the european market for wholesale b2b distribution in it...

The European Market forWholesale B2B Distribution inIT and Consumer ElectronicsTCA white paper – June 2017

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Welcome to the TCA’s first majorpiece of research

Robert NorumCEO, Technology Channels Alliance

Introduction

Distribution is experiencing an unprecedented period of change asaggressive market disruption in the form of consolidation and shiftingcustomer expectations, are forcing distributors to evolve.

This disruptive change is happening ata rapid pace all over Europe, as the battlebetween the large global giants, local countryplayers and specialist VADs hots up. The bigare getting bigger as they consume smallercounterparts to build on their servicescapabilities and to maintain market share ineach region. Cross-border acquisitions arehappening regularly in the distribution spacetoo, as the drive for increased margin continues.

But one question IT vendors should beasking themselves is which strategy to backwhen it comes to Europe? Stick with thebigger global giants of distribution, or realisethat because each market is so very different,that perhaps taking a chance with the localplayers in each region is actually a better wayof engaging with each territory and winningnew customers.

The channel itself is undergoing atransformation period, as resellers take a services-led, recurringrevenue approach to business, shaped by the inexorable growth of cloudcomputing and the rapid digital transformation of their customers.Vendors’ demands are also changing, and it is the distributors that arebeing forced to adapt their models to service both ends of the channelspectrum.

So it is this continually shifting landscape that prompted theTechnology Channels Alliance to commission an in-depth piece ofresearch, carried out by Bain & Company, entitled The European Marketfor Wholesale B2B Distribution in IT and Consumer Electronics.

This white paper will look at some of the key findings of the report,which covered eight European territories – UK, France, Italy, Spain, Germany,Switzerland, Poland and Sweden – underlining the general state of themarket according to the report, how distribution is perceived and alsothe emerging technologies that are set to power future growth.

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The Technology Channels Alliance was formally incorporated in Q3 2016 with foundermembers Esprinet, Exertis and Westcoast. Our stated aim was to provide a localisedforum for best practice, information and ideas sharing, as well as driving vendordiscussions and tackling industry issues in Europe. We committed to provide regionalknowledge, white papers, localised case studies, and specific research in EMEA. In Q4 2016, we produced our first white paper on The Future of Distribution in EMEA,with contributions from several leading distributors and channel sales tracking companies.And now, in Q2 2017, I am delighted to launch our first major piece of research TheEuropean Market for Wholesale B2B Distribution in IT and Consumer Electronics. We have commissioned Bain & Company to undertake a major research studyinto eight key markets in Europe to create the definitive picture for wholesale B2Bdistribution in both IT and consumer electronics, and to identify key trends at both aregional and country level. The findings show that Europe is a complex and fragmented market, with acombination of global, regional and local players all competing for share of walletand market share. Perhaps most interestingly over 65% of all distribution across theeight markets is conducted by local or regional distributors as opposed to globalbroadliners. Highlights of the key findings are included in this white paper, but the full 280page report is available free to all TCA members, and also purchasable by vendors onrequest. I hope you find it useful and please get in touch if you would like moreinformation on the TCA or the report.

TCA white paper

The European Market for Wholesale B2B Distribution in IT and Consumer Electronics

“The channel itselfis undergoing a transformation period, as resellers take a services-led, recurring revenue approach to business, shaped by the inexorable growthof cloud computing and the rapid digital transformation of their customers.”

[email protected]

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According to the Bain research, overall European economic recovery isset to be moderate over the coming years at around 1.5-2%1. Unsurprisingly the UK’s economy is predicted to slow down afterBrexit, but Poland and Sweden were highlighted as star performers.Switzerland is recovering from a2014/15 slowdown, and Italy andFrance still lagging behind, havegone through a tough few years interms of economic growth and ITinnovation. Both Sweden and the UK are themost tech-savvy markets in Europewith the highest IT spending onGDP, closely followed by Switzerlandand Germany. Italy and Spain areagain seen to be lagging behind, particularly in business usage,infrastructure and regulatory environment. But the good news for Italyand Spain is that the situation is improving, the research found. As a whole, the European IT and consumer electronics (CE) is worthcirca €190 billion and is expected to grow at 0.7% CAGR during 2017,propelled by a strong growth spurt in 2015 driven by mobility. Breakinginto IT product category level, the report revealed it is not such goodnews for the desktop and notebook market with a 5-8% drop inrevenue; however, the tablet market is recovering with growth of 1-2%,and a predicted 0.5-1% growth in the mobility market.

