor's Note: Following is Part 2 of a special series on "Choosing a New Software Platform." To find Part 1 go to www.channel-media.com/smb.

Okay. It's now mid-January. We originally had intended to create a next generation product to our successful OMS. At the end of the previous article, I had hinted at what sales was up to - talking to clients and prospects! Heaven forbid - vaporware being talked about? It was time to go create something.

So, we had a new product concept. Time for the functional specification meetings that just seemed to drag on and on and on … wait a minute they did! October turned into late November before they were done. Then, with the trusty aid of our dev tool "Mockup Central", using HTML code to fake a screen's "look & feel" very quickly, we "group-meeting" created the technical specifications document. In parallel to the tech-spec, we had the coding team fast-tracking code development - power coding at its best. Since we were basing the database specifications on an existing product, not too much was added - only about 40% new fields, records, tables, etc. (grin). The db relationship table looked like a spider on chemical assistance creating a web. The feature set of the new product rev was quickly looking, frankly, awesome.

We were creating a browser-based product that unfortunately required style sheets to get the necessary functionality, ease of use, etc. One major requirement that came out of the client-side discussions was that the product had to be "508-compliant" for our USA customers & prospects for physically challenged persons requiring special access. That lead to testing issues that lead to end-user platform requirements that Netscape Navigator had to be Version 4.79 (limited functionality) or Version 6.0, with Internet Explorer needing to be Rev 5 or better. If the 508 issue had not been identified right off the bat, it would have required a code re-write from the ground up - delaying the product by at least a month. Not that it was hard or difficult, but getting 508-compliancy requires a different thought process by the coders.

Behind the scene, the first half of the hardware platform was being delivered. The plan was for duplicated DEV and PROD platforms. The duplication solved many problems: if it worked on DEV, it should work on PROD, having fast access to spares in the event of a total ISP-site melt-down, really good development systems for fast response, etc. The first issue was that the room designated for the DEV 19" rack also contained a canister wall-mounted vacuum unit. Horribly fine dust came off this ancient thing every day when the cleaners did the floors. The landlord would not replace or move it. With no way out, we had to commandeer a supply room and create a server environment on the fly. This involved getting the supplies out & stored elsewhere (not my problem, so why worry, right?), getting new power runs, additional network cabling, and OH MY GOSH - this room is HOT! So, in came a new A/C unit to handle the calculated 5100Watts of servers + UPS units + monitor + KVM + network gear that the DEV platform now consisted of.

Now it's Dec 20. The Alpha code is semi-, sort of, "…maybe it works…" ready for round 1 testing. The testing crew had been contracted some time back for this weekend. We come in Monday the 24th to 120 bugs in Bugzilla (pretty neat tool, FYI). An anxious scan reveals nothing major at this time, mainly cosmetic issues. They are resolved by the Co-op students by Noon on the 24th - time for Xmas break. We also had time for the coders to add another 20% of the tech spec's to the candidate code. The testers worked a few more hours through to Dec 30, as did a couple of the Co-ops & the main coders.

Monday Dec 30 came all too quickly. Round 2 of testing - another 100+ bugs reported, a couple of which were serious. Would you believe? Some features did not meet the tech spec definitions! Time to consider new coders, be-headings, dire threats … or, as a default, a large box of Tim Bits and lots of mocha-blend java on tap! These bugs took a bit longer & a bit more effort to resolve, but once again Noon on Dec 31 rolled around - time to party! Everyone took time off until Jan 2. Way too much overtime lately and it showed. The team was tired but happy. We were still on schedule, on the critical path of the project.

With the crunch time of "First Client Goes Live" coming fast at Jan 24, we had a few components to complete: The front-end Registration process, the entire online payment sub-system (using plug-ins & a sub-contractor for the java beans), the online audio-based training, Help screens, and of course, the remaining bugs that kept showing up. There were 75,000 new lines of code at this point

Jan 6th - the team was at full steam now. The left-minded were doing audio tracks for the training modules, Co-ops were handling the look & feel, full-time staffs were doing the serious coding, the DBA actually appeared from the dungeon to work his wiles, testers were testing - it was like magic. Pretty cool to work with everyone, I must say.

