B2B Technology Insider

February 2014

B2B Technology Insider

The United States business-to-business channel and Canadian distribution market closed the first quarter slightly down at -0.7 percent and up 6 percent year-over-year, respectively.

Our industry analysts have identified key trends and categories to watch in the U.S. and Canada, including all-flash arrays, hyperconverged systems, print and supplies, and notebooks.

Read more about the latest from NPD by selecting a headline below.

U.S. all-flash array sales surge with most vendors experiencing triple-digit dollar growth

All-flash array hardware dollar sales reached nearly $129M in Q1’17 in the U.S. indirect B2B channel, up 35 percent from the first quarter of 2016.

NetApp captured more than one-third of the dollar share in this category, taking the lead from EMC after adding almost $33M, gaining 21.7 share pts. Recently acquired (by HPE) all-flash-array vendor Nimble is now the third-largest brand in this category from a dollar perspective, increasing its Q1 ’17 dollar sales by $27M.

Top All-Flash Array Vendors — 2017 1Q v. Prior Year Dollar Volume and Share, Share Pt. Chg.

NPD Group |  Market Research | Reports and Trends

Source: The NPD Group / Distributor Track® and Reseller Tracking Service — U.S. (overlap removed)

Hyperconverged systems — Nutanix maintains impressive lead despite entry of large OEMs

Hyper-converged infrastructure appliance dollar sales in the U.S. total indirect B2B channel grew more than 650 percent to $87M in Q1 2017, compared to the year prior. Nutanix captured 82 percent of HCI dollar sales, growing 22 percent points, equating to more than five times as much growth as the second-strongest growing vendor, Lenovo.

Nutanix increased its market dollar share by 22 points, growing more than five times as fast as Lenovo, now the second leading vendor. All of the dollar share gains in this category were driven by the four largest brands, with losses primarily coming from smaller vendors such as SimpliVity and Scale Computing.

With the exception of Nutanix (+22 percent) and Dell (+42 percent), all of the top eight vendors saw declining ASPs in Q1 2017 vs. the year prior.

HCI — 2017 1Q Dollar Sales and YoY Dollar-Share Pt. Chg.

NPD Group |  Market Research | Reports and Trends

Source: The NPD Group / Distributor Track® and Reseller Tracking Service — U.S. (overlap removed)

Print and supplies categories continue to experience steep declines

Compared to the year prior, Q1 2017 technology print and supplies categories dollar sales through two-tier distribution in the U.S. declined -$200M. Laser toner remains the largest category in this segment from a dollar perspective, representing almost half of the total revenue of $2.4B in Q1. Although some of the smaller categories such as 3D printers (-39 percent) and total scanners (-12 percent) experienced steeper percent declines, laser toners contributed almost half of the total dollar losses at -$93M.

As businesses continues to shift information management to digital platforms such as DocuSign, we expect to see adoption strategies in print and supplies forming around lower price points, a stronger focus on cybersecurity, and higher-end inkjet platforms.

Print and Supplies —  2017 1Q Dollar Sales and Percent Change

NPD Group |  Market Research | Reports and Trends

Source: The NPD Group / Distributor Track® and Reseller Tracking Service — U.S. (overlap removed)

Notebook sales in Canada distribution show no sign of cooling down

Notebook computers are showing no sign of cooling down. This is the sixth quarter in a row with positive revenue growth. Notebooks accounted for 18 percent of the total IT Hardware Distributor Track revenue in Q1 2017, up over 1 point from last year. Part of the reason for this growth is likely the three-year refresh cycle we see in the notebooks category. This was particularly a strong quarter for notebooks, generating $36M additional revenue compared to Q1 2016 and $82M more than Q1 2015. However, 2014 also had a strong Q1, selling only $13M less than this year. Other factors having an impact on the recent strong demand for higher end notebooks are specialized work environments like architects’/designers’ offices, handling of large data, analytics, and latest software. We also see high growth in build-to-order notebooks, which are 29 percent of total notebooks and show growth of +31 percent, indicating customization to get to higher-performance notebooks.

