News ChannelMedia Reporter’s Notebook By Steve Cross and Keith Newman

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Let’s start with a few observations from the wilds of Orlando, Fla., home to the latest VAR Vision and System Builder show from Vision Events. Recently, two shows were co-located; System Builder Summit and VAR Vision. The idea was to energize both shows and take advantage of a lot of vendor synergy, giving vendors access to the top VARs in the country and the top System Builders all at the same time. I think it worked! I found a vibrant show, with lots of trading of intelligence between the system builders and vars.

There was a fun mix of vendors, with lots of leverage for the vendors. Let’s start by talking about some of the players who were there and what they brought to the party. A little product stuff first.

Network security vendor Red-M was one of the many hot “new” vendors attending VARVision. In fact, the 3-year British-based company has 50 people and has been developing technology in the security area but is just introducing technology products now. Peter Rusy, Director of Operations, said the company is introducing several new products nice meeting. Have no idea where the name comes from, but these guys have some very savvy methods for securing wireless networks. They even have a PALM device that detects wireless activity and can see if the customer’s wireless networks are leaking. Talk about a great entry-level tool for networking VARs to take into the customer site and establish the need in a big hurry. That opens the door to the rest of the product line…Red Alert, Red Detect, and Red Secure, their big server-resident app. Neat stuff and they were duly recognized at the Awards ceremony by the attending VAR’s. Check ‘em out.

In an Interview with Intel following its Keynote presentation, the Company said it has made significant effort to improve and facilitate its channel marketing programs. Intel said that 42 percent of the desktop CPU market went through the channel compared to 38 percent the prior year and 27 percent in 2000. The challenge is now moving the notebook market to fall into line. “We clearly are pushing the importance of the channel. Mobility and the need to get the channel to move to notebooks. We need to stay in front of the market or it will all be OEM notebooks sold. To that extent, Intel has committed more funds and are trying to really help our system builders and VAR’s become more successful, Turner said. In terms of product focus, Intel, which had recently introduced Centrino in New York, was promoting its’ familiar attempt to upgrade customers to the next level of performance processor but it appears there is a load of support for users to step up. “There are 60 million PC’s in North America that are 3+ years old and approximately 50% of those are running Windows 95 or Windows 98. With Microsoft eliminating support for those OS’s, it is a great opportunity to convince customers to upgrade. There warranties are shot. There are also security risks of keeping an older system. In the area of mobile and wireless the revolution is growing. “Everything is connected – cell phones, PDA’s, notebooks and it all has to fit into our lifestyle. The killer app is portability, Turner said. For server platforms, price has come down so dramatically that it’s become ideal for small business to use the server.

Like Intel, Microsoft sees some unique opportunities facing its channel and system builder partners. Despite low single digit growth industry growth its forecasting, Margo Day - GM of US Partner Group, believe CIO’s will shell out where they see significant cost savings. One area, is server consolidation. Day pins it as a $5B opportunity. She said 70 percent of Fortune 1000 are consolidating servers next year – creating a huge upgrade and services opportunity for partners. She added there are approximately 4.6M NT 4.0 servers out there on a worldwide basis and 50% of those will be replaced with Windows Server 2003. For example, Day believes a lot of servers that were purchased around Y2K period have been fully depreciated and now newer system can be bought and customers are likely going to evaluate lower cost and easier to support systems. Day pointed to case studies where major clients realized a 17 percent reduction in total cost of ownership. Enter Microsoft’s biggest announcement of the new year: Windows, Server 2003, which Day feels offers business customers with a real choice to increase productivity, dependability, deploy a connect solution and offers compelling economics. For launch, Day said the promotion will rival Windows 95. And the Company has added significant channel support resources including account managers on the phone, in the field and web-based resources.

AMD provided some personality with channel marketing manager Gary Bixler hosting a discussion on 64-bit computing. “2003 is going to be an incredible year,” said Bixler. We are going to have new XP processors that offer market-leading performance then in mid-April comes the release of Opteron server products for the workstation market. In April, AMD is going to storm into the 64-bit world of computing with Athlon 64bit –its flagship line that will start with servers but migrate to desktop and mobile. “We think this is going to be huge but we are also suggesting that then SB’s and VAR’s migrate at their own pace.” The Company also threw a fantastic party at the House of Blues.

The VEO guys were there, with their family of webcams for everything from videoconferencing to security. VEO is second only to peripheral giant Logitech, VEO will ship almost 1.5 million cams this year! Neat stuff they were showing included a wireless web cam, the “observer” at $299, with some very hot software to see the camera from anywhere using a browser. The camera displays its IP address; just type it in and see what’s going on in real-time. Nursing homes, daycare, warehouse management, you name it. They were pitching both audiences, a low-end cam for the system builders, and this observer cam for the networking VARs. They are also very channel-centric. Look them up too.

