1. The EMEA ICT Channel Landscape By Jack Mandard – CEO compuBase

2. Channel Marketing Managers Challenges….  What are the general trends of our business  Is the EMEA distribution manageable as a unique territory or not?  What are the key countries?  How to address a small country?  Are channel organized the same way everywhere?  How many partners? How many tiers? compuBase 2007 2

3. 3 An Enlarged Target Market 1970 198019902000 2010 Users Centralised Systems Client server Web Mobile 1 x10 x100 x1000 x10000 2020 One Server per entreprise, many computers One computer, many terminals Many Servers, Home computing Server Clustering, Mobiles Machine to Machine Server, communicating objects…

4. An Increasingly Wider Spectrum compuBase 2007 4

5. One, two, three tier Channel Model Tier1 Chain Key Player Distributor Retail purchase centre Tier2 Resellers Master Var’s ISV Value Added Distributors Tier3 Very small dealers SMB Consultant Non IT specialist compuBase 2007 5 Directly addressed by vendor’s channel sales team Animated by vendor’s marketing team but managed by distributors Influenced by advertising and demand, addressed by regional distributors or larger resellers

6. compuBase 2007 6 A complex distribution Mass market Mass Market IT Specialist Mass Market IT Specialist Home Digital Specialist Home Digital Specialist Integrators IT Telecoms Solutions Integrators IT Telecoms Solutions e-tailer @ e-tailer @ Direct Sales Direct Sales ICT Specialist For Enterprise ICT Specialist For Enterprise Distributor Retail Specialist Or Directly managed Distributor Retail Specialist Or Directly managed Distributor broadliner Regional Distributors Regional Distributors Master VARs - VAD Master VARs - VAD Solution Entreprise commodities Entreprise commodities Soho - Retail

7. compuBase 2007 7 Importance of Services to Resellers Total Revenue Margin contribution Margin contribution With a 12% margin on resale Source of Net Margin

8. compuBase 2007 8 Market impact B to B Resale activities as an additional service not a core business. More and more IT partners consider themselves to be IT experts who should rather integrate technology value (future ROI) within the business environment than focus on resale. Their TCS (Total Cost to Sell) as a key issue to monitor. Vendors' capacity to offer additional services as a Key Factor of Success in a commercial relationship. Number of ICT & CE partners will continue to grow To address the full market IT Distribution will address more and more channel of sales.

9. compuBase 2007 9 The largest worldwide Indirect Channel Landscape. > 350,000 ICT partners – 80 countries > 25,000 vendors (Manufacturers & Software Publishers) > 5,000 distributors ICT market: IT, Telecoms and CE products

10. For the largest market in value / partners compuBase 2007 10 Numbers about Europe vs. … 2007WWEuropeUSROW € Millions Value% % % All IT 1 vs. 2004 961,899 +14.6 % 339,836 +13.5 % 35.33%355,961 +14.8 % 37.0%266,102 +13.7% 27.67% Telecoms 1 vs. 2004 1,141,160 +11.2% 361,319 +7.2% 31.66%233,369 +8,4% 20.45%546,470 +15.3% 47.89% ICT 1 2,103,059701,15533.34%589,33028.02%812,57338.63 % # ICT Partners 2 870,000305,000180,000385,000 1 Source EITO - 2 Source compuBase / CRN US

11. compuBase 2007 11 History of ICT Indirect Distribution … 1. A vendor has a good new product, very expensive and targeting large accounts. 2. The product is a success, the vendor develops its sales team. 3. A new market is born, the vendor receives overseas requests for distribution. Overseas market specificities and size push them to use exclusive and non exclusive distributors. 4. The vendor develops its own channel with dedicated agents. 5. Overseas distributors lack the financial structure to market the product, they work with resellers. 6. Locally the vendor swaps from a strict direct model to a one-tier model, usually dedicated to the brand. 7. Competition gets stronger, new product lines are launched, the offer gets broader. Competitors try to speed up using indirect channel. 8. Export activities are stronger and stronger based on a successful one/two-tier model. Locally, competition on price is now heavy, the vendor reduces its direct sales activities and moves locally to the same distribution model as export. 9. The vendor and his competitors try to enlarge their market using new distributors to gain new markets.

12. compuBase 2007 12 Differences between US and Europe Indirect Markets Facts:  Most OEM Manufacturers located in US or Asia.  Most vendors have initially developed an indirect channel in Europe or EMEA before developing locally.  EMEA is an extremely fragmented market, 80 countries, 50 languages. Consequences:  ICT indirect distribution in EMEA is older than Asia or US.  Nowhere is the number of partners/number of inhabitants ratio higher than in EMEA.  Marketing & Distribution costs are higher in EMEA than in US.  Business Growth rates and market value are not homogeneous.

13. EMEA Channel Market Distributors

14. compuBase 2007 14 Distributors Broadliner… VAD… MasterVar… MasterReseller…. More than 5,000 Distributors EMEA !

15. compuBase 2007 15 Hardware vendors & Channel… 53% of vendors are using indirect Channel

16. compuBase 2007 16 Hardware vendors & Distributors  43% of all vendors are using distributors  80 % of vendors using a channel have also a distributor

17. compuBase 2007 17 Software Publishers & Channel… Only 21% of software vendors are using an indirect channel and only 4% a distributor….!