Then, disaster struck. The PROD platform equipment was on back order - ten-day delay. The First Client wanted to move up one week, a coder came down with a flu-like bug that ran through the whole team, a serious database error crept in that took several hours over a couple of days and all the staff to debug & eradicate. A critical path timeline date was missed. The tension became a bit noticeable. We had a chat about it to address the issues - no actual blood spilled but a lot of venting occurred. Everyone had a say & the team got to feeling good about things again.

Candidate Release 1 will be done by Friday Jan 17. Bugs are down to a few really odd-ball issues now. The product, Colaboro™, has taken shape & form - with approximately 95,000 lines of new code. We took a "Hey, how about this …" comment from Sept 25th to a new product and platform by Jan 17th. The demonstration version is out with the sales staff in front of clients and prospects. The marketing team has the new trademarks underway and City Tours demonstrations are booked for the upcoming year. The owners are happy, the bankers look pleased. There is the smell of "bonus" floating in the air.

Time for the next version, anyone?

Ian Frazer Vice-President, Business Development
Corporate Mentoring Solutions Inc.
www.mentoring.ws

NEWS

Channel Digest

Answerthink will exit the interactive marketing business acquired from Think New Ideas in 1999 along with other restructuring actions.

The Company announced that it will discontinue all operations of its interactive marketing business. Revenues from the interactive marketing business for the quarter ended September 27, 2002 were $1.5 million. As a result of this decision, the Company expects to record a non-recurring charge in the range of $3.5 million to $4.5 million during the fourth quarter ending January 3, 2003, primarily for severance and lease exit costs. As a discontinued operation, the operating results of the interactive marketing business will be presented separately from Answerthink's continuing operations.

The Company expects to obtain a tax deduction in the range of $70 million to $85 million associated with its loss on investment in Think New Ideas which the Company expects will be available to offset taxable income in future years. The Company expects to recognize a net income tax benefit in the quarter ending January 3, 2003 of approximately $2.5 million representing the remaining income tax carryback available for refund to the Company. The Company expects to receive a total tax refund of approximately $9.5 million during 2003.

The Company also plans to record a restructuring charge in the range of $9 million to $11 million from continuing operations in the Company's fiscal fourth quarter related to severance and lease exit costs. The majority of the charge is related to exiting our existing New York office that was used primarily by the interactive marketing business and relocating to a facility that better suits our future requirements.

"We are taking all the necessary steps to strongly position the Company and improve our profitability as we head into 2003," said Ted A. Fernandez, Chairman and CEO of Answerthink. "We felt that is was important to focus our organization and re-size our infrastructure to the service areas that provide strong opportunity for long-term growth."

Verio said that it has added 1,000 new resellers to its viaVerio global reseller program, bringing the total number of its active resellers serving the small to medium enterprise hosting market to 5,000, the largest amount in the hosting market today. In related news, the company announced the appointment of Steve White, formerly of Interland, to executive director of Verio's SME Reseller Channel division, to continue the aggressive growth initiatives that have proven successful for Verio. "Expanding our reseller base has been a major focus for us this year and as a result, half of our SME hosting revenue now comes from partners," said Doug Schneider, president of SME Hosting at Verio. "The addition of Steve White to our team will help us manage and build on this growth. His industry experience will be hugely beneficial as we strengthen the viaVerio program globally with program initiatives that are important to the reseller community and that will continue to allow us to expand our success with the channel."

White will be responsible for supervising viaVerio's offerings and incentive programs on a global scale, and will develop and implement sales and marketing strategies aimed directly at the channel. "It's an exciting time to be at Verio, as we implement new growth initiatives that benefit both our resellers and the SME customer," said White. One new reseller, OpAve, Ltd. in Chelsea, Michigan, which sells Verio's services to the government, retail and SME markets, switched over to the viaVerio program in July and has since signed on more than 20 new accounts. "We were concerned about supporting our clients and giving them the best possible control over their web sites," said Steve Daut, co-owner of OpAve. "Verio's overall package allows us to do exactly that." In addition, Web Hosting Mexico Virtual has already experienced significant gain since the company began offering services through the viaVerio program in December, helping give Verio a leading edge on the international front. "Our combined solutions give us a sizeable advantage in this competitive market," said Manuel Kanahuati, president at Web Hosting Mexico Virtual. "We can now provide our clients with the best hosting service at a better price."