I’m frequently surprised by new stuff, and sometimes by old stuff. Gigabyte was one of the most interesting interviews I had. It’s a motherboard company, which didn’t sound very interesting when my editor handed me the assignment of interviewing these guys early one morning. But here’s an outfit with its head on straight. They are using manufacturing capacity and end-user ease of use as weapons in the market. Shipping 1.5 Million boards per month, stability and logistical excellence is Gigabyte’s focus. Why? Because those are two of the three most important issues to their system builders. Consistent quality and logistical execution are their watchwords. Additionally, they have done some stuff to help their end-use customers; color-coding ports, boards, etc for ease of support and speed of configuration. That’s outside the box thinking, and I was impressed. Heck, they even color-code pins.

Had a funny encounter with an interesting product guy from Hewlett-Packard, who was there to just “deep-dive” in the VAR/system builder channel looking for orientation as to how these channels work. I like that. Shows how interested HP is in the mind of the customer, and how to do better in the partnerships.

Logitech spun a new tag line out, along with streamlining their channel programs. They are big on a message of cost effectiveness for this channel “Make it a better PC”. Logitech was recruiting for their Partner Select program. Looks like a hot program for everyone but the ultimate Tier 1 players (HP, IBM, etc). Everybody in Partner Select gets a really fine program of support, access to resources, even includes marketing assistance and special discounts. Logitech’s point is that the branding of a dominant market share player makes a big difference to purchasers. I believe it. These guys are number 1 or number 2 in every market they enter, including web cams, speakers, mice, and keyboards, and their manufacturing prowess is legendary. By the way, Logitech will ship its 500 millionth mouse this month!

About this point you might ask, why does a major player have to go to these kinds of shows. Well, Network Associates shared their insights with me. Attending their first VAR Vision/System Builder Summit, NA is looking for white box partners, and with 9500 new potential outlets building 600,000 boxes per month, why wouldn’t they! Working with NASBA, National Association of System Builders and Integrators (off the record, shouldn’t they change their acronyms? Sounds like something else we don’t want to talk about) NA is building a system of front-end discounts for NASBA members. Their lead products for this channel entry are their McAfee Virus Scan with Firewall, and Active Virus Scan Suite Small Business Edition (isn’t that a crummy name?).

Roxio was exhibiting to the system builders as a target, with the re-branded stuff they acquired from MGI last year. Their package looked pretty good, with a complete digital imaging suite. Likewise PC Treasures had a whole selection of various software bundles for the system builders, most very low cost. PC Treasures also had the only “booth babes” in attendance, on loan from the Tampa Bay Buccaneers. I hate to be critical, but if that’s the best the Super Bowl Champions can do, they need some help for next season.

Had an interesting chat about the future with ARM, an unusual notebook-only system builder in San Jose. Right now, notebooks are 92% branded, but that will definitely go lower with time. ARM doesn’t think enough vendors who are looking out far enough to see it happening. Intel knows, but how many others are poised to support the kind of explosive growth this could produce for a handful of system builders? Good questions, huh? That’s why they pay me the big bucks. Just good investigative journalism (grin).

Another long-time OEM group going after this channel for the first time was Chenbro Micom, case manufacturer for desktops and servers. Founded in 1983, and doing business in the US for the last 9 years, Chenbro showed me some stuff off the record that was very hot. Currently supporting OEMs with a series of regional distys, Chenbro is adding national distribution to better address this channel. Right now these guys are building about 500,000 pieces monthly, on their way to 800,000 monthly. I will say that their marketing can use some domestication/translation. Their pitch is to “Easy your life, Cool your mind, Ease your soul, and Fresh your eyes”. Sort of a stretch. What ever happened to under-promising and over-delivering?

Had the most pleasant chat with the guys from Netscaler. Talk about a focused approach to a show. Netscaler needs high-touch, technically sophisticated VARs, and they were here to spot them and pre-qualify them. Cost justified show attendance, with mucho bang-for-the buck. Netscaler manages the channel with direct regional sales folks selling to named accounts, and managing the channel partners. Looked like a well-thought-out channel approach.

ChainTech (System Builder) Introduces exciting new products for system builders including color coded ways to identify ports and other inputs that facilitate integration and differentiation. For example, SB’s can offer customers a blue round cable to match a blue CPU. “We are the first one’s to offer universal color matching,” said System Builder Summit attendees Cathy Liu & Milton Fang. Liu added, “Today’s PC is like tomorrow’s LEGO. Everything will be easy to connect pieces.”

Talking to Fujitsu was another lesson in how to do distribution right. They are dead-on focused on this channel. Fujitsu reaches the channel through a couple Industrial Distributors and a couple nationals: Arrow, Ingram, Tech Data, and MicroLand Electronics. They sell direct to the major CPU vendors, and everyone else goes through disty. Clean. Fujitsu works with channel partners one-on-one to support them and help, then funnels everybody to the distys for fulfillment. They prefer to support their business partners, and don’t just toss the deals (and the customers) over the fence to the distys. By the way, Fujitsu really likes the merged show, they just tailor their pitch to the audience/badge.

NVIDIA was promoting the “Dawn of Cinematic Computing” and its leadership position in the GPU market. And it’s budding business with servers and notebooks. The Company is readying plans to rollout 256M solutions at aggressive price points and has many other exciting products and programs for system builders and resellers.

