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Insight Enterprises, Inc.
(480)
902-1001
1305
West Auto Drive
Tempe, AZ 85284
www.insight.com
Computer Retailers -
Category Directory
Software Retailers -
Category Directory
Sales
$2.9
billion
Business Description
Insight has grown to be a leading single-source provider of IT products and
services to businesses, government and educational institutions in the
United States, Canada, and the United Kingdom. In 2003, we began
transforming our business model and branding efforts to a “single-source”
value proposition which focuses on providing total product and service
solutions. This transformation is based on what we believe are customers’
business-driven needs, and is a shift from our earlier approach of strict
product fulfillment. Although we have service offerings that are more
advanced than most traditional direct marketers, this still represents a
very small percentage of our net sales and net earnings, and we are usually
referred to as a direct marketer in commentary on the industry.
We devoted substantial resources and attention in 2003 to implementing
changes to our IT systems in the portion of our business serving customers
in the United States. These system changes integrated acquired capabilities,
improved functionality, and we believe strengthen our ability to serve
business customers, and facilitate marketing of the full breadth of our
product and service capabilities across all customer segments. We believe we
are positioned in 2004 to fully deploy the single-source business model to
our target customers, particularly in the United States.
Our goal is to be the best source for IT products and services for business
and public sector entities by providing a broad, competitively-priced
product selection and customized services. We believe our single-source
business model will help our customers maximize return on their IT
investments and reduce their total cost of ownership throughout the full
technology lifecycle. We also believe that our single-source business model,
knowledgeable sales force, targeted marketing strategies, streamlined
distribution, advanced services capabilities and commitment to total
solutions will further differentiate us from our competitors.
We
provide the convenience of one-stop shopping by offering our customers a
comprehensive selection of more than 200,000 SKUs of brand name IT products
in North America, and more than 70,000 SKUs in the United Kingdom. We offer
products from more than 1,000 manufacturers including Hewlett-Packard
(“HP”), IBM, Microsoft, Toshiba, Cisco, 3COM, Lexmark and Sony. Our breadth
of product offerings combined with our efficient, high-volume and
cost-effective direct sales and marketing allows us to offer competitive
prices. We believe that offering multiple vendor choices enables us to
better serve customers’ needs by providing a variety of product solutions
based on customer preferences, or other criteria, such as real-time best
pricing and availability, or compatibility with existing technology. We have
developed “direct-ship” programs with many of our suppliers through the use
of electronic data interchange (“EDI”) and extensible markup language
(“XML”) links allowing us to expand our product offerings without further
increasing inventory, handling costs or inventory risk exposure. Convenience
and product options among multiple brands are key competitive advantages
against manufacturers’ direct selling programs, which are generally limited
to their own brands and may not be able to offer customers a complete or
best solution across all product categories.
The
largest product category continues to be computers, representing 33% of
product net sales in 2003 for Insight North America and 31% of product net
sales in 2003 for Insight UK. Growth in notebooks and PDAs in 2003 was
strong as businesses focused on increasing the mobility of their workforces.
The increase in desktop and server sales in 2003 is due primarily to refresh
cycles being initiated by businesses. Additionally, net sales of Microsoft
software products were strong in 2002 due primarily to the July 31, 2002
deadline for Microsoft’s upgrade programs. There was no similar catalyst for
software sales in 2003, and that contributed to a decline in software sales
from 2002 levels. All other product categories, as a percentage of product
net sales, were fairly consistent from the prior years, and we continue to
see increased demand for products that provide solutions to customers’
security and data retention needs.
We select our products based upon existing and proven technology and
anticipated customer needs. Our product managers and buyers evaluate the
effectiveness of new and existing products and select those products for
inclusion in our product offerings based upon market demand, product
features, quality, reliability, sales trend, price, margins and warranties.
Because our goal is to offer the latest in technology, we quickly replace
slower selling products with new products.
Most of the products we market are warranted by the manufacturer and it is
our policy to request that customers return their defective products
directly to the manufacturer for warranty service. On selected products, and
for selected customer service reasons, we accept returns directly from the
customer and then either credit the customer or ship a replacement product.
We generally offer a limited 15- to 30-day return policy for unopened
products and certain opened products, which is consistent with
manufacturers’ terms; however, some products may be subject to restocking
fees. Products returned opened are quickly processed and returned to the
manufacturer or supplier for repair, replacement or credit to us. We resell
all unopened products returned to us. Products that cannot be returned to
the manufacturer for warranty processing, but are in working condition, are
promptly sold to inventory liquidators, end users as “previously sold” or
“used” products or are sold through other channels, to reduce losses from
returned products.
During 2003, we purchased products from approximately 1,300 suppliers.
