Margin Makers: Peripherals Stay Up In A Down Economy

VARs have long been able to eke out a few extra points of margin on a complete solution when they have added the right printers, storage, projectors, LCDs and other devices at the edge of the network. To do that, though, has always involved choosing the right products, the right vendors and the right combination of technologies that deliver real value to customers.

This year, a number of events have also converged to make peripherals across the IT spectrum both attractive to end users and increasingly profitable -- or at least margin-steady -- for solution providers. For example, rising energy prices and increasing environmental consciousness have made power-efficient hardware both a must and an ROI no-brainer. At the same time, technology providers have reached new levels of success at integrating features like HD video, Wi-Fi, security and manageability into the whole range of peripherals from projectors to LCDs to printers.

Also, while inflation has begun to impact the U.S. economy, peripherals pricing has remained steady, making them an increasingly strong bargain compared to other non-IT goods and services.

Out of this environment there emerges a picture of a healthy margin structure for peripherals, which the CRN Test Center details in this 2008 Margin Makers special report. And it's a picture that should hold while the market continues to adopt the new technical breakthroughs and usage patterns.

Add-on Storage
Last year, VARs began telling CRN Test Center researchers that desktop external storage had become a growing area of profit opportunity—at the same time that vendors like Western Digital Corp., Lake Forest, Calif., broke through the 1 TB mark and began adding technical functionality like remote access and encryption to their products.

Now, coupled with advances in storage virtualization and deduplication, VARs are continuing to point to data center add-on storage as a valuable margin opportunity. The 2008 CRN Channel Champions Survey found that top vendors provide them with product margin opportunities ranging from 10 percent to 20 percent—and from vendors whose offerings can range between $10,000 to $20,000 in street price. IBM Corp., Hewlett-Packard Co., Iomega Corp., Sony Corp., Quantum Corp. and Exabyte Corp., according to VARs, have all been offering double-digit margins even in an economy that had some fearing a recession earlier this year.

"My thoughts here are around the shift we're seeing—and driving—from product to solution sales," said Jerry Baldock, worldwide manager for IBM's Storage Channel Strategy. "One of IBM's value-adds is enabling partners to offer solutions that include IBM hardware, software and services, and that this ability for partners to be able to position themselves as a 'trusted adviser' to the customers is where the future lies.

"The second part would be understanding the market and our offerings. For storage attach there are [a number of] segments, with quite different needs and sales skills required," Baldock said.

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