Margin Makers


If you sell computer hardware, here are two words that could make you reach for the Tums: "profit margin."
 
Intel and AMD have been waging price wars. Average selling prices for components, like memory, have been under pressure for months and months. If, for example, you're a Hewlett-Packard reseller, the list price on a standard, SMB notebook has risen by this fat amount over the past year: Zero percent.
 
You get the picture.
 
But value-added resellers are finding opportunities to deliver value to customers and find profit margins on hardware. And they are finding those opportunities on the periphery. From LCDs, to projectors for conference rooms, to network scanners, solution providers are evaluating customer needs and filling them with hardware solutions that keep everyone happy.

In interviews with a series of vendors and solution providers, a picture begins to emerge of a market in which hardware margins are shifting to wide-ranging portions of the network where infrastructure is being updated for the first time in several years. Small and midsize businesses are now taking part in peripheral upgrades that were once exclusive to Fortune 500 engineering shops, marketing agencies and large data centers.

 
Some manufacturers are using channel hardware profit margins themselves as a weapon to win market share from competitors. Oki Data Americas, for example, is in the midst of rolling out a new channel program called ProfitOps. The Mount Laurel, N.J.-based printer manufacturer provides hardware margins of as much as 12 percent—sometimes more—on printers that are actually priced for small or midmarket customers. In fact, delivering profit margins to solution providers which, in turn, deliver value, was so important they decided to put "Profit" into the name of the program.
 
"[Average selling prices] are falling; manufacturers are taking more and more of the big accounts direct," said Candice Dobra, vice president of product marketing at Oki Data Americas. "We're really trying to address this problem of margin compression."
 
In peripherals, there is no single rule for estimating how a margin may shape up. Whether talking about printers, add-on storage, projectors or scanners, for example, a reseller's profit margin can range between 3 percent and 30 percent per sale depending on unit volumes, vendor incentives, software integration and service contracts. And value added to each sale can range from simple out-of-the-box setup to, in the case of digital signage or data center power management, incredibly complex architecture and months of planning.
 
Some manufacturers provide margin opportunities to the channel up front, in the form of discounts. Some provide them on the back end, after volume quotas are met. If there is a common theme, it's this: Solution providers are eager to provide value to their customers, and they are growing ever-more-careful to make sure they don't sacrifice profit in the process. And vendors are catching on.
 
Here is a rundown on margin opportunities in six different areas of peripherals, including products, vendors and programs:

Next: Projectors