Lawson Software reported revenues of $87.8 million for its fiscal 2003 second quarter ended Nov. 30, 2002, compared with revenues of $98.6 million in its fiscal 2002 second quarter. License fee revenues were $19.0 million in the second quarter, compared with $30.1 million in the fiscal 2002 second quarter. Services revenues were $68.8 million in the quarter, compared with $68.5 million in the comparable fiscal 2002 second quarter.

Cognos, a publicly traded business intelligence software firm, said it has entered into a definitive agreement to acquire Adaytum, a provider of business planning software that had raised more than $41 million in funding, for $160 million.

VERITAS the leading storage software provider, and Precise Software Solutions (Nasdaq: PRSE), the leader in application performance management, today announced that they have signed a definitive agreement for Veritas to acquire Precise in a transaction valued at $537 million. Together, VERITAS and Precise will provide a unique solution for IT professionals to run mission critical applications with optimal performance and continuous availability. Industry analysts predict this market opportunity will grow to $11 billion by 2006. Also, Veritas said it will acquire Jareva Technologies, an innovator in automated server provisioning. Jareva's software products uniquely allow businesses to lower their IT costs by making more efficient use of server hardware and reducing the need for dedicated IT staff to perform common administrative tasks. The acquisition of Precise enables Veritas to ensure that mission-critical applications such as SAP, Oracle, BEA and Microsoft Exchange run faster and have less downtime, leading to better end-user productivity and higher return on investment. Veritas keeps applications running in the face of hardware and software failure. Precise continuously monitors and analyzes all components of the application infrastructure-web servers, application servers, databases and storage-allowing customers to proactively identify and correct problems before they affect application response times. Instead of manually deploying and configuring servers for specific operating systems and business applications, Jareva's server provisioning technology enables companies to automatically deploy additional servers-without manual intervention. In addition, servers can be moved between applications depending on workload. So, a particular server could run SAP on Windows 2000 one day, and then run Oracle on Linux the next. This ability to share servers allows CIO's to drive more value out of their hardware investment. "Jareva Technologies will enable VERITAS customers to reduce their investments in server hardware and the labor required to manage it," said Gary Bloom, CEO of Veritas."

EchoStar said that DISH Network satellite TV receivers are now available at 229 CompUSA stores nationwide. CompUSA will carry the JVC line of satellite TV receivers. Installation of the dish antennas will be performed by DISH Network's national installation network. "This agreement offers consumers and CompUSA shoppers access to the lowest all-digital TV price in America, hundreds of channel choices and the best choice for pay TV," said Amir Ahmed, vice president of sales and distribution at EchoStar's DISH Network. "In addition, this agreement offers DISH Network a way to expand our distribution while at the same time increasing CompUSA's product line."

"JVC is very pleased to be working with EchoStar and CompUSA in expanding DISH Network's distribution," said Al Levene, vice president, new products & special markets at JVC Company of America. "With this agreement, CompUSA can now offer its customers a full line of JVC satellite receivers, from personal video recorder models to systems offering reception of high-definition TV programming."

ATG recently announced that it has further established its position as a leader in the online CRM market with the delivery of ATG 6. ATG 6, which will be generally available beginning today, offers significant enhancements across the integrated ATG Commerce, ATG Portal and ATG Relationship Management Platform products and marks the delivery of the new ATG Publishing, ATG Search and ATG Siebel and Documentum Integration modules. The enhancements, upgrades and new modules are all designed to provide the customer with an integrated, robust solution that enables users at all levels of the organization to effectively develop, deploy and modify online CRM initiatives in the most efficient and cost effective manner possible. ATG Commerce provides a comprehensive online selling solution for building strong relationships with consumers, businesses, and channel partners. ATG Commerce enables companies to automate all aspects of online sales, marketing, and support processes. Companies can increase sales and customer retention rates by providing each customer with a personalized online buying experience. ATG's unique Scenario Personalization(TM) capabilities provide significant up-selling and cross-selling opportunities, which help companies increase average order size and revenues. "ATG is responding to the changes in how businesses buy enterprise software - and thus far the feedback on ATG 6 has been extremely positive," said Bob Burke, president and CEO at ATG. "With ATG 6 we are now able to deliver a single-vendor, pre-integrated solution for marketing, selling and supporting customers online. Rather than having to buy large software systems from a number of vendors and having to incur the costs and risks in integrating these disparate systems, our customers can now buy an integrated solution from ATG, resulting in reduced total cost of ownership, reduced project risk, and shortened time-to-value."

