Impacts and
Perspectives of
Electronic Commerce
The IT Distribution Sector in
Italy
Vincenzo Gambetta
Consultant
Electronic Commerce Business Impacts
Project Workshop
Rome, 29-30 October 2001
ASSINFORM Profile
ASSINFORM is the Italian Association of the major Information &
Communication Technology Companies and represents a major
reference point for the Italian ICT industry.
For ASSINFORM the convergence of Computer, Communication,
Content and Consumer Technologies is a top priority.
Content
Computing
ASSINFORM
Communications
As a founding member of the European Information Communication
Technology Association (EICTA) ASSINFORM, submitting
recommendations for ICT development projects, contributes to
the formulation of UE industrial policy.
EBIP Project Workshop
October the 29th, 2001
Rome,
2
The Companies
2NET Spa
LOGIKA COMP SpA
EMC2 COMPUTER SYSTEMS ITALIA SpA
LUCENT TECHNOLOGIES ITALIA SpA
ENERGIS CARRIER SERVICE
AGENFOR LOMBARDIA
MAGGIOLI INFORMATICA SpA
ENGINEERING INGEGNERIA INFORMATICA SpA
ALBACOM SpA
MERANT Srl
ERICSSON
TELECOMUNICAZIONI
SpA
ALCATEL ITALIA SpA
MICROSOFT Srl
FUJITSU
SIEMENS
COMPUTERS
SpA
ASKANIA Srl
NCR ITALIA SpA
GETRONICS SOLUTIONS ITALIA SpA
AT&T GLOBAL NETWORK SERVICES ITALIA SpA
NOKIA ITALIA SpA
3COM ITALIA SpA
AUTOSTRADE TELECOMUNICAZIONI SpA
GLOBAL KNOWLEDGE NETWORK ITALIA Srl
NORTEL NETWORKS ITALIA
BULL HN INFORMATION SYSTEMS ITALIA SpA
GLOBAL ONE COMMUNICATIONS SpA
OMNITEL PRONTO ITALIA SpA
BUSINESS OBJECTS ITALIA SpA
GPLV PARTNERS SpA
ORACLE ITALIA Srl
CABLE & WIRELESS SpA
GRUPPO FORMULA SpA
PHILIPS SpA
GRUPPO PRAGMA Srl
PRICEWATERHOUSECOOPERS
CANON ITALIA SpA
CAP GEMINI ERNST & YOUNG SpA
CEDACRINORD SpA
CIM SpA
CISCO SYSTEMS ITALY Srl
CITIES ON LINE SpA
COLT TELECOM SpA
HEWLETT PACKARD ITALIANA SpA RAI - RADIOTELEVISIONE ITALIANA SpA
SAP ITALIA SpA
I&T - INFORMATICA E TELECOMUNICAZIONI SpA
IBM ITALIA SpA
INAZ PAGHE Srl
INFOSTRADA SpA
COMPAQ COMPUTER SpA
INTESA SpA
DATA MANAGEMENT SpA
ITALTEL SpA
DATAMAT INGEGNERIA DEI SISTEMI SpA
ITER Srl
DIANOS SpA
L.C. SISTEMIA Srl
SEP – SERVIZI E PROGETTI SpA
SIEMENS INFORMATICA SpA
SILICON GRAPHICS SpA
SIRTI Società per Azioni
STORAGE TECHNOLOGY ITALIA SpA
SUN MICROSYSTEMS ITALIA SpA
UNISYS ITALIA SpA
ELSAG SpA
EBIP Project Workshop
October the 29th, 2001
Rome,
3
Some activities performed by ASSINFORM

