Distribution Snapshot: Enterprise Products

Editor’s note: This is the third of four Distributor Snapshot special reports based on U.S. sales-out data reported by Global Technology Distribution Council members to The NPD Group.

More and more enterprises have Intel inside, according to the NPD Distributor Track. Sales of Intel-based servers through North American distributors grew 9.9 percent to $1.18 billion during the 12 months ended June 30, the NPD Group reported. Over the same period, sales of RISC-based servers fell about 25 percent to $735 million.

The NPD Group bases its sales estimates on data gathered from the Global Technology Distribution Council (GTDC), whose members include eight large U.S. distributors that account for an estimated 80 percent of all North American distribution sales. The NPD adjusts the numbers to account for estimated sales by nonmember distributors.

Overall, sales of enterprise-class hardware fell 2.4 percent to $6.39 billion over the period, while enterprise software sales rose 11.8 percent to $1.87 billion. Enterprise products, as classified by the GTDC, are a broad set of hardware and software categories that are generally, but not exclusively, deployed by enterprises.

Intel-based servers were the single-largest enterprise hardware category. And a key driver of that category was rising sales of flexible, cost-effective blade servers, distribution executives said.

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“Blades from a unit shipment perspective may not be dominant yet, but blades make a lot of sense,” said Steve Tepedino, president of Avnet Partner Solutions, Tempe, Ariz. Tepedino said Intel servers running Linux are also on the rise. “Unix is not going away, but it’s not growing as fast as other platforms where we see Linux on blades and Intel,” he said.

Within the Intel server category, sales of IBM-branded servers increased 47.4 percent to $376.1 million. Compaq-brand server sales accounted for the most revenue, $788.1 million, but fell 0.8 percent. Hewlett-Packard sales dropped 35.8 percent to $11.6 million and Apple’s were down 48.4 percent to $2.2 million. Curiously, sales of Dell servers through distribution, though minor, increased 775.3 percent to $4.5 million. An NPD analyst said the sales likely came from broadline distributors.

IBM’s growth is due to its blade servers, said Paul Bay, vice president of U.S. vendor management at Ingram Micro, Santa Ana, Calif. “Big Blue also continues to work closely with distribution to attract new solution providers and, as a result, is gaining more visibility in the industry as a proven, channel-loyal manufacturer,” he said.

Other distributors agreed. “IBM has really embraced blade technology and, as a result, has had strong sales in that space, while Dell doesn’t have an offering,” said Andy Bratton, vice president of sales at the Support Net division of Arrow Electronics, Melville, N.Y. “In addition, IBM does a great job with promotions and programs that target HP, such as matching and beating HP pricing and conducting detailed briefings for customers.”

At Agilysys, which is IBM’s largest RISC/Unix distributor in North America, sales of IBM’s Intel-based servers are rising faster than HP’s. Peter Coleman, executive vice president of the Cleveland-based distributor, attributed that to IBM’s EXAct program. “The EXAct program is for a small number of highly qualified and certified resellers in a ‘closed’ distribution model that we can make investments in and partner with against IBM’s competition,” he said.

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Meanwhile, RISC servers represented the second-largest product category with $735.2 million in sales, but revenue fell 25 percent compared with the year-ago period. “RISC is still a very strong category for the distributors. It’s proprietary for some key platform applications. It’s down slightly, but they all believe this will remain a strong category,” said Tim Curran, CEO of the GTDC.

In enterprise storage, EMC and Hitachi Data Systems both enjoyed triple-digit growth, gaining market share on Compaq, which led overall with $117.6 million in sales, down 2 percent.

EMC in particular has made great strides in the channel in the past year, said Mike Arends, vice president of sales for Arrow’s Enterprise Storage Solutions division. “EMC’s channel program, Velocity, is one of the strongest out there. It offers a lot of resources to partners: rebates, co-op dollars, information, marketing tools and training,” he said.

In enterprise networking, Cisco Systems had $101.3 million in sales in North America, more than the next five companies combined. Its channel sales also increased 30 percent. “The emphasis that Cisco is placing in advance technologies is helping fuel their growth,” said Ken Bast, senior director of global business management at Ingram Micro.

In software, the fastest-growing categories included general system utilities, database and file management software, security software and Internet utilities, all up more than 50 percent. Also showing healthy growth were programming tools, application servers, commercial virus detection and programming languages. The single-largest category, relational databases, held somewhat steady at $391.4 million.

The GTDC includes Agilysys, Ingram Micro, Arrow, Avnet, Bell Microproducts, Synnex, GE Access and Tech Data.