NETGEAR has welcomed noted distribution expert Linwood A. "Chip" Lacy, Jr. to the company's board of directors. Mr. Lacy, a Computer Industry Hall of Fame member, brings considerable expertise to NETGEAR's board, including 11 years as chairman and CEO of Ingram Micro, Inc., the largest global wholesale provider of technology products and supply chain management services.

"We're thrilled to welcome a recognized channel expert of Chip Lacy's stature to NETGEAR's board of directors," said Patrick Lo, NETGEAR's CEO and chairman. "Chip's contribution to the industry is legendary -- he basically created the professional computer distribution channel. We look forward to benefiting from his insight as NETGEAR continues to expand and strengthen the distribution channels for our networking products."

Mr. Lacy, dubbed 'Distribution's Kingpin' by Computer Reseller News magazine upon his induction into the Industry Hall of Fame in 1997, has had an impressive career in distribution that spans nearly 25 years. From 1985 to 1996, as CEO of Ingram Micro and its predecessor company, Micro D Inc., Mr. Lacy increased worldwide sales from $120 million to $12 billion and raised profitability by more than $100 million. He has also served as president and CEO of Micro Warehouse, and was chairman of 4SURE.com, acquired by Office Depot in 2001. Prior to Micro D, Mr. Lacy held positions with Best Products and Zales Corporation's Catalog Showroom Division.

"I'm delighted to be joining NETGEAR's board at this juncture in the company's development," said Chip Lacy. "The company has quickly established itself as the dominant provider of high-quality, high-value networking equipment for homes and small and growing businesses. I'm confident that my experience will assist NETGEAR in further expanding their distribution channels, resulting in increased sales and enviable growth."

Avnet's Chairman and CEO Roy Vallee has announced the election of five new corporate officers: Vice Presidents Janice Miller, Robert Nail, David A. Rapier and Raymond Tsang, and assistant secretary Catherine R. Hardwick. Richard (Rick) Hamada, previously a corporate vice president, was promoted to senior vice president.

Hamada, president of Avnet Computer Marketing since January 2002, reports to Roy Vallee and is a member of the Avnet Executive Board. Hamada has proven to be a top performer among his peers in the computer distribution business. During the more than two years Hamada, in his previous role, held the top post at Avnet Hall-Mark, its sales grew 75 percent. He was recently cited by Computer Reseller News (CRN) magazine as one of the top 25 Most Influential Executives in that industry.

Miller, just promoted to vice president and director of organizational development from her previous role as vice president of corporate strategic planning, joined Avnet in March 2001. She is responsible for succession planning and executive development and in addition will assume responsibility for human resources strategy and employee development. She reports to Vallee and is a member of the Avnet Executive Board.

INSIGHT, Inc., a top international provider of supply chain planning solutions for the world's foremost companies, announces that Michael E. Finley is the company's new president, following the retirement on January 1 of Dr. Richard (Dick) Powers.

Mr. Finley will direct INSIGHT's growth and expansion into new areas of transportation, supply chain optimization, and post-optimization simulation, while continuing to enhance INSIGHT's leading-edge solutions. "Mike's distinguished career as a leader in logistics in the Navy and pioneer for Performance Based Logistics concepts within the Dept. of Defense (DoD), are testimony to his knowledge of complex logistics processes and technology," said Dick Powers. "INSIGHT's clients will find him solving customers' issues and leading our outstanding team." "I am very pleased to join INSIGHT with its impeccable reputation, excellent customer support, dedicated employees, outstanding products, and long list of world-class, loyal customers," said Mike Finley. "I plan on continuing Dick Powers' legacy of exemplary leadership and business integrity."