European overview1

“Both Sweden and the UK are the most tech-savvy marketsin Europe with the highest IT spending on GDP, closely followed by Switzerlandand Germany.”

2

IT spending incidenceon GDP (2016)

Source: Bain Analysis

1.1%

1.9%

0.8%

1.1%

1.5%

0.9%

0.8%

0.6%0.3%

0.9%

0.9%

0.3%

1.1%

0.7%0.3%

UK

3.8%

0.9%

1.2%

0.5%

FRA

2.6%

ITA

1.7%

SPA

2.1%

0.9%

1.0%

0.7%

GER

2.6%

0.8%

1.3%

0.9%

CH

3.0%

POL

2.1%

SE

3.5%

IT services spending

Software spending

Hardware spending

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IT & CE end-markettrends by category

Source: Bain AnalysisDesktop

Sharply declining andexpected to keep oncontracting at 7-9%.

NotebookDeclining at 4-5%a year, expected tostabilise in 2019.

TabletMarket saturation led

to contraction in 2014/5,but replacement cycleprompted recovery in

2016. Gaining popularityin business, but weakin terms of consumer

demand.

MobilityFlattening after shift

to smartphonesegment – transition to

larger screen sizesprompting replacement

of old devices.

Printing & officeMarket continuing to

contract as firms shift topay-per-use/service

models to save money.

Other IT productsi.e. hardware and

accessories (monitors,networking consumer)decreasing, consumer

software growing.

Server & storageFlattening with weakenterprise demand,

victim of pricingpressure.

NetworkingGrowth expected at

2-3% in coming yearsdriven by WLAN, fixedIP phones and ethernet

switches as part ofnetwork renovation cycle.

Value softwareStrong growth at3-4% powered by

investment invirtualisation, storage

software and dataprotection solutions.

TV & audioContracted due to highsaturation levels of HD

TV. Slight recoverypredicted due to newtechnology and more

affordable prices.

GamingPhysical gaming

expected to recover aftera negative 2016, drivenby augmented/virtualreality technology, arelease of updated

consoles and a growinggaming population.

Other consumerelectronics

i.e. navigators, portablemedia players – on the

up after years of decline,driven by smart

wearables, droppingprices, new applications

coming to market.

1 Bain Analysis on IMF, OECD, EU Commission, EIU

Sergio Iardella, partner at Bain & Company, and report co-author, saidthe report highlights the vital role of distribution across Europe. “Distribution has an increased importance across all productcategories. It is able to offer efficiency in managing logistics andfulfilment services in the high-volume space such as notebooks anddesktops, but it is also able to support vendors in dealing with a veryfragmented resellers and enterprise customers space in IT value (e.g.server, storage, networking, security, …),” he said. “One of the things I was not expecting to come from the researchwas how relevant and how significant all the European broadliners are –companies like the founders of the TCA– that have traditionally built theirbusiness in a specific country andexpanded into others,” Iardella added. Country-wise, the report singled outGermany as the number one IT and CEmarket in terms of value, at €46 billion,closely followed by the UK (€44 billion)and France at number three (€35billion). Poland and Sweden arehighlighted as the fastest growingcountries, with the UK, Germany andSwitzerland expected to grow in the lowsingle digits, and France, Italy and Spainremaining flat. In terms of distribution, the overallEuropean IT and CE distribution marketis worth €69 billion according to Bain’sfigures, driven primarily by mobility,printing and value added services, withGermany again the biggest market (€19billion), followed by the UK at €16billion and Italy and France at €8.7billion each. Distribution accounts for between 45and 55% of the total IT market inalmost all European countries and has aparticularly strong grip in the desktopand notebook and printing spaces. The

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“Distribution has an increased importance across all product categories. It is ableto offer efficiency in managing logistics and fulfilment servicesin the high-volume space such as notebooksand desktops...”