18. EMEA Channel Market IT & Telecoms Partner

19. compuBase 2007 19 Africa: 19,000 ICT partners Middle East 11,500 ICT partners Europe 305,000 ICT partners An ICT partner is a company generating a majority of its business in IT & Telecoms or more than 300 K€ / year

20. compuBase 2007 20 Northern Europe: 55,000 ICT partners Western Europe: 119,000 ICT partners Eastern Europe: 45,000 ICT partners Southern Europe: 78,000 ICT partners

21. compuBase 2007 21 Major Differences Between Distribution in the Big 5 and in the Rest of EMEA Big 5 :  Multiple strong broadliners  A few very big VAD (often bought by broadliners..)  Many specialist distributors  A three-tier distribution system  A lot of specialized IT partners Rest of Europe  One strong broadliner  A few specialist distributors  A two-tier distribution system  Many Vars (The « we can do it also » resellers… )

22. compuBase 2007 22 Major Differences Between Distribution in the Big 5 and in the Rest of EMEA Other EMEA large countries  One strong local broadliner  Few specialist distributors  A great number or master Var or Master Reseller  A two-tier distribution system  A lot of Vars Other EMEA small countries  Overseas distributors  Few strong Master Resellers or Master Vars who play the distributor role.  IT dealers not specialized

23. compuBase 2007 23 How Many ICT Partners? Europe Pure IT 150,000 The Top 5 countries represent 70% of IT market value Other EU 20% Other Western non EU 6% Eastern represents 4% 80% of locations are HQ IT + Telecoms + CE = 305,000 IT + Telecoms = 250,000

24. compuBase 2007 24 Where is the Growth? Top 3 Other Western Northern Europe Southern Europe Emerging markets IT Resale  IT Service  Software  Telecoms  Home Digital 

25. compuBase 2007 25 Business changes The companies declaring resale as a main activity, represents only 34% of the locations and are growing again thanks to CE products The companies declaring Services as main activity, represents more than 40% of the locations and are increasing, but specialisation is decreasing.

26. Changes are important Over the last 5 years 29379 ICT companies have disapeared - nearly 30 % of existing companies of 2002 compuBase 2007 26

27. Changes are important Hopefully, we have detected 32 245 new companies compuBase 2007 27 Software business suffers from concentration and the challenge to go to Indirect. Non Specialist IT Services still up. Resale to end user is growing fast thanks to CE products.

28. compuBase 2005 28 Germany  Concentration in process.  Business back on track  No centralised business but stronger importance to the western part.  A door to Eastern countries.  A door to Austria and Switzerland.  Strong mid size ecosystem.  Around 46 000 IT & Telecoms partner.  21 000 available at compuBase.

29. compuBase 2005 29 France l Concentration in process l Business centralised around Paris for HQ l Growing importance of the other regions especially western region. l A door to South Europe, Magheb and West Africa. l Around 35 000 IT & Telecoms partner. l 23 000 available at compuBase.

30. compuBase 2005 30 Italy  Largest granularity in business  Strong IT business in the north, very weak under Roma.  Very small companies and SMB oriented  Not concentrated  Isolated in Europe  At least 38 000 partners.  10 000 available at compuBase.

31. compuBase 2005 31 Spain  Strong granularity in business.  Two main poles of activity: Madrid and Barcelona.  Small companies.  Dynamic market open to abroad.  A door to South America and Morocco.  Many HQ for Portugal joined to Spanish HQ.  At least 27 000 partners.  8 000 available at compuBase.

32. compuBase 2005 32 BeNeLux  High density of companies.  2 languages  Small companies.  Dynamic market open to abroad.  Brussells getting stronger thanks to EEC.  Around 22 000 partners.  8 000 available at compuBase.

33. compuBase 2005 33 Austria and Switzerland Switzerland. 3 languages. Strong IT & Telco business. Small companies. Some European Financial HQ. More than 6 000 ICT companies. 2 100 available at compuBase. Austria A door to Eastern countries. Weaker than CH. Around 4 000 ICT companies. 2 000 available at compuBase.

34. compuBase 2005 34 Nordic Countries  Medium and Small companies.  Dynamic telecom market.  Around 25 000 partners.  12 000 available at compuBase.  A door to Russia and Eastern countries.

35. compuBase 2007 35 Africa & Middle East  30,000 ICT partners  Market driven by local Master Vars or Master Resellers  Northern and Western Africa markets addressed often by French distributors.  Southern and Central Africa markets addresed by UK or RSA distributors  Eastern Africa addressed by Middle East distributors.  Fast in Growth rate but small value Market. 7,000 11,500 5,000 3,000 2,000

36. compuBase 2007 36 Northern Africa…. Total # of partners: 7,000  A market driven by local distributors and French distributors.  Strong importance of governmental networking.  Business focused on the Mediterranean border.

37. compuBase 2007 37 Middle East Total # of partners: 11,500  A market driven by local distributors and UK distributors.  Strong importance of governmental and family networking.  Business focused on the Mediterranean border and Persian Gulf.  Address also Eastern Africa

38. compuBase 2007 38 Is the One/Two-tier Model Adapted to Emerging Countries? Yes  Vendors need local actors to understand the market and business usages.  A local distributor may address other areas in a country No  Distributors business organization is different in emerging markets compared to well established markets. Less point of sales in volume. More multiple activity businesses. Most local distributors are also resellers. Most local resellers declared able to be a distributor.

39. compuBase 2007 39 Conclusion  EMEA market is not a fully fragmented market, but a multiple area market covering 10 different regions.  Business management must be adapted to each region specificities.  Country size and economy have a very strong influence on IT & Telecoms distribution organization.  1 tier / 2 tier model is NOT a standard in emerging countries…  Language and colonial history usually define the natural business flow.  Addressing cultural and business issues requires local support.