In a move to accelerate the company's path to profitability, ATG announced a restructuring effort that includes an approximate 20 percent headcount reduction. The company also announced preliminary results for the fourth quarter ended December 31, 2002. The workforce reduction of approximately 115 people is focused primarily on ATG's professional services, general and administrative staff and internal sales support and operations. In addition to the headcount reduction, the company is closing and consolidating office space in selected locations. In conjunction with this reorganization, the company has promoted Greg Lazar to senior vice president of worldwide sales and field operations. In his new role, Lazar will be responsible for managing ATG's global sales organizations and enhancing partnerships with systems integrators and other distribution channels. The company anticipates taking a restructuring charge in the range of $22 to $24 million for the fourth quarter of 2002. ATG expects to complete the restructuring actions in the first quarter of 2003 and begin realizing the full cost savings, estimated at $12 to $16 million annually, in the second quarter of 2003.

IONA(R), the leading e-Business Platform provider for Web Services Integration (NASDAQ: IONA), today announced the appointment of James Watson to the position of Vice President of Professional Services. IONA Professional Services provides educational, product consultancy and solutions architecture services to IONA customers and partners, as well as to the company's internal field organizations. As vice president, Watson will oversee IONA Professional Services' business and engagement models for consultancy, training, and partner-based activities worldwide. Watson joined IONA in 1999 when Aurora Technologies, the consultancy group he founded, was acquired by IONA. Aurora was the premier consultancy organization for distributed systems technologies, training, and mentoring in both the defense and commercial sectors. Since joining IONA, Watson has served in roles of Technical Director and Vice President of Engineering, and most recently as Vice President of Platform and Infrastructure.

"Today's business and economic environments dictate that the process of purchasing and implementing technology be strategic but also executed in a tactical timeframe," said Jim Watson, newly appointed vice president of IONA Professional Services. "The commitment of IONA Professional Services is to help every customer and partner exceed their goals for IONA's technology and to offer them the expertise and perspectives necessary to realize maximum value in time, cost and application."

"Our goal for 2003 is to offer our customers and partners the most rapid, economical, and flexible integration solution available, and to support their investment in IONA with customized and consistently great service," said Barry Morris, CEO at IONA. "Jim is an experienced and seasoned industry veteran who understands integration, and I am confident he will drive IONA Professional Services to a position of leadership and profitability."

GTSI said that Thomas A. Mutryn has joined GTSI as Senior Vice President and Chief Financial Officer. Mutryn assumes the role of Senior Vice President and CFO from Robert Russell, who retired in June 2002. Prior to Mr. Mutryn's appointment, Quang Le, GTSI's Vice President and Corporate Controller, served as Acting CFO. "Tom and Quang complement each other well. We expect a seamless transition and superb continuity of financial management," said GTSI Chairman and CEO, Dendy Young.

"GTSI is very pleased to have Tom Mutryn join our executive management team and assume the top financial post," Young continued. "His extensive experience in directing strategic business and financial activities within a large international organization will be most valuable to GTSI as we continue to aggressively grow our business in all segments of government. Tom will also play a major role in representing GTSI to the financial community."

At US Airways, as Senior Vice President, Finance, and CFO, Mutryn led the finance organization and served as a key member of the company's executive decision-making team. In this position he oversaw treasury, accounting purchasing, financial planning and analysis, and other finance functions. Prior to US Airways, Mutryn was Vice President and Treasurer of United Airlines and also held a number of executive posts at American Airlines.

ACP - There's $$$ For You in Refurbished Products
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A New Look at Printers by ARS Analyst

Printers: Revolution by Design
By: Gary Peterson
Director of Research, Printer Group

In 1999, a Michael Graves Designs toaster won a silver medal in BusinessWeek's IDEA awards. Apple's iMac won a gold.

Style is nothing new to electronics. You can pick up any Sunday advertising circular and see the evidence. A tiger striped cell phone with a tail antenna, a clear blue vacuum cleaner with a "tornado" viewing window, or even a fire engine red scale with an embedded LCD fat gram display are all just a credit card swipe away. The idea of buying a vacuum cleaner that just cleans carpets, or a toaster that just toasts bread, is as boring as buying a pair of sneakers that doesn't have lights in them.