Phoenix, Greg Ewald, Sr. Mgr, Channel Development was promoting some new technology that allows system builders and VAR’s help customers reduce returns and support costs by accessing hard drives and connecting to the web, email and even play DVD’s without booting the operating system.

Steve Cross is Director of Channel Sales for iVAST, Inc., the world leader in end-to-end MPEG4 solutions. scross@ivast.com 702-492-7472

NEWS

Channel Digest
by ChannelMedia Staff

Leading Vendors Partner Around
Network Associates recently introduced Magic Solutions HelpDesk IQ™– a new browser-based service desk solution for small and medium size organizations. Leveraging proven technology from Magic Solutions, HelpDesk IQ™ is an easy-to-use, quick-to-deploy help desk solution that is highly customizable for growing businesses within any industry. The product will be generally available to North America customers in the second quarter of this year through channel partners. “Leveraging its extensive experience in the service management market, Magic Solutions continues to deliver on its commitment to provide customers across the board with best-of-breed solutions to meet their help desk demands,” said Jeff Honeycomb, president of Magic Solutions at Network Associates. “With Magic Solutions’ HelpDesk IQ product, small and medium size organizations can now boost their customer satisfaction scores with an easy-to-use, out-of-the-box solution that allows them to immediately and effectively meet the time-sensitive demands of their own customers at the help desk.” Customers responded positively to the news. "We see a tremendous market opportunity with an offering like Magic Solutions' new Helpdesk IQ," said Terry Elton, vice president of business development at SteelCloud. "With the Helpdesk IQ solution, our small- and medium-sized customers will be able to address business problems faster than the competition, ultimately increasing efficiency and positioning them for continued organizational and revenue growth." Designed to help small and medium size organizations reduce costs while significantly improving their customer satisfaction ratings, HelpDesk IQ will offer businesses the capability to reduce problem resolution times and increase operational productivity, which are critical to bottom-line savings and business profitability. HelpDesk IQ helps customers achieve these goals by providing key features such as online self-service capabilities; inventory tracking; robust quick ticketing; automatic escalation of service requests and alarming issues; and out-of-the-box email integration. Also, the Magic Solutions’ HelpDesk IQ product includes out-of-the-box integration with the Microsoft CRM Customer Service Professional solution. This added benefit allows small and medium size organizations that are experiencing an increasing demand from customers and business partners to conduct more business processes electronically. This integrated solution will also be available in the second quarter through channel partners.

Research Note: During 2003, at least 50 percent of business intelligence projects will not reach their full potential or will be hopeless failures, according to Gartner. Through 2004, more than 50 percent of Global 2000 enterprises will fail to use BI properly, losing market share to those that implement and leverage BI correctly. However, Gartner analysts say that with the right approaches, best practice examples, and the right methodologies, architectures and technologies, enterprises can win big with BI. "Success in BI can be defined as the ability to add real insight to the business and enhance the decision making process," said Howard Dresner, vice president and research director for Gartner. "The best outcome becomes more probable when the IS organization and end users have an equal amount of ambition in their desire to promote BI, and they work together to deliver valuable and sustainable BI solutions to the enterprise."

Omnipod has launched a Premier Provider Channel Sales Program to expand its reach into the corporate as well as the state and federal government markets, enabling channel partners to grow their businesses through the sales and implementation of Omnipod’s Professional Online Desktop. Select solution providers, system integrators, technology providers, and software resellers will market, sell, and implement the POD, a highly secure communications platform integrating instant messaging and file sharing applications designed for use in the corporate and government markets. “We believe in a focused channels approach concentrating on a few strategic partnerships,” said Greg Davis, director of channel sales for Omnipod. “We are interested in working with a select group of geographically located partners that understand how the POD can solve business problems for corporate, state, and federal customers. The partners we work with will see the value in making joint calls with our direct sales force, leveraging opportunities from our combined marketing and sales efforts, and providing implementation services for the POD solution at the customer site.”

“We’re excited about participating in Omnipod’s channels program,” said Mark Melillo, president/CEO of Melillo Consulting. “Omnipod’s secure communications platform is the best that we’ve seen, and it offers the advanced administrative features that our enterprise customers require.” Melillo Consulting, Ilumin Software Services, Excelliant, Softchoice, SoftWorld, Cybercore, and Edge Technologies have now joined Omnipod's channels program. Omnipod will work closely with partners – training their sales forces in the uses and value of the POD and holding joint seminars to educate the enterprise and federal communities on how their organizations can benefit from highly secure IM and file sharing. In addition, Omnipod will share leads and provide opportunities to accrue sales margins as well as implementation and customization fees. “Today’s organizations need assistance in bringing corporate discipline to one of the most rapidly evolving and effective means of communication, and Omnipod does this,” said Jay Ethridge, CIO of Excelliant. “Tomorrow, the challenge in instant messaging will extend beyond person-to-person and include person-to-service as well as service-to-service. We believe Omnipod, with its advanced architecture, will be at the forefront of that revolution, and we look forward to making those possibilities available to our customer base.” The POD overcomes the problems arising from consumer and other traditional IM and file sharing offerings by providing advanced security (168-bit 3DES SSL), sophisticated administrative features, the ability to mimic existing corporate hierarchical structures, and interoperability with other IM networks. From a central administrative level, the entire POD solution can be overlaid by customized rules-based protocols controlling who can exchange information with whom. Granting various permission levels on the network is easy for an administrator to set and change frequently, if desired.

