Morning Rudy,..Re:..The small-medium business market is a very large segment, something on the order of $35B, which has low penetration in comparison to the larger corporate market.
Thanks for the explanation of VARs. I admit that I haven't given this business segment much thought as I assumed that eventually, they would go the way of the dinosaurs since the margins were so thin. However, there was a segment on TV last night which showed what these small VARs do and why they are being somewhat successful. This was helpful as far as understanding but it's hard to make the leap that this could be a long term profitable business.
For one thing, they apparently get their fees from the fact that they charge a little more for the hand-holding aspect including troubleshooting and setup. They would have to get more here as the report stated that their margins on the PCs were 8%. At only 4 or 5 units per week, they really have to have other income. Additionally, it was mentioned that MSFT estimates that as many as 50% of these units contain illegal software.
Now, even if this market is $35 billion annually, what would be the cost to CPQ or anyone else to provide technical support? Maybe Dell is not being arrogant by dismissing this market but rather realistic? I don't know the answer here but when you think of having to supply some 200k individual businesses with parts and technical support, it looks like a logistics nightmare, especially where warranty issues are concerned.
Again thanks for the insights
Lee |