Even the computer industry is not immune to the style bug, and you can blame Steve Jobs for that. Jobs and Apple Computer started a revolution with the introduction of the iMac computer. The little bubble shaped, fruity colored iMac proved to be enormously popular because it was different than the beige boxes every other computer manufacturer was offering - the iMac was clever, and the iMac had style. Apple's iMac was revolutionary not only with consumers, but also with other manufacturers who saw the iMac as an ingenious boost to otherwise suffering business models. Apple did not have to spend billions of dollars in research for the iMac. Apple did not have to reinvent the wheel, or find the next "killer app" to find success. Apple simply took the same old computer and changed the way it looked - a cheap way to change the world.

Apple's iMac was far too successful to go unnoticed by other computer and peripheral manufacturers. Almost instantly, manufacturers of products from networking hubs to digital cameras hopped on the blueberry bandwagon in hopes of finding a new niche to exploit. Though this proved to be a new wave of marketing for the iMac, not every product riding Apple's coattails was actually ready to be "styled."

The most basic step in marketing style is to announce that the product is now a commodity or an appliance. This is similar to a toaster -- a toaster toasts. What this shows consumers is that the only difference between two toasters is the way each toaster looks, not their performance or quality.

The printer market is no exception and has been forced to endure its own strawberry and lime invasion. Mimicking the success of Apple, printer companies produced colored lids that could match the printer with the consumer's iMac; some even launched printers specifically made for the iMac and Apple's ill-fated "cube" computer. The one consistency amongst all of these fruity colored printers was that none of them survived, proving that the printer market was not an appliance market.

The theory was tested again in 1999 when Hewlett-Packard launched Apollo printers, a revolutionary company that was the first to attempt to sell inkjet printers based on their appearance, not their performance. Apollo's message to consumers was "Great Value and Style!" and produced printers with revolutionary designs and eye-catching colors. Apollo went so far as to produce a "Barbie Printer" which was a pink colored printer, covered in Barbie stickers to appeal to a young female market.

Though Apollo was riddled with all kinds of problems from the start, the company's biggest roadblock was that its printers' shortcomings in performance did not outweigh the attractiveness of their design. After three struggling years in the industry, Apollo mercifully closed its doors in the spring of 2002. Gambling on the theory that printers were appliances and that style would be a competitive advantage, Apollo lost the bet.

Today, the style bug has bit Kentucky based printer manufacturer Lexmark. The company has boasted that it is redesigning the appearance of its printers and will produce products with style to appeal to the more sophisticated shopper. Lexmark went so far as to say that printers are a commodity market and that style is the difference to consumers. To take advantage of this trend, Lexmark has redesigned the multifunction printer (PrinTrio X75), introduced sleek black products to the market (X85), and has gone so far as to launch a "Michael Graves Designs" inkjet printer that boasts a unique, shapely design.

Lexmark is attempting to go down the same path as Apollo, offering very affordable printers that now carry a sense of style (Great Value and Style!). However, this path is a dangerous one for Lexmark to undertake and if the company ventures too far down the road, it may not be able to come back -- Lexmark's extremely aggressive pricing strategy has already labeled the company as a producer of "cheap" printers. In addition, Lexmark is also not known as a producer of high-quality photo printers, which is where the industry is headed. If these trends continue, Lexmark will find it enormously difficult to regain a "premium" brand image and be able to sell higher priced, more profitable printers.

The most dangerous message style sends to consumers is that the company has nothing else to offer. When a company can no longer deliver better performing or more affordable products versus the competition, then the company goes with appearance and style as a differentiator. However, as Apollo painfully proved, inkjet printers are not toasters and consumers value what is inside the printer rather than what is outside.

I have yet to meet an engineer who reads Cosmo and I have yet to meet one who designs hats as a side job. Engineers build wonderful gadgets, but they don't pick colors from an easel very well. Lexmark's engineers need to build glorious photo printers and top performing multifunction units to lead the way for the company - not rely on Michael Graves Designs.

Apollo Printers took the IDEA awards bronze medal in 1999. Maybe finishing third is pretty horrible after all.

Introducing New Contributor John Addison:
Top Customers, Top Profits, Top Focus!