Sergio IardellaPartner, Bain & Company

research found it was ‘moderate’ in thetablet space, and ‘limited’ in mobilityand CE, with a ‘highly variable’ presencein the value space. Iardella added, “The most importantthing about a player that is strong in theIT value space is the much highermargins and it is an area of focus fordistributors to work on. The averagemargin of a ‘traditional’ broadliner is 1%,but for a value player it is 3-4%. That’ssignificantly higher.” Alessandro Cattani, CEO of pan-European distributor and TCA foundermember Esprinet said the lack ofpenetration in the value space createsopportunity. “Distribution plays an importantrole in the go-to-market strategy of thevast majority of countries as well asvendors. The share of distribution hasincreased across the European market,which shows we are addressing the needsof the manufacturers as well as theresellers,” he said. But one of the keyfindings of the Bain research was that in

IT and CE marketshare intermediated by

distributors (2015)Source: Bain Analysis

55% 36%42%48%47%48%29%40%

UK FRA ITA SPA GER CH POL SE% on total end-market value (as-if-sold)

“ Distribution plays an important role in the go-to-market strategy of the vast majority of countries as well as vendors. The share of distribution has increased across the European market, which shows we are addressing the needs of the manufacturers as well as the resellers.”

Alessandro CattaniCEO, Esprinet

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certain territories, namely France, distribution was under-represented,and Cattani said this required work on the part of industry to get to thebottom of this. Cattani said, “Different categories like PCs and consumer electronicshave such different penetration numbers that there has to be somethingwrong somewhere down the line, either on the vendor side or thedistributor side.” Cattani mused whether the discrepancies between PC andsmartphone penetration in the various territories was a fault withdistribution. “PCs are sold not only to professional resellers and endcustomers, but also to retail,” he added. “Perhaps the fact that smartphones are sold directly – is it becauseof a difference in the way these products are sold and priced? Is itsomething that we as distributors are not providing, perhaps we are notproviding the right level of service? Or is it the vendors? They still havea direct sales force so that is a lot of sales not going throughdistribution. From my point of view that is the most intriguingquestion,” he said. Roberto Fiorello, partner at Bain & Company and report co-authorcommented, “The shift of key mobility vendors (Apple, Samsung andHuawei) to a channel, rather than a direct model, will make a significantdifference and we see this continuing to increase in each territory”.

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IT and CE market share intermediated by category (2015)Source: Bain Analysis

67%

UK

38%

FRA

83%

ITA

76%

SPA

46%

GER

60%

CH

59%

POL

68%

SE

66%

UK

33%

FRA

85%

ITA

83%

SPA

74%

GER

68%

CH

79%

POL

66%

SE

24%

UK

35%

FRA

43%

ITA

50%

SPA

55%

GER

22%

CH

44%

POL

44%

SE

DESKTOP NOTEBOOK TABLET

% on total end-market value (as-if-sold)

0

20%

40%

60%

80%

100%

“The shift of key mobility vendors (Apple, Samsung and Huawei) to a channel, rather than a direct model, will make a significant difference...”