Brother Bows Innovative Enterprise Solutions Innovative new devices in the PDA, tablet and notebook category are driving the market for a range of mobile solutions. In some instances these solutions have the potential to revitalize or even save a slipping category. Such is the case with the MPrint micro printer by Brother. The MPrint micro printer is an ultra light weight, pocket size wireless printer that interfaces with Windows based tablets, and notebooks; Pocket PC(R) based PDAs and Palm based PDAs. Its compact size, internal paper cassette, and variety of output media (A7 size ThermaPlus(R) M paper, self-adhesive labels and carbon copy paper), open up a world of new possibilities for the use of mobile enterprise devices in the field.

"The complete realization of a truly mobile enterprise is not possible unless that final tether, the one binding the field force to its desktop printer, is broken," says Dean F. Shulman, Senior Vice President of Marketing at Brother. "The MPrint micro printer does that and more. For the PDA, the MPrint micro printer has the potential of elevating its perceived functionality from that of a glorified date book to a much more integral component of the mobile enterprise."

With the MPrint micro printer, Brother is actively supporting efforts to move the PDA beyond its basic personal information management (PIM) function through the development of custom applications. Expected early adopters include those in the field sales force industries, financial services, medical application development and retail information technology.

Partnerships in the News: HP and Red Hat have signed an agreement making HP a preferred vendor for delivery of single-point fulfillment and service of the complete Red Hat Enterprise Linux product line on HP industry-standard hardware. Under the terms of the agreement, HP becomes a global services provider for the entire Red Hat Enterprise Linux line of certified solutions, which includes Red Hat Enterprise Linux AS, Enterprise Linux ES and Enterprise Linux WS. The new agreement also details further collaboration between the two companies across their respective global services organizations. The worldwide leader in Linux server shipments(1), HP will support the Red Hat Enterprise Linux family of solutions on both 32-bit Intel(R) architecture and Itanium(R) platforms. HP is working to integrate Linux solutions with services by offering customers greater flexibility and single-point-of-contact service-level agreements.

"HP is expanding its relationship with Red Hat to bring enterprise-class functionality and global support to Linux. Today's announcement builds on our $2 billion in Linux-based revenue in 2002 and our decade of commitment to the open source and Linux communities," said Peter Blackmore, executive vice president, HP Enterprise Systems Group. "HP is the single source for all Linux hardware and software support for customers. "Last week, Red Hat announced Red Hat Enterprise Linux ES, which is designed for edge-of-network and departmental server applications such as network, file, print, mail and Web serving. This new product complements the family of Enterprise Linux products, which consists of Red Hat Enterprise Linux AS, for high-end server deployments, and Red Hat Enterprise Linux WS.

Cisco announced a definitive agreement to acquire privately-held SignalWorks, a developer of advanced software that delivers high-performance audio capabilities for IP telephony systems. The acquisition advances Cisco's leadership in the fast-growing global IP (Internet Protocol) telephony market, which is expected to increase from approximately $900 million in 2002 to $4.3 billion in 2006 (Synergy Research Group). The acquisition of SignalWorks is expected to close by the fourth quarter of Cisco's Fiscal Year 2003. The acquisition has been approved by the board of directors of each company and is subject to various closing conditions. "The acquisition of SignalWorks reinforces Cisco's continued commitment to leadership in IP telephony," said Marthin De Beer, vice president and general manager of Cisco's Enterprise Voice and Video Business Unit. "The SignalWorks core technology team is comprised of seasoned industry veterans with many years of experience in voice and digital signal processing, and the integration of SignalWorks' voice technology with Cisco's market-leading IP telephony product portfolio will drive continued innovation and performance differentiation for Cisco. Ultimately, this acquisition will allow Cisco to attract new small business, enterprise and service provider customers." SignalWorks' Acoustic Echo Canceller (AEC) software, which provides unparalleled voice clarity, is a digital full duplex, voice-processing algorithm that will drive continued product innovation and differentiation across Cisco's complete line of IP phones and IP softphones. Already deployed in Cisco IP phones used by several Fortune-500 companies, SignalWorks' AEC software delivers advanced audio features, such as multiple microphone capabilities, stereo sound, and PC-based softphones, providing the basis for the future expansion of Cisco's IP phone product line into new high-end markets. This advanced audio and speakerphone capability will allow Cisco to further penetrate the enterprise, small- and medium-sized business, and service provider managed services markets.