You have four types of customers. Some make you lots of money. Others cost money and valuable time. This article helps you sort out the customers, and take the right approach with each. To simplify, sort your customers (and potential customers) into these four categories:

1. Most important
2. #1 customer community
3. Margin improvement required
4. Goodbye

Most important

The 80/20 rule continues to be a wonderful guideline. Last year, 80% of your gross profits probably came from less than 20% of your customers. We love these customers. They pay our bills, provide the foundation of our business, and challenge us to be better. With these top customers, it is important to protect and expand. Protect your relationships, and expand with improved solutions and services. Protecting and expanding go hand-in-hand.

Who are the experts about how to protect and expand with these customers? The customers. They can tell us why the love us, how to protect their relationship, and all the added ways we can help (and make money). The most popular ways to assess their needs include:

• Customer satisfaction surveys
• Complaint-handling procedures
• Evaluation forms with shipments and service engagements
• CRM
• Focus groups
  

Recommended is that you use more than one approach, such as surveys and focus groups. Many distributors, vendors, and outside research firms can help. You may be able to use MDF for some of these. Form a team for each of your top 10 customers. Evaluate customer needs in detail. Develop a 2003 strategy for protecting and expanding your relationship. Meet monthly. Include an executive from the customer account in half the meetings.

#1 customer community

IBM is investing $100 million in growing its SMB business. Like most of us, you probably don't have a spare $100 million to go after all of SMB. Why not go after a segment of SMB where you can be #1? Focus where you can develop great references and expertise. This strategy is consistent with the Gartner annual survey of small and midsize businesses (Channel Media 12/20/02 article by T. Kempf and M. Yamamoto Krammer). The customers' top PS vendor selection criteria are:

1. Established track record and references
2. Application expertise
3. Integrated solution deployment
   

 

"The data supports the idea that vendors selling into the SMB space should focus on creating a go-to-market strategy. They should highlight their ability to deliver fully integrated or repeatable IT solutions to specific vertical markets, as shown in project successes and client testimonials."

For example, you notice that your business with mid-sized health care facilities grew last year. With analysis, you determine that this community is underserved. With some research, you learn that the leading mid-market software firms do not want to fool with hardware and the networking infrastructure. You establish the following goal: "In 2003, we will become the leading infrastructure provider for healthcare facilities with 20 to 100 beds located within 50 miles of us." You form a team including an executive, marketing, sales, professional services to create and execute a plan to become #1. You form an alliance with an ISV completely focused in this sector. You join the leading healthcare business association, target its 247 members, sponsor events, and gain momentum quickly.

Margin improvement required

It takes focus, people, and money, to protect and expand key customer relationships. The same goes for becoming the leader in a customer community. It follows that we need to spend less time and money elsewhere. Last year 80% of your customers delivered only 20% of your gross profits. Yes, some of these fit in the customer communities where you intend to be the #1 leader. Others will become top customers in the future. Most, let's face it, are not great customers. Instead of developing close relationships, they want you as one more vendor to bid the margins down to zip. They do not engage your brilliant and profitable professional services team.

These 20/80 customers need immediate margin improvement. Consider having your price quotation system being integrated with your customer database. "Margin improve" customers cannot be quoted below a certain margin without vice presidential approval. Yes, you need margin flexibility with your top customers. Have the courage to be appropriately paid by the majority that brings small profits.

Goodbye

You know about these customers. They always go for the thin deal. They do not pay for services, but they tie-up the time of your valuable system engineers, then they become a receivables problem. In reality, you lose money on these customers. Most of us try to spend minimal time with these accounts (and hope they will go away). Yet, drain your time they do. A better approach is to have a talk, or send a letter, recommending that they are better served by another vendor. They will probably be happier with Dell or Best Buys. You will have freed your valuable time and resources to focus on protecting and expanding with key customers and customer communities.

John Addison, as president of OPTIMARK, has devoted the last 10 years to helping solution integrators, VARs, hardware, and software firms. Mr. Addison's workshops and speeches are popular in the Americas, Europe and Asia. Prior to consulting and workshops, Mr. Addison was an area channel manager for Sun Microsystems. In 3 years he led a sales team to 300% annual growth from $4 to $110 million. John Addison is the author of Revenue Rocket, which will be published by ProStar Publications in February. You can reach John at john@optimarkworks.com.

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