Roberto FiorelloPartner, Bain & Company

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them the edge,” he said. “But there arethe European broadliners – those with€1 billion plus in revenues who are theleaders in their country – these are justas relevant, especially if you lookcountry by country. And then there is along tail of smaller players who addspecific value to particular productcategories.” With profitability a priority, the Bainreport placed Esprinet, Also and Exertisas the most profitable players with EBITmargin standing at between 1.4 and1.7%, compared with the 1% average. Ingeneral, the Bain report found thatbroadline distributors are facingincreasing pressure on profitability dueto a combination of factors, includingthe sharply declining PC end market,traditional channels coming underincreased stress from e-tailers (e.g.Amazon) and competitive pressureamong distributors. Alex Tatham, managing directorof Westcoast, said the report findingscemented the importance of thespecialised, more local players in the distribution space. “The report shows just how important a wide range of Europeandistributors are,” he said. “The big guys – Tech Data and Ingram - takea significant chunk of business, but actually the European distributorsmake up over 60% of the market, and that is an enormous block ofopportunity for them and the vendors. These companies are growing ata faster rate than the big US companies. Ultimately, vendors will get abetter result by working with local players. They may have to workslightly harder for it, but results will be better all the same.” Tatham said the fact that distribution was under-represented incertain product categories and territories also meant an opportunity. “It gives us great hopes for our own future when we look at theopportunity, both in the UK and Ireland, and in other territories,” he said.

“The report shows just how important a wide range of European distributors are.The big guys – Tech Data and Ingram -take a significant chunk of business, but actually the European distributorsmake up over 60% of the market.”

Alex TathamMD, Westcoast

Looking at the competitive landscape – the report revealed that larger,global broadliners are the market leaders at a European level, accountingfor a combined 32% of the market – with the likes of Tech Data/Avnetgrabbing 19% overall market share and Ingram Micro 13%.

The competitive landscape2

But the more local, European-centered players also had a firm gripon the market, with stand-outs including Also at 8% market share,Esprinet and Vinzeo at 5%, Exertis at 4% and both Arrow ECS andWestcoast at 3%. Iardella said traditionally the large global players hadenjoyed an advantage. “The global broadliners have had a traditional advantage due tobeing from the US where most of the big vendors are which has given

Distribution marketby player (market

value 2015)Source: Bain Analysis

Others

Brightstar 20:20

Adveo

UFP

ABC Data

Action

Computer Gross

AB

Westcon

Westcoast

Arrow ECS

Exertis

Esprinet +VINZEO

ALSO

Ingram Micro

Tech Data + Avnet TS

€3.5b €8.4b €3.1b €8.4b €24.7b €19.5b

31%25%

34%39% 42%

31%

5%

8%

8%

17%

20%

4%3%

3%5%

6%

8%

10%

18%

22%

3%4%5%5%

7%

9%

15%

18%

3%6%

9%

11%

11%

15%

3%3%4%4%

6%

6%

13%

14%

4%5%

7%

8%

12%

25%

Printing, other IT products,consumer electronics

IT valueMobilityTbltNotebookDsktp

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the average. We need to work out if this is because of the structure ofthe industry. Smaller countries are more fragmented – this is clearly thecase with Italy. Or is it the go-to-market strategy? Are we not providingthe right level of service so that end user customers can reap thebenefits of higher investment in IT?” The key is evolving along with market demand, Cattani said. “We as the distribution industry need to focus more on the margingenerating activities and products,” he said. “More focus on value inall different ways – value products such as the data centre, and value-added services. The industry is no longer about box moving – the way ofactually being a distributor must evolve. There is a more service driven rolefor distribution, more outsourced capabilities, more product generation.So resellers can outsource some of the knowhow into the industry.” “There is a need for a call-to-arms and renaissance in innovation ofskills and capabilities so we can close the gap in terms of IT investmentand the nations lagging behind,” he added. Tatham agreed that there is work to be done. “The report demonstrates that companies like Westcoast, Esprinetand Also are very much under-represented in the value category and weall need to do better in that. We need to take a look at ourselves in themirror and focus on something that we can really make a mark on.” Exertis’ Ennis said strategy change was a given as margins areconstantly squeezed. “We used to expect technology to grow mid-singledigits every year, but things are very different now, it is not just abouthaving maximum coverage of every vendor in your portfolio – if youtake that approach you may end up sidelined,” he said. “Resellers and their customers are now looking for digital/hybridsolutions. The lines between distributors and resellers are blurring moreand more. Now distributors can look to an extended service propositionand have longer term solution led offerings for the marketplace.” Importantly, Ennis said the market could accommodate all models. “I hope the report shows that it is different strokes for differentfolks. The tier-one vendors will have a huge amount of capability andthe larger fulfilment models work very well for them, but there are manymore vendors that want more of a partnership approach. There is a veryvibrant alternative to the global distributors and this alternative isstrong and is growing. There is plenty of room for everyone in the marketplace.”

