eSys primed for $1bn in Europe
2006-04-11
Components expert eSys is pursuing a two-pronged distribution and PC assembly strategy designed to push it beyond the $1bn (€830m) turnover mark in Europe within the next two years. IT Europa has learned that the company plans to step up its presence in a number of CEE territories and is even contemplating a PC integration facility in western Europe to aid embattled assemblers. Although eSys boss Neeraj Chauhan plans to spend more of his time running eSys’ fast-growing US arm he will remain a key influence over the expansion along with former Middle East boss and newly-appointed EMEA director Pavan Gupta.
In the space of a few years, eSys has gained coverage in 12 European markets, assembled a 120-strong team and grown revenues to $600m (€500m) a year, all with ‘minimal investment costs’, according to Chauhan. He claims this is proof that the HDD disti’s model works in both developing and mature markets: ‘The next phase is about growing this business further so that by 2007 we are targeting $1bn (€830m) from Europe. The way the growth will come is by expanding our territorial footprint - basically all of eastern Europe, the Balkans, Baltics, northern Africa and the Middle East.’
eSys intends to launch representative offices in smaller countries and supplement these with fully-fledged stocking and sales subsidiaries in larger zones, such as Hungary and Ukraine. Although this will impact eSys’ cost base, Chauhan is adamant that any outlay will be offset by additional revenue.
He also claims that with Europe becoming ‘logistically integrated’ it is easier to ship between EU countries, allowing eSys to maximise its existing capabilities. Chauhan believes eSys’ plans will be backed by manufacturers who want a pan-European structure in regions where they rely heavily on local partners. ‘There is a paradox here,’ he says. ‘We are talking abo ut places where you need investment in support and infrastructure and yet these are the markets which large, organised players like Ingram or Tech Data normally shy away from.’
In addition to geographic expansion, eSys is aiming to pull in additional revenue by beefing up its product portfolio. It recently inked a storage agreement with Fujitsu and extended an existing deal with Samsung to additional countries. Talks with other major components-related vendors continue.
Meanwhile, in a move that will surprise many rivals, eSys could begin assembling PCs in western Europe. As reported in IT Europa 18 months ago, the firm opened a PC hub in Dubai for systems builders who lacked capacity to meet large orders or simply wanted to buy from a third party. With PC builders in Europe facing long product lifecycles and entry-level pricing pressure from A-brands, eSys believes the creation of a PC integration facility at one of its distribution hubs could ease the situation.
This is most likely to occur in somewhere like the Netherlands where eSys can exploit freight arrangements, and call on its superior buying power. ‘At any given point in time we have half a million drives in our inventory for mainstream SKUs so if we take 3,000 for our own production it doesn’t change anything,’ argues Chauhan.
It suggests such a facility would give local assemblers the visibility and capacity to be more competitive, particularly in the project business. Chauhan cites the example of a Turkish assembler who recently bought parts from eSys to fulfil a 50,000 unit order. ‘On an apples for apples comparison, we would have afforded them to be at least 10pc more competitive if we had a factory here,’ he insists, adding that eSys could reduce order delivery times by a third due to its stocking model. eSys speculates that 30pc of its sales may come from ‘something integrated’ in the future, up from a single -digit figure at the moment.
www.esysglobal.com
our analysis
With distributors seemingly scaling back their pan-European capabilities, eSys’ plans to move in the opposite direction will leave many rivals laughing loudly at such high aspirations. But didn’t they do the same thing when little-known eSys first broke into the European market four years ago?
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