Paradigm Technology Partners, a leading managed services and security solutions provider, and APPSConnect, a leading provider of Total Project Outsourcing, Application Integration and C-Level Professional Services, today announced a strategic alliance to deliver comprehensive security protection solutions to the energy retail and wholesale market vertical. Through the alliance, Paradigm and APPSConnect will focus on helping energy market participants such as independent system operators, producers, grid operators, wholesalers, retailers, and state and federal regulatory organizations deliver and manage secure mission-critical infrastructures - and protect the information and services of their respective constituents. Paradigm and APPSConnect have integrated their solution sets to deliver an industry-specific service offering that provides solutions in the areas of ERP Implementation, Custom Energy Management, Infrastructure Security, 24x7 Utility Infrastructure Monitoring and Day Two Management. These solutions will enable utility organizations to securely protect and manage their infrastructure environment while adhering to federal, state and national protection standards. Through a series of services designed to identify, remediate, and optimize security issues throughout their environment, greater corporate security will be achieved. The security protection solutions aim at reducing an organization's risks by not only performing comprehensive reviews but through targeting technologies that are targets in themselves based on risk profiling and industry intelligence. Technologies including internal infrastructure, client and partner portals, SCADA operations, network management systems, and transactional databases are all targets of internal and external threats. "Together, Paradigm and APPSConnect address a top concern to both CIOs and Chief Security Officers in the energy retail and wholesale market -- the security of information, assets and access," says Kevin Cotter, CEO and President, Paradigm Technology Partners. "The combined strengths of both companies deliver this security in a seamless, integrated manner."

Avnet Electronics Marketing, through an agreement with cost management solution provider Tradec, has introduced the latest tool in its Promiere suite from Avnet Supply Chain Services. Quote Manager, offered by Promiere, provides a Web-based solution that improves the efficiencies of the quotation process. With Quote Manager, Promiere customers will be able to accelerate the quotation process and reduce transaction costs, further enabling them to manage the supply chain more strategically, leading to improved profitability. Quote Manager allows easy formatting, distribution and tracking of Requests for Quotations (RFQs) to Avnet and other suppliers. Quote Manager also delivers analytical tools to aid the sourcing decision process.
"We have seen our mid-tier customers in both the OEM and EMS spaces struggle mightily with the quoting process," said Greg Frazier, executive vice president of Avnet Supply Chain Services. "We can help them. Right now they rely on e-mail and spreadsheets to keep their quote processes in operation. Quote Manager provides our customers a centralized and virtual process for quotation development, facilitation, and analysis, closing the loop by leveraging past information to improve future results. This will offer a step function improvement in the quote process for many or our mid-tier customers."

"There is a clear need for a Web-based tool that drives speed and efficiency into the quotation process," Frazier continued. "By forming an alliance with Tradec, the established leader in the space, Avnet Electronics Marketing has ensured its customers will realize dramatic improvements in quotation turnaround time with lower overhead costs. "Quote Manager is based on the same technology as Tradec Material Cost Management System, a system widely adopted by top EMS providers and OEMs to manage the cost of direct materials. Delivered on a subscription basis and hosted to reduce the total cost of ownership, Quote Manager is an offering packaged to allow small- and medium-sized companies to leverage similar technology at a lower cost of entry. “Both Tradec and Avnet recognized the need for an entry-level solution to improve the quotation process," said Edwin C. Winder, chairman, president and chief executive officer of Tradec. "Together with Avnet Electronics Marketing, we have assembled a very compelling package that employs underlying state-of-the-art technology, delivered in a service model accessible to the target market. We are pleased to offer our solution to Promiere customers. "Promiere's Vice President Glenn Bassett agreed, "Quote manager is a natural extension of the Promiere capabilities. Customers can leverage our existing tools to cleanse BOMs, cross part numbers, and avoid EOL situations. Quote Manager can then be used to get the best possible performance from their quote process. These tools offer our customers competitive advantage, based on more repeatable, reliable and efficient quote process performance. "Under the agreement, Avnet will market and sell Quote Manager through Promiere. Tradec will operate and maintain the hosted system, providing the third-party neutrality necessary to enable all suppliers to participate.

System Builder Summit Awards

Reseller Awards
Business of the Year – Mynix Technology
New Business Achievement – Paragon Development Systems
Community Service Award – AOpen Center

Vendor Awards
Best System Builder Program or Promotion
Nominees – AMD, Intel, NEC-Mitsubishi Electronics
Winner - NEC-Mitsubishi Electronics

Best Overall Presentation
Nominees – AMD, Intel, Maxtor
Winner – AMD

Best Product: Hardware
Nominees – Intel, Maxtor, NVIDIA
Winner – NVIDIA

Best Product: Software
Nominees – Microsoft, PC Treasures, Roxio
Winner - PC Treasures

VARVision Awards

Reseller Awards
Business of the Year – CDWG New Business Achievement – NMGI

Vendor Awards
Best Product: Systems and Peripherals
Nominees – Case Logic, Hughes Network Systems, Intel
Winner – Intel

Best Product: Networking Technologies - Software
Nominees – Microsoft, Red-M, Sophos
Winner – Red-M

Best Product: Networking Technologies – Hardware
Nominees – Hewlett-Packard ProCurve, Intel, NETGEAR
Winner – NETGEAR

Best Product: Software Applications
Nominees – iCode, Microsoft, RSA Security
Winner – Microsoft

Best Channel Strategy
Nominees – Hewlett-Packard ProCurve, IBM PCD, Red-M
Winner – Red-M

Best Vendor Presentation
Nominees – AMD, Microsoft, Red-M
Winner – AMD

Best Vendor
Nominees – AMD, Intel, Microsoft
Winner – AMD

The small and midsize business (SMB) market provides an enticing, yet dangerous, sales opportunity for IT Solution Providers. It is an enormous market, but confusing to those that attempt to sell into it. The SMB market is a diverse collection of thousands of individual geographic and vertical market segments that have been generally lumped together by definition as a single target market. Sales strategies that approach this market as a single, homogeneous market will fail. Additionally, successful SMB strategies typically differ by the size of the IT Solution Provider. Following are examples of successful SMB sales strategies for various sizes of IT Solution Providers.

