Computer Distribution

These are hard times for distributors, but it's an interesting time for distribution. While the traditional PC distribution model is under siege, as evidenced by the recent spate of grim earnings announcements, this is only a small part of the overall picture.

These are hard times for distributors, but it's an interesting time for distribution. While the traditional PC distribution model is under siege, as evidenced by the recent spate of grim earnings announcements, this is only a small part of the overall picture. Opportunity is ripe for those who know where to look for it and what to do once they've found it.

Under the existing model, commercial distributors will have to sell more and more just to maintain their profit levels. It doesn't take an accountant to figure out this isn't going to work for long. Sooner or later, and probably sooner, demand will level off and profits will start to spiral downward.

Still, there's a need to get products to customers. So what's going to change? Inventory, of course. No one is going to buy everything online, but components and complete systems will be available globally over the Web—from vendors, auction houses and speculators. And while traditional distributors still may handle the shipping and billing and arrange the financing, the actual location of the goods almost certainly will shift.

In the future, distribution won't be only about getting products to the reseller or its customer. It will be about securing the best price instantaneously and bidding for whatever's available, based upon market conditions. And those that can't adjust, or that misjudge global market conditions, could find themselves in dire straits very quickly.

Computer distribution is rapidly becoming a commodities exchange where products are measured the same way as pork belly futures. It's less about turns of products and more about a rapid response to market availability, changes in demand and global economics. Players will be bidding in a global marketplace that no longer will favor long-standing relationships. Internet economics won't allow that.

Rather than a business of warehousing parts, distribution will become a business of acquiring parts and systems and moving them as fast as possible to meet demand anywhere around the world. For resellers building solutions for customers, that will be both good and bad, as markets shift from glut to shortage by the hour.

If you thought things were moving faster and faster, so far we've only witnessed the qualifying round. The real race is about to begin.

ed_sperling@zd.com

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