Long live the server channel – but beware the changes

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If you think the server channel is dead, think again. According to IDC, it is going strong – although the market will have to overcome the challenge of new channels.

“New channels keep emerging,” said Janet Waxman, program director with IDC’s systems and storage distribution channels group. “Along with these emerging channels come different business models. Vendors must choose the right type of channel while constantly assessing their partners and keeping a watchful eye on the market to ensure they are aligned with the right companies.”

Indirect channel revenue will increase at a compound annual growth rate that is almost twice that of the direct channel. A huge opportunity exists for the channels in the lower bands. In 1999, entry server sales accounted for 53% of all server revenue. By 2004, this percentage will inflate to 58%.

Server manufacturers must work with existing and emerging channels to develop a collaborative model. One of the changing models is a greater shift toward the use of the Internet as a channel.

“Many industry watchers believed the Internet would be the final assault on the indirect channels,” said Waxman, “but the opposite is true. The web has spawned many new businesses, some of which require the face-to-face selling that a channel partner can provide.”

Despite the hype about the Internet, other new technologies will present the server market with even greater challenges. Storage, for example, shows tremendous growth for the channel, and customers seeking a one-stop integration and support feature will be drawn to it.

“Those who understand the product as well as the customer segment that is being targeted, and those who can articulate why the channel is required will be most successful,” concluded Waxman.


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