Working Groups






Legal
Statistics & Market
Telecommunications
Public Authorities
E-commerce And Digital Signature
Training/employment
EBIP Project Workshop
October the 29th, 2001
Rome,
4
The Italian IT Market (Million €)
1998
1999
2000
2001
2002
2003
Hardware
€ 5.878
€ 6.921
€ 8.212
€ 9.529
€ 10.949
€ 12.525
Software
€ 2.479
€ 2.753
€ 3.047
€ 3.409
€ 3.770
€ 4.158
Services
€ 7.205
€ 8.135
€ 9.142
€ 10.392
€ 11.714
€ 13.160
Hardware Maintenance
€ 966
€ 888
€ 826
€ 764
€ 708
€ 656
€ 16.527
€ 18.697
€ 21.227
€ 24.094
€ 27.141
€ 30.498
Total
1999/1998
Growth Rates
2000/1999
2001/2000
2002/2001
2003/2002
Hardware
17,8%
18,7%
16,0%
14,9%
14,4%
Software
11,0%
10,7%
11,9%
10,6%
10,3%
Services
12,9%
12,4%
13,7%
12,7%
12,3%
Hardware Maintenance
-8,0%
-7,0%
-7,5%
-7,4%
-7,3%
13,1%
13,5%
12,6%
12,4%
Total
CGR 2000-1998
13,3%
CGR 2003-2000
12,8%
Font: Sirmi - 2001
EBIP Project Workshop
October the 29th, 2001
Rome,
5
The Italian Micro-IT Market (Million €)
Total
1998
1999
2000
€ 6.119
€ 7.274
Growth Rates
2001
2002
2003
€ 8.780
€ 10.325
€ 11.993
€ 13.824
1999/1998
2000/1999
2001/2000
2002/2001
2003/2002
18,9%
20,7%
17,6%
16,2%
15,3%
Total
CGR 2000-1998
19,79%
CGR 2003 - 2000
16,33%
Total IT Distributors Italy (a)
%-ge of Micro-IT Italian Market
€ 4.754
€ 5.965
€ 7.360
77,7%
82,0%
83,8%
25,5%
23,4%
y on y increase %-ge
CGR 2000-1998
24,42%
(a) Including the interchanges between Distributors
Font: SIRMI, 2001
EBIP Project Workshop
October the 29th, 2001
Rome,
6
The first 10 IT Distributors in Italy
Market Share (year 2000) - First 10 IT Distributors
43,1%
Other Distributors
Algol Gruppo
3,0%
Assotrade
3,0%
T ecnodiffusione
3,2%
Data Base Gruppo
3,6%
Computer Gross
3,7%
5,5%
T ech Data
6,5%
Ingram Micro
7,2%
CDC
9,5%
Esprinet
11,7%
Opengate
0,0%
5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 40,0% 45,0%
Font: data from SIRMI 2001
EBIP Project Workshop
October the 29th, 2001
Rome,
7
The analysed Distributors
Italian Market Share
(year 2000)
Distributor Name
Esprinet
9,54%
Tech Data
5,47%
Actebis
2,39%
Executive
1,16%
Total
18,56%
CHL
EBIP Project Workshop
October the 29th, 2001
Rome,
8
The IT products Distribution Environment
Brands
(IBM; Compaq, HP, Toshiba, Acer,
Lexmark,...)
Domestic Vendors
IT Distibutors
Sub Distributors
Vortals
VARs
Corporate
Dealers
System
Intgrators
Others
Mass
Merchandising
and Specialised
Chains
Resellers
Business
User
EBIP Project Workshop
October the 29th, 2001
Consumer
End User
Rome,
9
The IT products Distribution – Few figures



The number of Distributors/Sub-Distributors is, more or less, 220
The Dealers are over 12.000; following is an evaluation of the number of
operators for some of the above categories:
 20 Corporate Resellers
 More than 700 VARs
 More than 700 Resellers or PC VARs (at least one half can be
considered small Resellers)
 More than 4.500 Software Houses and Software System Integrators
 More than 20 Large System Integrators
 More than 2.500 outlets of Specialized Chains (30 more or less)
1.000 companies that can be classified as National PC vendors; but only
30 companies have shipped the 82% of the production (y 2000)
EBIP Project Workshop
October the 29th, 2001
Rome,
10
Market characteristics