SMB Sales Strategies That Apply to All IT Solution Providers
The following selling strategies are applicable for any size IT Solution Provider:

• Don't just sell the product, but offer valuable business solutions — SMB managers are not interested in technology for technology's sake, but rather in technology-based solutions that can enhance their business.
• Don't ignore strategic selling models — these approaches that take into account the buying behavior, psychographics and technology stance of the customer are not just for selling to large companies.
• Show the money — justify and demonstrate return on investment to help SMBs build a business case for funding approval. Proportionately, the potential financial impact of a solution may be larger in an SMB than it is in a large enterprise.
• Build references and use them — reference selling is a powerful sales tool, especially in the SMB market. IT Solution Providers should develop multiple references by target industry and build marketing programs to publicize the sales message of these references.
• Develop and promote a reputation — a vendor's reputation is built on its service and support. SMBs place more emphasis on post-sales support than on any other selection criteria.

SMB Sales Strategy for Large IT Solution Providers
Historically, large IT Solutions Providers have sold most successfully to other large organizations. Most large IT Solution Providers that have attempted to capture a measurable share of the SMB market soon realize that building a direct sales force large enough to effectively sell into the entire SMB market would be a recruiting nightmare and a cost quagmire. Therefore, large IT Solutions Providers should:

• Limit the target market for direct selling — focus can be achieved by segmenting the market by region, size and vertical industry. For most large IT vendors, a direct sales strategy should be reserved for targeting the larger midsize businesses (750 to 1,000 employees) that are more receptive to this method and whose contract value merits this effort.
• Target smaller opportunities with channel programs —leverage some of the thousands of specialized IT Solutions Providers (such as VARs) that already have a sales presence and a "trusted advisor" relationship among specific segments of the SMB marketplace. Also, many SMBs consider the proximity of a VAR to be critical buying criteria.
• Leverage existing telesales and e-sales efforts — these two sales methods are relatively inexpensive and should be used to enhance sales efforts within the SMB market for both direct and indirect initiatives.

SMB Sales Strategy for Small and Midsize IT Solution Providers
To be successful in the SMB market, small and midsize IT Solution Providers must focus and specialize. These efforts should include:

• Leverage established relationships —each local market has a certain personality or culture that often dictates buying behaviors. IT Solution Providers' sales efforts can benefit from the leverage of this local knowledge.
• Get involved with local groups or associations —take steps to get involved in the organizations where your clients participate. Activities such as sponsoring local/regional conferences or hosting an executive breakfast series about emerging technology issues have been successful.
• Become the recognized expert — IT Solution Providers should sell expertise and intellectual capital. By becoming a featured speaker, or by hosting a local radio show on technology or contributing to local business periodicals about technology, you can be seen as an expert The result will be a larger sales pipeline, less competition and both reduced sales cycles and selling costs.

What should you do next?
The SMB marketplace, when taken in aggregate, is similar in total IT market opportunity to the large and enterprise business market. However, the shear volume and diversity of the companies that make up the SMB market segment make it difficult to build an effective single sales strategy in this space. Therefore, IT Solution Providers must clearly determine which specific segments of the SMB market are best aligned to their competency and corporate strategy and focus their sales efforts accordingly.

The following table presents a model that depicts a viable sales strategy for IT Solution Providers to target the SMB market. Please use this to support the article.

Sales Strategy Model for Selling IT Solutions to the SMB Market

Usage Legend: S = complete sales cycle; Q = qualify leads; PS = presales process; L = launch promotions; C = close business/take orders; SP = sales support
Source: Gartner Dataquest (October 2002)

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NPDTechworld Information Technology Industry Overview
By Stephen Baker
Director, Industry Analysis NPD Group

In data from February, 2003, distribution revenue fell year-on-year for the third time in the last four months as sales were hit by falling prices in some key growth categories and an on-going mix shift into lower value categories. February total revenue was just over $1.4billion, more than 11% behind 2002 number and off 10% sequentially from January 2003, slightly worse than the February 2002 6% sequential fall-off. Falling prices in key categories like LCD Projectors, CD and DVD recordable drives, multi-function printers and notebook computers served to mute the revenue gains that might have accrued as a result of the 4% increase in total units sold. Unit volume growth was concentrated in two broad swaths of categories: communication products and consumables. Both of these categories generate significantly lower average prices than the overall category mix and their unit growth enabled them to gain unit and dollar volume share during the month.