Looking at overall notebooks, the largest market by far is Windows computers, accounting for almost two-thirds of all notebook revenue in Q1. There is growth from Mac and Chromebooks, with revenue growth of 38 percent and 64 percent respectively. In the graph below, Chrome notebooks make up 39 percent of sales under $500 and 50 percent of the growth dollars, which shows the higher adoption of Chromebooks most likely in the education sector. It is also evident from the graph that 71 percent of the dollars spent are under $1500, but the growth dollars in this price segment account for only 32 percent of the growth dollars. The big highlight below is 17 percent of total notebooks revenue is in the $1500 to $2000 price point, yet it contributed 44 percent of growth dollars; 62 percent of growth dollars were in the Windows 10 Pro segment.

Looking at the $1500+ market and the destination channels, about two-thirds of the growth dollars came from the small VAR destination channel, showing the higher purchasing from the SMB private and government sectors.

Notebooks — 2017 1Q Dollar Share and Growth by Price Segment

NPD Group |  Market Research | Reports and Trends

Source: The NPD Group / Distributor Track® Canada

Ask the Analyst — Country Briefs

Canada

The month of March in Canada marks the fiscal year-end for the government. Though the purchasing cycle by the government has been more stabilized there still exists that end-of-the-year buying rush that keeps distributors and commercial resellers busy during this period. March, as it happens, also marks the end of calendar first quarter and after the holiday rush is considered by some to be the back-to-business season, hence the importance of this quarter.

During the past six quarters we have seen quarter after quarter of positive growth in the Canadian IT hardware distribution market. Q1 2017 results compared to last year’s Q1 showed a positive revenue growth of +6 percent, which is a significant number considering Q1 2016 also ended with +8 percent growth over the previous year’s first quarter. Among the three months making up this quarter, March was the best-performing month with +11 percent growth over last year. This was followed by February with +8 percent growth, but Jan’17 experienced some declines in the low single digits.

Small and large VARs account for two-thirds of IT hardware distributor revenue, and both showed positive growth.

Notebooks, networking devices, solid state drives, storage area networks, notebook accessories, and hyperconverged systems led the growth in this quarter, contributing 70 percent of positive dollar gains.

Hyperconverged systems is a newer category released by The NPD Group. The revenue of this category has been growing every month, indicating the increasing adoption of these systems in commercial technology.

When we are trying to explain product growth trends, convenience is often the reason which can explain some of these trends. Revenue growth of docking stations last quarter is one of those trends that can be attributed to convenience. Work stations are usually equipped with multiple monitors, headphones, full size keyboards, Ethernet cable, and power cords. All of these devices need to be connected with the laptop, and docking stations make these connections smooth by just resting the notebook on it. The revenue and units of docking stations in March doubled compared to February, and for the quarter their sales grew by +30 percent over the same period last year.

Accretion of sit/stand workstations is another trend seen in corporate offices as users become more health conscious. Sitting all day is not good in the long term; these sit/stand monitor arms and stands allow users to raise their monitors/desks so they can stand while continuing to work. Many of these products are instrumental in the +23 percent revenue growth of the monitor stands/arms category in Q1 2017.

Some categories still present a challenge that the market needs to overcome. So far it has done a great job of keeping the numbers positive while we wait to see the picture next quarter’s results present.


Ali Naqvi manages the IT hardware Distributor Track business, which encompasses all IT hardware distribution partners in Canada. Working closely with distribution partners, Ali helps them understand and utilize NPD data to highlight positives and uncover opportunities.

Read more posts by Ali Naqvi here.

United States

The United States business-to-business IT hardware market declined slightly at -0.7 percent (or -$96M) in Q1 2017 vs. Q1 2016. This indicates the market is still adjusting to technology shifts, coupled with a weaker U.S. economy that grew at a meager 0.7 percent in Q1 2017 versus 0.8 percent in Q1 2016.