Niall Ennis, managing director ofExertis, also agreed the differentgeographical market make-up meantopportunity. “The big US disties are present in allmarkets and have a strong role to play,but in every market 60-65% of themarket is covered by regional players,meaning there are a lot of differentplayers bringing areas of expertise inlocal markets. Any vendor implementinga distribution strategy will want to havefull coverage to penetrate all marketsand verticals – and local players have astrong role to play in that strategy.Despite the drive greater Europeanintegration – with the exception of onecountry (UK) – you still have verydifferent dynamics on a market bymarket basis.” He added, “The challenge fordistribution is to bring a strong localfocus while also delivering the benefitsof scale and efficiency. The big playersare working on low margins, offeringlogistics and credit, but there are goingto be more specialist players that are goingto give more of a services-led approach.” Cattani stressed that there was stillwork to be done to maximise theopportunities. “The report states anaverage of 2.2% of GDP is spent on IT –however, countries like the UK arespending 3.8% and other European countries are below that,” he said. “The UK stands out because of services in its GDP. There is the bigweight of financial institutions in the UK and there is also a link withItaly and Spain which has a low level of productivity compared withother countries. Another indication that the role of IT industry anddistributors need to focus on levelling this in countries that are below

“The challenge for distribution is to bringa strong local focus while also delivering the benefits of scale and efficiency. The bigplayers are working onlow margins, offering logistics and credit, but there are going to be more specialist players that are going to give more of a services-led approach.”

Niall EnnisMD, Exertis

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Not only is the opportunity rife in the existing technology categories,but Bain’s report points to three key areas of emerging technology thatsignal a potential business bonanza for the distribution channel: theInternet of Things, cybersecurity and hyper-converged technologyinfrastructure. According to the report findings, the IoT market is worth $190billion and is expected to grow at a Y0Y pace of 20% for the foreseeablefuture. The opportunity for distribution includes the rise of the smarthome/workplace, and an increase in emerging vendors – some of whichhave not yet been seen – entering the market. Value services will alsoplay a significant role. Bain’s Iardella said this is a huge area of potential for distributors. “IoT is an exciting category where a lot of disruption will occur – ITand software will move into this space, and distribution could be at theforefront of adding value in terms of leading customers and workingwith new vendors in the space. This, of course, will require distributorsto figure out how they could leverage their traditional capabilities innew value chains (e.g. industrial automation or even automotive).” Cybersecurity is a top priority for every business going forward andhighlighted as a major concern by CIOs across Europe. And the findingsare particularly timely considering the massive cyber-attack-turned-epidemic WannaCry, that affected an estimated 200,000 victims (andcounting) in 150 countries according to EU police organisation Europol1. Bain’s figures placed the market at $80 billion in 2015 and predictsit will grow at up to 10% a year, meaning it continues to be a cert interms of investment for the channel. Distribution opportunities againinclude the proliferation of new vendors looking to establish a market innew territories, plus a range of support and consulting services for theirreseller and retail customers who often need help navigating throughthe maze of different products on offer. Finally, the explosion in data creation, will lead to a growing

3 Emerging technologyopportunities

1 https://www.europol.europa.eu/12

“Cybersecurity is a top priority for every business going forward and highlighted as a major concern by CIOs across Europe. And the findings are particularly timely considering the massive cyber-attack-turned-epidemic WannaCry...”