Key Highlights

Desktop volume continues to plummet, falling by nearly one-half from the prior year and by a seasonally typical 10% sequentially. With ASPs at all-time lows, February’s average price was barely $900, desktops are becoming an increasingly small part of the sales mix. The steep drop from January could be an indication of price-cutting or of liquidation pricing, either way, the need to drop into price levels not seen before indicates that the desktop market is deeply wounded and any revival of demand is likely to very tempered.

Notebooks remained a bright spot in the distribution channel, as they are throughout the IT world. Unit volume is poised to pass desktops, while revenue is already consistently exceeding it. Notebook pricing was flat sequentially with January, although, at below $1700, it remains at historic lows.

Server volume, while weak, remains consistent. While ASPs continue to fall on a year-over-year basis they have flattened out sequentially, raising hope that revenue can turn positive later in the year, even if sales volume rises only minimally from today’s levels. Regardless, this category, like desktops, continues to lose its all-encompassing importance to distribution as sales volumes expand out into new product types and the go-to-market distribution strategies of the major PC makers emphasize a variety of methods to reach the customer.

PDAs weakness is apparent in distribution as it is throughout IT. ASPs jumped back to more reasonable levels of $245 in February from January’s low of $217. Volumes continue to fall precipitously as the PDA market shifts toward more low-priced products and combo phone/wireless devices that are less prone to be moved through distribution. The stable pricing indicates that distribution is moving toward more specialized distribution of PDAs to more corporate facing entities and away from mass distribution of low-price devices.

Inkjet printers in distribution are reacting much like in end user markets. Pricing rose for the fourth straight month. While increasing prices are good news the unit volume declines are still more than sufficient to offset the increased value of the goods shipped. As products sold move away from bundled printers and toward both photo printers and business class inkjets it is possible that dollar volume may eventually return to positive territory. As yet the trends do not indicate that this eventuality is likely to happen in the near term.

One of distributions new key categories, laser printers represent a category where distribution has been able to add value, in addition to its ability to target the key classes of resellers who can make these products available. Pricing remains at levels that can support the value add of distribution while customer demand for color lasers and mid-priced black and whites has helped drive volume and ASPs up.

MFDs, while not nearly as important to overall distribution revenue as laser printers, represent an important new opportunity for distributors. Sales here are, in many cases, replacing scanner and inkjet sales. In addition the product paradigm for MFDs supports business class products and higher pricing than the traditional consumer market pricing for inkjets. While inkjets are the majority of sales currently, trends indicate that MFDs will pass inkjet in unit and dollar volume sometime in 2003.

The future of distribution is, in many ways, evident in its ability to drive volume through consumable categories like this. As the overall IT market morphs into one that places equal value on the aftermarket assets as well as the hard goods that drive the initial sale. As volumes grow in this category, it gains share (and importance) within the overall distribution hierarchy.

While this is a category that is still ramping up in consumer markets its presence in distribution and commercial remains limited. Low profitability, low retails, a wide variety of distribution choices and lack of demand from end users to source these products through the traditional reseller served by IT distributors will keep this category at low levels through these channels.

Sales for memory cards exploded in February, continuing on the path of red-hot sales growth. Pricing remains flat, both sequentially and year-over-year, as the classic tech pricing curve stays in evidence in the category. The market for all types of flash memory continue to expand and products like USB flash are likely to be increasingly important to commercial markets and help drive further distribution growth in the category.

Data cartridge volume was soft again in February as pricing and unit volume continued to be soft. If distribution is to maintain a place in media distribution it will maintain its presence in the segment through this key category. As the largest and most established of all the storage media categories in distribution any signs of a slowdown should be watched carefully to be certain that the reason behind the decline is associated with category specific issues versus a move away from distribution.

Monitor pricing has stayed very consistent over the past months despite the fall in volume, however is has exhibited any growth as has occurred in other channels. As CRTs are replaced by LCDs the sales mix shift has driven ASPs higher in other channels. A lack of ability to generate positive ASP growth through distribution could mean that revenue will continue to fall in the segment. This would indicate that distributors are unable to capture higher share of LCD sales and are being relegated to sales in the weak CRT market.

LCD projectors saw a significant year on year price decline in February that drove revenue negative, even though sales volume jumped by nearly a third. Pricing fell to below $2000 for the first time spurring this poor outcome. This category had begun to take a place as an important positive revenue generator and an acceleration of price declines that put that into jeopardy would not be positive.

The scanner market, while serving totally different buyers and constituencies through distribution as in consumer, exhibits the same schizophrenic type behavior in both. Plunging unit volume has normally been offset by ASP growth but once again in February, despite a jump in pricing of over 25% to nearly $400, revenue growth was not covered by increasing ASPs.

Networking devices, the largest category of products sold by distributors, represented 19.5% of sales in February. After a slow January for unit sales, volume bounced back into positive territory. Yet, the February revenue decline was much worse than January as pricing fell significantly, both year-over-year and sequentially. Sequential pricing fell 9.5% to $232 as pricing fell in most sub-categories.

Hard drive pricing remained weak, as it has for a number of months, falling below $200 per drive. Declining revenue in this segment, which remains the third largest individual segment, is a critical factor in driving overall distribution revenue negative. For the distribution channel to turn positive it is critically important to move volume and revenue in right direction.