Low margins
Increase of performance/price ratio
US Dollar fluctuation
Stock rotation
Box Movers with no added Value
Price driven Market, no loyalty
Services (!?!)
Crowded market
The market shows a strong tendency to concentration.
 In 1996 the first 20 distributors satisfied more or less the
64% of the demand
 In 2000 the market share of the first 20 distributors has
been evaluated 72% [Sirmi]
Products, strategies & prices controlled by Vendors
EBIP Project Workshop
October the 29th, 2001
Rome,
11
Product and transaction features in the
Italian IT Distribution Market
EBIP Project Workshop
October the 29th, 2001
Rome,
12
On line and off line orders
From the Distributor Site is it possible to place on line orders?
41 %
59 %
Yes
No
Font: Computer Dealer and Var and Reseller Weekly
EBIP Project Workshop
October the 29th, 2001
Rome,
13
%-ge of revenue due to on line sales
What is the %-ge of your revenue due to the on line sales?
5%
7%
2%
12%
47%
27%
< 10%
10-30%
30-50%
50-70%
>70%
No answer
Font: Computer Dealer and Var and Reseller Weekly
EBIP Project Workshop
October the 29th, 2001
Rome,
14
%-ge of resellers preferring on line orders
What is the %-ge of your customers that prefers
the use of on line orders?
5%
7%
3%
40%
13%
32%
< 10%
10-30%
30-50%
50-70%
>70%
No answer
Font: Computer Dealer and Var and Reseller Weekly
EBIP Project Workshop
October the 29th, 2001
Rome,
15
Two examples of web orders growth
Esprinet Web Orders History
[ev alua tion c o nside rin g, sin c e 19 98 , E sp rine t a s the su m of th e res ults o f th e c o mpa nies c on v e rge d in it
70,0%
62,0%
60,0%
49,1%
50,0%
40,0%
35,1%
30,0%
26,3%
20,0%
10,0%
35,0%
17,0%
10,0%
0,0%
1998
1999
%-age of WEB Rev enue
EBIP Project Workshop
October the 29th, 2001
2000
2001
%-centage of WEB Orders
Rome,
16
Two examples of web orders growth
Executive Revenue
120
50%
Revenue (Mio €)
100
38%
80
40%
31%
30%
60
20%
40
10%
20
0
0%
0%
0%
1996
1997
1998
%-age of Web Revenue
44%
0%
1999
2000
2001
Year
Traditional
WEB
EBIP Project Workshop
October the 29th, 2001
%-age of WEB Revenue
Rome,
17
The revenue due to the e-commerce
activities in the IT Distribution sector in Italy
80%
70%
Maximum %-ge of e-commerce Revenue
60%
50%
36,5%
40%
25,2%
33,3%
30%
20,1%
25,3%
20%
10%
16,5%
0%
1998
1999
2000
2001
2002
e-commerce for the year 2001, will worth ~ 3.000 million €
EBIP Project Workshop
October the 29th, 2001
Rome,
18
Impacts of e-commerce

Deep process of re-engineering
 Internal
 External

New services offered
 Loyalty and trust
 Increase of the customers’ base






Costs’ savings through the all chain
People moved to more productive activities (sales, customer
care)
Integration of Information Systems (Partner, Logistics)
Reduction of time to market, higher stock rotation, new market
areas
Information to be used to better understand the market and to get
the opportunities
E-commerce offered in ASP to Resellers
EBIP Project Workshop
October the 29th, 2001
Rome,
19
Obstacles and advantages in exploiting the
e-commerce advantages

Telecom Infrastructure
 No problems of costs
 Reliability and flexibility good enough (increase of number of
services, growth of transferred data and of the Net activity …)


Regulatory factors: concerns about intellectual property and ecommerce legal regulation
Internal factors are of strategic importance
 Skills and Technology available in house
 Need of a severe Business Plan
 Proactive Management

External factors
 Evolution (more flexible and effective) not only of the commercial
structures, but all the company has been involved
 Importance of Human Factors and of the Brand Image
EBIP Project Workshop
October the 29th, 2001
Rome,
20
Obstacles and advantages in exploiting the
e-commerce advantages

Strategic factors relating to competitiveness
 No lock-in effects
 Management of business relationships are facilitated
 Key factor for the enlargement of the customer base

No fundamental importance has been attributed to the
Government policies, but ... the Government should
 take initiatives that allow the improvement of the network efficiency
(larger bandwidth)
 define simple and clear legal rules for e-commerce
 promote a more efficient hiring system for people that can be skilled
or that already have skills that are critical for the strategic evolution of
the companies
EBIP Project Workshop
October the 29th, 2001
Rome,
21
A glance to the (next) future