giant, will actually go direct and bypassthe channel. This means the channelmust get closer to its customers andmake sure they are the preferred routeto market. They need to be indispensableto these vendors. Lorenzo Battistella,manager at Bain, stressed the need forconstant evolution in distribution. “For distributors, it will bevery important to move towards avalue-added portfolio, extendingtheir proposition, capabilities andservice model to fully support SMBand corporate resellers in the digital transformation era,” he said. “Pay-Per-Use and As-A-Service delivery models are key, upcomingtrends that distributors will need to address in the near future. Newpartnerships with emerging vendors that see distribution as an effectiveroute to the mass market will give distibutors a major opportunity tostrengthen their portfolio and differentiate themselves in the highermargin IT value space. They have the opportunity to develop end-to-end propositions to address digital transformation needs, combiningbest-of-breed solutions from new, emerging vendors in an integratedproduct/service offering for SMB and corporate resellers – a lesscomplex one-stop-shop alternative.”

ConclusionAs has been highlighted during the research, the market opportunity isripe for distribution in every single product category and those yet toemerge, but it has to be prepared to adapt to the markets it is operating in. Those smaller, more local and often agile players are most able toadapt but are often overlooked by vendors that are new to the Europeanmarket who are blinkered into sticking with what they know with theglobal giants when looking to grow their footprint in new territories. These local players have the in-depth knowledge of each marketthey operate in, and have the trust of the resellers they are supplying.They have built their businesses from scratch in each country. They canopen up doors that some vendors may not even know existed, but firstthey face a battle to win vendor hearts and minds. By staying ahead of the curve, ensuring that value sits at the core ofevery offering, distribution will continue to thrive and lead the way interms of innovation, thus ensuring a very positive future to come.

FlexPod(Cisco/NetApp JV)

VCEVMWare/EMC/Cisco JV,later acquired by EMC

VSPEX (EMC)

Oracle

HPIBM

demand for hyperscaling technologies from the likes of Microsoft,Amazon Web Services and Google, plus the increase in data centresreplacing traditional architectures with hyperscale and convergedinfrastructure, also signals opportunity. But just as this new generation of technology is hitting the market,so does a new way of doing business, and the channel must contendwith the threat that these next generation converged infrastructure

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Cloud computingSecurity

ERPMobile applications

NetworkingDB/BI/Analytics

CRMMaintenanceWireless LAN

Electronic medical

CollaborationCompliance

Likelihood IT projectswill be cut in case ofeconomic downturn

Source: JPM CIO survey

Net percentage difference

PrintersVirtualisation

WindowsApplications software

SocialMobile hardware

PortalData centre

Servers/mainframeConsulting/outsourcing

StorageHR

Infrastructure softwareDesktop/laptop

Infrastructure hardware

Most likely

0 5% 10% 15%

Least likely

Convergedinfrastructuremarket sharesSource: IDC &analyst reports

0

20%

40%

60%

80%

100%

2014

Others

Country by country overview

16 17

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UKThe UK is shrouded by uncertaintythanks to the Brexit vote in 2016,and growth is predicted to slow in2017 to around 1.1%, afterconsecutive years of 4-5% growthpre-Brexit. The report points to a‘mild recovery’ in 2018 to 1.6%. However, despite this, the UKis still one of the most tech-savvymarkets in Europe with a marketworth €44 billion, and one of thehighest ratios in terms of ITspending/GDP (3.8%) and ITspending per capita (€1500) inwhat is described as one of themost competitive ICT markets. In terms of distribution, theUK market is worth €16.2 billion,registering 7.5% growth in 2016driven by mobility, particularlywith Apple shifting to a moredistribution-led model. Distribution accounts for 43%of the total market, and headingup the pack in terms of marketshare is Tech Data/Avnet with 50%share, with Exertis grabbing 16%and Westcoast 12%.

