Any old iron!
There’s no shortage of companies willing and able to sell you upgrades for your equipment. ICS Europe MD Karl Doran distinguishes ICS Europe’s model from the rest by its specialisation in end-of-life products: systems of a slightly older vintage than those that most distributors would concern themselves with. In some cases, these systems can be extremely old, especially in computing terms. For instance, there is still a happily functioning installed base of old VAX systems originally built by Digital Equipment Corporation, now part of the larger HP organisation.
“We are still supplying DEC parts,” says Doran. “There are still many major companies in Germany, for example car manufacturers, running their operations on VAX systems. The cost of maintaining them is much less than replacing them, so we keep them supplied with spare parts.” These parts include FRU such as disk drives, motherboards and other sub-assemblies that occasionally need to be replaced.
ICS Europe simplifies the job of finding and procuring spare parts, as opposed to component upgrades, for the local Irish channel.
“We sell spare parts up to field-replacement unit (FRU) level,” says ICS Europe managing director Karl Doran. “We are the only authorised HP/Compaq parts reseller in Ireland and we are also an independent parts distributor for most major manufacturers, including Dell, Lenovo, IBM, Fujitsu, Sun, Lexmark, Epson, Cisco, 3Com and Seagate.”
ICS Europe is now a fully Irish-owned company, having bought out the Irish section of the business, which comprised about 25% of the business, from its US-based parent ICS at the end of 2007.
ICS started off as a specialist distributor in the disk drive market, and that focus is maintained by the US company. It is still disk-drive maker Seagate’s largest partner in the US for excess drives and factory-refurbished products, according to Doran.
ICS positioned itself to act as a welcome complement to the activities of the large disk drive manufacturers and their channel partners. It sourced product in two ways: factory-refurbished products and excess inventory. In the first case, a defective disk drive that was returned by a customer as part of a warranty arrangement would be refurbished by Seagate and released back to ICS under a new warranty. In the latter case, ICS would take advantage of the fast-moving nature of the disk-drive product business by taking over end-of-life products from the big distributors.
Doran explains, “Product life cycles in the IT industry are short and getting shorter. The manufacturers and the big distributors want to concentrate on promoting and selling the newest products, so when a disk drive is superseded by a new model, the big distributors can return a percentage of unsold inventory to the manufacturer and gain a credit against their next purchase. The disk drive maker will then keep back a proportion of the drives for warranty replacement purposes but will sell on the excess to other companies, such as ICS.”
As an example of the volume of transactions that can be handled in this way, Doran says that ICS now buys so many drives from Seagate that it has a greater purchasing power in this space than Toshiba America, one of the largest suppliers of notebook disk drives.
ICS operates with a longer warranty arrangement than the frontline distributors. Typically, such companies will offer a one-year warranty, but ICS avails of warranties from the manufacturer for as much as five years. This reflects the slower pace of change of the market into which it sells its products.
Although it is now independently owned and operates completely separately from the company in the US, the Irish-based ICS Europe retains close links with its former parent.
“We have a franchise to supply Europe the parts they have in their inventory,” says Doran. “We can log on to their system, see all of their inventory and fulfil any requests from Europe for their products. We have half a million euro worth of spare parts in Dublin, but the US company has $30m worth of spare parts that we can ship into Ireland within two days.”
The independence gives ICS Europe the freedom to branch into areas beyond the disk drive business.
"Product life cycles are short and getting shorter. Manufacturers and distributors want to concentrate on promoting and selling the newest products"
The market. In fact, Doran says that drives now account for only about 30% of the company’s business. “The disk drive market has gone the same way as the memory market,” he says. “Drives are getting bigger and cheaper at the same time. Margins are very tight.”
Spare parts for printers now account for an increasing share of ICS Europe’s business, between 30 and 35% at the moment, according to Doran. It is a widely held truism of the industry that most of the money made by printer manufacturers comes not from the sale of the hardware itself but from the ongoing sales of consumables such as ink and toner cartridges. Doran insists that the two sectors are largely separate.
“We supply maintenance kits that allow customers to continue to use a printer rather than have to buy a new one,” he says. “We’re not in the consumables business. The only possible way we would be a competitor would be a fuser unit that we sell for some models. That’s made up of the fuser and some pick-up-and-feed components. As moving parts, they tend to need replacement after some time, so they are classified as spare parts rather than consumables.”
Doran says that the printer market is a natural fit for ICS Europe’s business because of the reluctance of customers to replace their printers at the same rate as their PCs. “The printer is often the last piece of hardware to be replaced,” he says. “Many people may replace their desktops or notebooks every three years but some printers typically stay on site for five years.” This is despite the fact that the cost of replacing an entire printer is similar to the cost of replacing a fuser unit.
Doran says that, typically, his company supplies such parts via maintenance services companies that would have contracts to service end users’ equipment. In that way, the replacement part would probably be made available to the end user as part of the overall “peace of mind” service that it has bought from the maintenance company.
The vast majority of ICS Europe’s business is supplied via channel partners, i.e., resellers and maintenance companies that deal directly with end users. The only exception to this is the HP parts business. Doran explains that, as the authorised parts reseller for HP in Ireland, his firm is obliged to take calls from end users inquiring about spare parts.
“But we price the parts so that the end user can buy them cheaper if they go through one of the big resellers,” he insists. “We are not trying to undercut the channel.” On the contrary, ICS Europe bases its business on helping the channel to source necessary products as accurately and efficiently as possible. It manages the inventory of older products so that it can fulfil requests for spare parts that end users make of their resellers and distributors.
“We also offer an outsourcing service for ‘hard-to-find’ spare parts, options, and upgrades,” says Doran. “We have a strategic vendor alliance programme that allows us to represent global product specialists. We upload all our stock and strategic vendors’ stock every morning to our website, www.icseurope.com, so that our customers can search hundreds of thousands of spare parts, options, and upgrade listings to see if they are available through ICS Europe.”
Thanks to this ability to source rare parts, ICS Europe continues to service a sizable market on the continent. About 35% of its business comes from Europe, with the rest coming from the domestic Irish market.
With the doom and gloom predicted for the Irish economy in general, the spare parts business also has the advantage of being largely recession-proof.
“Generally, the first thing to go in a recession is the IT budget,” says Doran. “So companies have to make do with their current installed base. They make sure they are covered by a ‘Break Fix’ service contract, so demand for parts goes up because the longer hardware is installed, the more likely it is to fail. We have a very stable business, and we do well in recessionary times.