From a category perspective, we saw weakness in data center areas such as servers, storage area networks (SAN), and network-attached storage (NAS), which also took down the components that are typically installed as in them (e.g., x86 CPU chips, hard disk drives, server memory, etc.). The declines in SAN, NAS, and the server markets can be attributed to myriad factors, such as smaller firms moving their computing resources into the cloud (e.g., Amazon AWS), x86 virtualization reducing the amount of servers needed in the data center, and emerging storage categories such as hyperconverged infrastructure (HCI) and all-flash arrays (AFA) that are experiencing high double-digit growth rates. From a peripheral perspective, laser toner declined significantly, along with single- and multi-function laser printers, as firms are printing less due to a shift toward digital mediums coupled with mandates to print less in an effort to curb operating expenses.

Bright spots for the market were in notebook and desktop PCs, network security, access points, large format commercial displays, all-flash-arrays, and hyperconverged systems. From a PC perspective, growth in the channel continued to be propelled by the education market’s need for cheaper PCs (e.g., Chromebooks) and vendors’ increasing shipments to lock in supply ahead of time as component shortages (NAND and DRAM) raised prices. Other bright spots continued to be in network security as more firms seek to protect critical infrastructure and intellectual capital. Growth in access points can be attributed to more firms evolving with mobile workers and the growth of the open office trend. In addition, key vertical markets continue to add free or fee-for-service WiFi in hotels, quick-service restaurants, and airports to lock-in the consumer. Lastly, we saw strong growth in emerging storage categories such as all-flash arrays and hyperconverged infrastructure as firms demand integrated systems that are easy to manage, can scale quickly, and also can handle randomized workloads much more efficiently due to boot storm issues with x86 virtualization.

In summary, we remain cautiously optimistic about Q2 2017. It is typically a much stronger quarter for the channel due to its ties to the K-12 market, and we have already seen strong growth in Chromebooks versus last year. Areas where we expect continued growth will be in all-flash array and hyperconverged infrastructure categories, coupled with digital signage, as more firms shift toward digital advertising strategies.


As The NPD Group’s Director of Industry Analysis for Commercial Technology, Michael Diamond offers expert analysis and commentary about the shifting commercial market. Through his focus on driving deeper insights with clients, Michael is improving core business-to-business (B2B) services and helping B2B clients navigate the channel more effectively.

Read more posts by Michael Diamond here.

Background
NPD is the only source for total commercial channel sales for the U.S. and Canada technology distribution and U.S. reseller market. Our monthly and weekly distributor and reseller sales out reports provide timely information and insights including unmatched detail down to the item level.

Reports are available for all key technology categories including PCs, printers and supplies, and networking and storage. These items and categories can be segmented in the Distributor Track® database by distribution destination channel types such as retail, direct market reseller, or small solution provider, or they can be combined with our Retail Tracking Service and Reseller Tracking Service to get a total market view.

Over 100 manufacturers, distributors, and financial analysts rely on us to help them make more informed business decisions in product development, marketing, sales, and other areas.

NPD’s Distributor Track®is an essential tool for any channel member looking to expand profit margins and boost channel opportunities.”

Tim Curran
CEO, Global Technology Distribution Council

About The NPD Group
The NPD Group provides market information and analytic solutions that drive better decision-making and better results. The world’s leading brands rely on us to help them get the right products in the right places for the right people. Practice areas include apparel, appliances, automotive, beauty, consumer electronics, diamonds, e-commerce, entertainment, fashion accessories, food consumption, foodservice, footwear, home, mobile, office supplies, retail, sports, technology, toys, video games, and watches / jewelry. For more information, visit npd.com and npdgroupblog.com. Follow us on Twitter: @npdgroup @npdtech


For more information about our commercial technology services and solutions, please contact Niko Levenetz at niko.levenetz@npd.com.