FranceFrance is still lagging behind itsEuropean counterparts in terms ofeconomic recovery – with 1.4%GDP growth in 2016 and 1.3%growth predicted for 2017,compared with the Western Europeaverage of 2%. In a market worth €35 billion,France’s IT spending/GDP isaligned with the rest of WesternEurope at 2.6% (2.7%), and ITspending per capita at €900, vs€1000 in Western Europe. Looking at distribution, themarket is worth €8.7 billion andstayed pretty flat in 2016 withdistribution only accounting for28% of the total end market. However, Bain’s figures predictthis will increase as vendors lookfor efficiency from distributors’financial strength and marketcoverage. Continuing consolidationmeans the top three distributorscapture almost 50% of the marketwith Tech Data a clear leader(26%), Ingram Micro (14%) andAlso (7%).

ItalyItaly’s economic recovery isadvancing at what Bain describesas a ‘modest’ pace – 0.9% growthin 2016, 1% predicted for 2017 and2018, below the 2% averagepredicted for the rest of WesternEurope. IT spending in a marketworth €21 billion is lower thanaverage at 0.7% (WE average 2.7%)and IT spending per capita is alsolower at €500, compared with the€1000 WE average. The market isalso ‘lagging behind’ the mostcompetitive WE countries,particularly in terms of political,regulatory environment andbusiness usage. The Italian IT and CEdistribution market is worth €8.7billion and is growing. It accountsfor 50% of the total end market,but is gaining on the direct modelas vendors look for increasedefficiency. The top threedistributors capture 45% of thetotal market with Esprinet a clearleader (24% market share),Computer Gross (11%) and TechData with 9% market share.

SpainSpanish economic recovery isdescribed as ‘notable’ in the studyat 2.6% GDP growth in 2016, with2.7% growth predicted for2017/2018 – a higher pace than the2% Western Europe average. However, in an IT marketworth €15 billion, Spain has low ITspending/GDP at 2.1% versus the2.7% WE average, and a low ITspending – the same as Italy - percapita at €500 compared with€1000 in Western Europe. It isdescribed by Bain as a market‘lagging behind’ the mostcompetitive countries, particularlyin business usage and ICT skills. The Spanish distributionmarket is worth €6.2 billion, withdistribution accounting for 48% ofthe total end market, again this isset to grow as vendors look forincreased efficiency and addedvalue. It’s distribution landscape isdominated by three distributors –Esprinet with 20% market share,Tech Data with 19% and IngramMicro 12%.

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GermanyThe German economy has beenone of the most robust in Europe,achieving between 2.5 and 3.5%GDP growth between 2013 and2016, with a slightly more modest1.8 to 2.3% predicted between 2017and 2018. Germany also has thebiggest IT market in WesternEurope, worth €46 billion, and ITspending/GDP is average at 2.6%(2.7% average across WE). Spending per capita is €1000,matching the average acrossEurope and its ICT market isdescribed by Bain as ‘the mostadvanced’, particularly in termsof political environment andinfrastructure. The German distributionmarket is worth €19bn andactually contracted in the lasttwelve months, due to a strongcontraction in the mobility space.But it accounts for 47% of the totalIT market. Three distributorsdominate this landscape in termsof market share, with IngramMicro at 22%, Also at 18% andTech Data at 17%.

SwitzerlandAfter a setback in 2014/15 whenthe Swiss Central Bank unpeggedthe €-CHF exchange rate, theSwiss economy is predicted toprogressively accelerate with 2.2%growth in 2017 and 3.1% in 2018according to Bain’s report. In amarket worth €10bn, the Swisshave one of the highest ITspending/GDP rates – 3% versus2.7% in Western Europe, and oneof the highest IT spending percapita - €2200 compared to theaverage €1000. The market isdescribed as ‘excelling’ among themost advanced economies. The Swiss IT and CEdistribution market is worth €3.7billion, seeing solid 5.4% growthbetween 2015/16 thanks to strongtablet, notebook and CE sales. Distribution accounts for 44%of the total end-market and isgrowing as vendors realise thevalue of distribution as the way togrow their footprint in the region. Three distribution players hold thelion’s share of the market, withTech Data accounting for 26%,Also 23% and Ingram Micro, 10%.

