IT and Business Insights for SMB Solution Providers

Prospering in Hardware

Margins on hardware may be thin, but channel pros are finding new and effective ways to make money from it anyway. By Rich Freeman
Reader ROI: 
MARGINS ARE AS SLIM as ever in hardware, but channel pros are finding creative ways to profit from it anyway.
BUNDLING HARDWARE with software and services can produce rich “blended margins.”
BUILDING HARDWARE INTO industry-specific solutions can yield even greater profits.
DON’T THINK “PC” when you hear “hardware.” AV gear, digital signage displays, and IoT devices are opportunities too.

2021 IS AN ODD TIME to be complaining about the hardware market.

After all, a year ago at this time channel pros were still scrambling to meet pent-up demand for PCs among end users suddenly working from home due to the coronavirus pandemic, not to mention their study-from-home kids.

Contrary to at least some expectations, moreover, that torrid sales momentum hardly cooled in the quarters that followed. Sales of desktops, notebooks, and workstations climbed 13.1% in 2020, according to IDC, which recorded 91.6 million shipments worldwide in Q4 alone. Aberration? Global shipments in the normally weak post-holiday first quarter this year totaled nearly 84 million.

And there appears to be no end in sight. “We believe a fundamental shift has occurred around the PC, which will result in a more positive outlook for years to follow,” said IDC analyst Ryan Reith in a recent press release.

Don’t expect, David Vu, of Knoxville, Tenn.-based MESHD MSP, to get excited, however. Like many of his peers, he regards hardware as more of a burden than an opportunity. “Hardware is something that we will always kind of have to deal with in some respect, because you have to access the internet somehow,” says Vu, who traces that lack of enthusiasm to a phenomenon familiar to channel pros everywhere.

“There’s not much margin in hardware,” Vu says.

Erez Pikar

Or at least there isn’t, he and others agree, if you simply take and fill orders for new PCs and servers. IT providers who think smarter about how they sell and support hardware can make good money along the way. Indeed, according to Erez Pikar, CEO of Trox, a provider of education solutions headquartered in Phoenix, reports of hardware’s death as a business opportunity for the channel are greatly exaggerated.

“I’ve heard many conversations that said the same thing for the last 20-plus years I’ve been in this industry, and people are still make a living selling hardware,” he says.

Improve, Simplify, and Automate

Joining those people involves big changes, but getting small things right can be helpful too. Adding manufacturer service plans like Lenovo’s Premier Support or Dell’s ProSupport to hardware deals, for example, can increase margins for you while reducing device-related downtime for your clients.

Including warranties in every sale you make, renewing those warranties when their expiration dates approach, and offering extended warranties from third-party providers when renewal isn’t an option are further profit boosters. When one such provider, hardware and software asset management vendor ScalePad, began offering extended warranties on workstations last year it discovered that 64% of the devices then in its database were unprotected. Selling extended coverage just for that sliver of the world’s commercial PCs represented a $500 million channel sales opportunity, the company estimated.

Simply checking in on customers regularly about their hardware needs can uncover hidden revenue opportunities too. You’ll never know if companies are tiring of their current PCs midway through a refresh cycle, for example, if you don’t ask. “We try to do quarterly reviews and see where the client’s performance and expectations are,” Vu says.

About the Author

Rich Freeman's picture

Rich Freeman is ChannelPro's Executive Editor

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