In the short-medium period of
time all the distributors will adopt (also if with different degrees of
complexity) the e-commerce or, more in general, the Net Economy
technologies
The saving of human resources originated by the re-engineering processes
will be invested in reinforcing the Costumer Care Structures (customer
support and telesales).
The average %-ge of e-commerce will tend to the limit, seen today, of 60%70% of the total revenue
The (number of) Distributors will decrease
 merging and acquisitions
 the ones not specialised in a class of products or in supplying products
of a specific Brand
The bigger distributors will diversify their activities and will try to expand
abroad
The trend of concentration of the total revenue on a limited number of
Distributors will be stressed
An additional advantage of the biggest structures comes from the
relationships with the vendors
EBIP Project Workshop
October the 29th, 2001
Rome,
22
A glance to the (next) future





In the time frame of few years the number of the Resellers will decrease
too
 a way to stay on the market could be the adoption of the ASP
services offered by some Distributor to allow the presence of the
Reseller on the web. The role of the Reseller will change
The above ASP services have, then, a good probability to expand, being
they useful for the Distributors and convenient for the Reseller
Today to anticipate, the evolution of the distributors tendency to have a
closer control of the Consumer and SOHO market is very difficult
T&Cs, customized on the Reseller performances, will be more and more
sophisticated and complex, meanwhile the medium size distributors
could use the negotiation as a strategic tool
Services offered through the Net - the more and more sophisticated
technologies would bring
 to the improvement and to the diffusion of the available services
 to the provision of new services and
 to make usable in a more automatic way the available contents
EBIP Project Workshop
October the 29th, 2001
Rome,
23
The CHL Model


CHL in year 2000, as domestic vendor, produced
34.500 PCs (which represent a share of the
domestic vendors market equivalent to the 2,52%)
with an expected increase of the production very
near to the 50% [Sirmi 2001].
IDC credited CHL for more or less the 25% of the
Italian B2C revenue in the year 2000
EBIP Project Workshop
October the 29th, 2001
Rome,
24
The CHL Model





10 years ago CHL started as an assembler of customized PC, using a
BBS (Bulletin Board System) to send the price list to its customers
CHL used to operate as a Distributor; but the main part of its business
was generated from the end-user market
In1999 CHL decided to sell a larger set of goods only through the ecommerce application and only to the end-users
CHL has deployed a very powerful Vortal were the end user finds IT and
no IT products, PCs, courses, books, information on products, Forums
and an advanced technology to build the PC configuration he wants to
order
Today CHL is positioning itself as an Commercial (Application) Service
Provider, offering to Brands and Vendors the service named TwoASP,
and making of this activity the core business.
EBIP Project Workshop
October the 29th, 2001
Rome,
25
The CHL Model

The business model is completely different by the initial one:
 The Brand hires from CHL the services to promote, to inform about and to
sell its goods straight to the end-user
 The Brand has the full control of prices, quantities and discounts to apply
to the goods
 The Brand has the responsibility to restock the CHL warehouse
 The goods are owned by the Brands even if they are on the shelf of the
CHL warehouse
 The goods can be sold only if they are on the shelf
 The goods, when ordered by the end-user, are “billed” using the prices
defined by the Brands
 When building up a PC CHL “buys” the parts from the Brand
 The goods are delivered to the end user using the CHL services
 CHL revenue is generated by the fee applied for the transactions made
between Brands and end-users
 CHL, in addition, gets the services it uses in outsourcing (warehouse, PCs
assembly, distribution system, Call Canter, post sales assistance, etc.);
this gives to the company a high degree of flexibility .
EBIP Project Workshop
October the 29th, 2001
Rome,
26
The CHL Model




Distributors and the Resellers do not exist any more.
A new subject carries out the intermediation: the
Provider of the Application.
This new subject gives to the Brand full supports to
sell, to deliver and to assist the Brand’s goods, but
doesn’t have the financial exposure of the goods
stoked in the warehouse.
CHL is then a “light” company that makes possible
with the Net Economy technologies a new form of
“automatic” intermediation between Brands and Endusers.
EBIP Project Workshop
October the 29th, 2001
Rome,
27