PolandStill seen as one of the developingcountries in Europe, the Polisheconomy has seen between 2 and3% growth during 2013-1016, andis expected to pull in a 3 to 4%growth rate over 2017/18. With an IT market worth €8.6billion, IT spending/GDP is 2.1%,bang on the average for EasternEurope. Spending per capita isagain aligned with the rest of theregion at €200, with huge scopefor growth when compared withwestern Europe. The Polisheconomy is described in the reportas in the ‘development phase’currently behind the mostadvanced countries across allevaluation areas. The distribution market inPoland is worth €4 billion and hasseen moderate growth over the lastyear of 0.6%, but with a slowdownin desktop and table distributiondue to high inventory levels. Distribution accounts for 54%of the total end IT market inPoland and three distributorsdominating the landscape – ABwith 24% market share, Action18% and ABC Data with 17%.

SwedenThe Swedish economy has seenaround 3.9% growth over 2015/16and Bain expects it to continueexpanding at around 2 to 3% in2017 and 2018, smashing theWestern European average of 2%. In a market worth €10bn, thereport describes Sweden as one ofthe most ‘tech-savvy’ in Europewith one of the highest ratios bothin terms of IT spending/GDP at3.5% and spending per capita at€1600 compared to the €1000western European average. Thereport describes Sweden as ‘amongthe pioneers’ when it comes totechnology. Looking at the Swedish ITdistribution market which is worth€3.1 billion, distribution accountsfor 36% of the total end-market,with three players dominating -Tech Data with 27% market share,Ingram Micro with 19% marketshare and Also with 8%.

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Executive summary

The TCA/Bain research covered eight key European territories – UK,France, Germany, Spain, Italy, Poland, Sweden and Switzerland.

The general European economy is set for a moderate recovery atbetween 1.5 and 2% over the coming years.

Sweden and the UK are the most tech-savvy markets in Europe (highestIT spending on GDP), closely followed by Switzerland and Germany.

The European IT and consumer electronics (CE) market is worth €189billion and is expected to grow at 0.7% CAGR during 2017.

Germany is the biggest overall market in terms of value at €46 billion,with the UK second at €44 billion.

The overall European IT and CE distribution market (in the territoriescovered in this report) is worth a combined €69 billion, with Germanythe biggest market, followed by the UK.

Distribution accounts for between 45 and 55% of the total IT market inmost of the eight territories covered, except France, where it is less than 30%.

Areas of strength for distribution across the selected territories weredesktops/notebooks and printing. Bain perceived distribution to be‘limited’ in mobility and ‘highly variable’ in the value space.

Global broadliners account for 32% of the distribution market in theselected territories, with the remainder split between large pan-European players and niche local players.

Emerging technology trends such as the Internet of Things (IoT),cybersecurity and hyper-converged infrastructure are highlighted assignificant opportunities for distribution going forward.

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Registered address:87-88 Harcourt StDublin 2, Ireland

+44 (0)7767 624662info@technologychannelsalliance.orgwww.technologychannelsalliance.org@TCA_EMEA

About the TCAThe Technology Channels Alliance (TCA) has been created todefine and promote the role of wholesale distribution as part ofthe end-to-end technology channel in EMEA. Its primary objective is to ensure that technology vendorsunderstand and make full use of the benefits of working withlocal and regional channel partners across EMEA. The TCA will also be enablers and advocates of newtechnology to ensure channels in EMEA are educated andoptimised to deliver on the promises new technology makes.This will include events, research and case studies to help ourmembers work more closely with vendors and other channelpartners to address industry issues and opportunities.

How to joinFor more information, visit technologychannelsalliance.orgcall Robert Norum on +44 (0)7767 624662 or [email protected]

MembersMembers comprise Esprinet, Exertis, Westcoast and M San Grupa.

Report authorsSergio Iardella, Roberto Fiorello & Lorenzo Battistella at Bain& Company.

the european market for wholesale b2b distribution in it...

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