The February decline in the recordable optical drive category was much worse in this month than last. Pricing, while far off last year’s levels, has stabilized in the mid $130 level over the past few months. The better corporate mix of products, such as drives for notebooks, as well as a lack of exposure to the plummeting prices in the consumer channel, has kept pricing relatively high through distribution. At these pricing levels if a stabilized demand picture should emerge by mid-year the category should turn positive in revenue growth.

(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.)

For questions and comments please send an email to Stephen_Baker@npd.com

The Battle Rages in the Notebook Market.
By ChannelMedia Staff

The notebook computer market could be poised for some of the biggest changes in history. With Intel touting the Centrino platform, Advanced Micro Devices pushing a range of new chips and its 64-bit offerings looming and Transmeta showing its cards prior to its return to the fray, developers and ultimately customers will have unprecedented options. Leading off is Intel, which released its Centrino platform, one that combines a low powered processor with wireless capabilities. The company debuted its first generation of the technology in early March and received support from a number of the leading notebook manufacturers, including Dell, IBM and Hewlett-Packard. There are a total of six chips in the initial lineup ranging starting at 1.6GHz, 1.5GHz, 1.4GHz and 1.3GHz. A low-voltage version will be available at 1.1GHz and an ultra low voltage one at 900MHz. The Centrino platform is an all or nothing deal for developers, they have to use the software and all of the hardware that Intel offers to be able to use the logo and get the advertising dollars, and there are a lot of dollars behind this push, the biggest from Intel since the original Pentium. The company plans on spending $300m in advertising alone. AMD, without the marketing push, or market share for that matter, of Intel, is taking a different road in this market. Instead of providing an entire take it or leave it solution the company makes the claim that it is leaving the door open so that developers can using any combination of technologies to get wireless, rather than a one size fits all. Hand in hand with this effort was the release of 12 new processors for the notebook market. In the thin-and-light market, AMD is debuting its first chips ever, starting with the low-voltage mobile Athlon XP-M processors 1800+, 1700+, 1600+, 1500+ and 1400+. This represents the company's first concentrated effort in a market segment that it has long conceded to Intel. For full-sized notebooks, the company has released the Athlon XP-M processors 2600+, 2500+, 2400+, 2200+ and 2000+. In the Fall AMD will strike again, if all goes well, with a 64-bit chip for the notebook market. This has the potential to hurt Intel, if not in sales at least in prestige, since Intel will not have a 64-bit chip for this market for several years. So of course Intel is saying that no one needs 64-bit on the desktop or notebook, and it could be right since there is no real OS support and no need currently for that kind of horsepower to push current applications. But bragging rights are bragging rights. Gamely following the pack is Transmeta, which has released the details of the TM8000, formerly code-named Astro. Capable of processing eight instructions per clock cycle, it can handle more work per cycle than other chips. The chip also has new code-morphing software and power management technologies, and Transmeta has added three high-speed bus interfaces: 400MHz HyperTransport, an embedded DDR-400 SDRAM interface and an on-chip AGP-4X interface. These interfaces should eliminate some performance bottlenecks. The chips are slated for release in the third quarter. The company has started to gain traction with manufacturers recently and has deals with Hewlett-Packard, Sony and others and is making inroads in the smartpad market.

While it will take time for all of these systems to reach the market, there looks to be truly differentiating technology or business models, from all three chip developers and this should translate into more consumer choices.

The technology industry has undergone some unprecedented changes since the year 2000. In the late 1990s companies prepared themselves for an impending disaster by the name of Y2K. Billions of dollars were spent by companies trying to update technology systems and infrastructure to counter this seemingly unavoidable event. Meanwhile, the Internet promised to revolutionize our day-to-day lives. E-commerce, e-banking, e-procurement, and countless other applications were set to impact our lives beyond that of the industrial revolution. As a result, technology infrastructure companies dominated the years up to the recent technology downturn. Organizations such as JDS, Nortel and Cisco prospered as their technology provided the backbone to the Internet. Access to capital grew faster than business models, which leveraged the ‘new’ information age. With capital came innovation. With innovation came the commoditization of technology and information. Recent studies have demonstrated we are over capacity with technology infrastructure – distributed computing evolved from the fact that only15% of corporate IT infrastructure is actually utilized.

Optimization: The Next Technology Phase

In the new millennium we have seen a paradigm shift occur, whereby corporate leaders are becoming more reliant on technology. Today, IT is looked upon as a key enabler for corporate strategy, including revenue growth, efficiency gains, data integrity and governance. To achieve these critical objectives, CEOs and CFOs now have the need to understand technology and the need to make it work better. The need for technology and business to work in a new way has increased. Although technology has evolved at a staggering pace, the service and support of technology remains locked in the delivery models of the 1970s. These models worked well during the days when technology was ‘the black hole’ for business stakeholders and when budgets were abundant. However, it is now essential that these delivery models cater to today’s evolving technological needs. While technology solutions, such as distributed computing, are rapidly evolving to address the under utilization of technology infrastructure, IT service management, a key growth area, is evolving to ascertain the effectiveness and optimization of existing