Approximately 42% (based on dollar volume) of these purchases was directly
from manufacturers, with the balance from distributors. Historically, we
have also purchased from and sold to other computer resellers in order to
offer our customers favorable pricing, to balance our inventory or to
minimize inventory risk. Purchases from Ingram Micro, Inc. (“Ingram”) and
Tech Data Corporation, which are distributors, and HP, a manufacturer,
accounted for approximately 21%, 15% and 16%, respectively, of Insight’s
aggregate purchases in 2003. No other supplier accounted for more than 10%
of purchases in 2003. Our top five suppliers as a group (Ingram; HP; Tech
Data; International Business Machines Corporation, [“IBM,” a manufacturer];
and Synnex Information Technologies, Inc. [“Synnex,” a distributor])
accounted for approximately 67% of Insight’s total product purchases during
2003. Although brand names and individual products are important to our
business, we believe that competitive sources of supply are available in
substantially all of our product categories and, therefore, we are not
dependent on any single supplier for sourcing product.
We obtain supplier reimbursements from certain product manufacturers. We
typically receive reimbursements from suppliers based upon the volume of
sales or purchases of the suppliers’ product. In other cases, such
reimbursements may be in the form of discounts, advertising allowances,
price protection or rebates. Manufacturers may also provide mailing lists,
contacts or leads to us. We believe that supplier reimbursements allow us to
increase our marketing reach and strengthen our relationships with leading
suppliers. These reimbursements are important to us, and any elimination or
substantial reduction would increase our costs of goods sold or marketing
expenses and decrease our earnings from operations. During 2003, sales of
products manufactured by HP and IBM accounted for approximately 33% and 13%,
respectively, of Insight’s net sales in 2003. No other manufacturer
accounted for more than 10% of Insight’s net sales in 2003. Sales of product
from our top five manufacturers as a group (HP, IBM, Microsoft, Cisco and
Toshiba) accounted for approximately 63% of Insight’s net sales during 2003.
We believe that the majority of IT purchases by our customers are made based
on the ability of our total product and service offering to meet their IT
needs more than on specific brands. However, consolidation among
manufacturers (e.g., the merger of HP and Compaq Computer Corporation in
2002) has increased our reliance on some manufacturers, particularly HP.
Advanced IT Services Offering
Although sales of services are currently a small percentage of our net sales
and gross profit, we believe our service offering differentiates us from our
competitors. We believe this service offering helps to establish strong,
deep-rooted relationships with customers as they look to us for more than
just product fulfillment and view us as partners in creating integrated
product and service solutions for their IT needs. As sales of services
increase, services will likely become a greater percentage of gross profit
because sales of services are generally at a higher gross margin than
product sales.
We provide our customers a wide variety of IT services which focus on the
following areas:
• Custom Configuration — We custom configure servers, desktops, laptops and
peripherals, including services such as:
• asset tagging;
• basic testing;
• hardware and software configuration; and
• software installation.
• Advanced Integration — Our ISO 9001: 2000 certified advanced integration
lab in the United States provides technical operations, resources and
expertise to manage and implement large-scale network rollouts, including:
• workstations, servers and connectivity equipment;
• individual user customization of file servers, switches, routers and
racks;
• pre-built networks, including IP addressing; and
• live network testing and turnkey deployment.
Our advanced integration service capabilities are more widely available to
customers in the United States than in Canada or the United Kingdom
• Enterprise Consulting — We evaluate, design, implement and manage business
technology projects for our customers. Our enterprise consulting
competencies include:
• infrastructure assessment and design;
• wireless LAN design and implementation;
• Citrix deployments;
• Microsoft implementation;
• IP voice and telephony solutions; and
• network security.
• National Repair Center — Our National Repair Center is dedicated to
maintaining our customers’ equipment and ensuring optimal performance levels
through a variety of services including:
• break fix services;
• hot swap/spare program;
• asset retrieval, refurbishment or redeployment; and
• end of lease processing.
• Resource Management — We offer highly skilled technical staff to augment
customers’ existing IT staffs in areas such as:
• desk side support;
• help desk support;
• installs, moves, adds and changes;
• LAN administration; and
• critical server restoration.
• Project Management — We provide customers with experienced project
managers who coordinate the planning, design, deployment, and support of our
customers’ IT projects or ongoing service programs.
• National Implementation Programs — Together with selected highly qualified
service partners, we provide comprehensive, customized implementation
services , including:
• national implementation and deployment projects;
• national service maintenance programs;
• wireless LAN implementations; and
• service vendor relationship management.
The vast majority of services provided by Insight North America are
delivered through extensive in-house capabilities, including services
performed in our ISO 9001:2000 certified advanced integration and custom
configuration labs. We believe this is a key differentiator from direct
competitors in the United States. Insight UK manages delivery of services by
contracting with highly-qualified service partners. In all cases, regardless
of delivery methods or geography, the customer’s dedicated account executive
remains the primary contact throughout the entire sales and service
implementation process and we offer to maintain the service level agreement
to assure consistent quality of service across the project. This commitment
to project management is central to our “single-source” value proposition
for delivering total product and service solutions, and we believe it will
enhance the development of strong, long-term relationships with customers.
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