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Front End I Electronic Components Supply Network Who will pay for technical support?


Many customers expect accurate and timely technical support for the electronic components that they specify and purchase. But customers continue to baulk at being asked to pay for it! However, according to Adam Fletcher, squeezed margins, rising costs and changes in the electronic components business model may force a change in the application support services that customers currently enjoy


T


he provision of technical support in the electronic components markets has always been the prerogative of


manufacturers and their authorised distributors via the provision of a wide range of technical data and access to qualified applications engineers. The cost of this technical support has ultimately been met by the customer as an invisible element, hidden in the purchase price of the goods.


Changes in the delivery of content to customers has been made possible by the use of the internet (and intra-net). Few would deny that the web is a great repository of information and increasingly, of communication. Surprisingly, to date


Martin Brown, Field Applications Manager, Anglia Components


“The quality of the response whether by


Tony Frere, Deputy Chairman, Solid State Supplies plc


“Whilst we have undoubtedly seen many of the broad-line distributors move technical support to their online systems at Solid State we firmly believe that customer’s technical issues are best resolved by an engineer in front of an engineer, consequently we continue to invest heavily in technical personnel and in face to face time. When you’ve got a complex FPGA issue you don’t want to be directed to the online FAQ section of some faceless website, you want an engineer to help solve the problem. Solid State provides that engineer, it’s a cost of doing business to a niche distributor but a cost with real value attached”.


adoption of a web-based model has actually increased costs for many manufacturers and authorised distributors, as they strive to manage their digital transition and the need to provide new and enhanced service models. Customers quite rightly demand the


8 March 2012


widest possible choice of suppliers and technologies for use in their new products. Manufacturers need to get their latest products into new customer designs to secure future sales revenues, at the same time maintaining the supply of established products, managing the decline in demand of older parts and ultimately proceeding to end-of-life (EOL). Manufacturer authorised distributors support multiple manufacturers to maximise the opportunity to win multiple component wins in new customer designs and thereby secure their own revenue stream. The technical complexity of electronic components varies wildly: Some products are simple to understand whilst others (ASSPs) can be extremely difficult to get to grips with and require extensive investment for both customer and supplier. Many authorised distributors have invested heavily in their internet sites to enable parametric searches of products. Some have extended their capability with the provision of enhanced value-adding features such as EDA tools and social networking. However, the manufacturer continues to provide a huge investment in extensive back-up services, providing the technical information and training necessary to enable their channel partners to support the widening customer base.


45% of the sales revenue, over 95% of the customers Today in the UK manufacturer authorised distributors enjoy 45% of the sales revenue but in exchange, have to support over 95% of the customer base. Only 5% of the largest international customers are


Components in Electronics


supported directly by the manufacturer, which suggests that the majority of the technical support is provided by manufacturers’ authorised distributors – mainly via Email, telephone, social media and during face-to-face conversations. The electronic components markets in


Western economies continue to be driven primarily by developments in semiconductor products, which are now entering a mature phase having evolved and developed rapidly over the past sixty years. Mature markets tend to be dominated by five primary suppliers who account for over 80% market share whilst many other smaller niche market players squabble over the remaining 20%. The big five suppliers continue to deliver significant innovation but are plagued by equally innovative competitors, leading to the increased commoditisation of products and competitive pressures that reduce both price and margins and possibly forcing a seed-change in the affordability of technical support to customers in the electronic components market.


IT market comparison Compare the electronic components market with what happens in the IT market and you’ll notice a number of very marked differences. The marketing and initial sales processes in the IT market are viewed as a common expense and are primarily carried by the supplier directly. Their applications support personnel and those of the value added resellers are called ‘Consultants’ and their time is either billed to the manufacturer as ‘a cost of sale’ or directly to the customer as a fee for


phone, email or chat-room depends on the expertise and experience of the FAE involved. As suppliers assign more and more European customers to distribution, they are recognising that they need to offer distribution FAEs the same level of training and investment as their own staff. Now, the best distribution FAEs understand the products in their portfolio at least as well as the vendor’s in-house team that they are increasingly being expected to replace and are trained to the same level on the same courses, often by the product developers. Although some distributors remain


reluctant to back their FAEs’ time (and cost) investment in intensive manufacturer training programmes, the best distributors are very clear in understanding and committing funding to this business need. It’s the old business dilemma of ‘is this a cost or is this an asset?’ which is all too often seen as the former, especially in times of belt-tightening. Anglia remains very firmly committed to the on-going technical training and development of its FAE teams.”


in cost. It seems inevitable that technical support will therefore have to evolve into a more transparent model, perhaps like the IT market model. I suspect that ‘first line support’ will continue to be provided free as part of the overall business service but those organisations that need more detailed and extensive technical support for new complex products may have to face paying for it either directly from the distributor or from a third-party authorised consultant.


ECSN | www.ecsn-uk.org Adam Fletcher is Chairman of Afdec/ECSN www.cieonline.co.uk


the support provided. Customers typically have to agree to Annual Support Contracts to access essential technical support or phone-in to a call-centre via a premium rate telephone number.


The next few years will see the technical support model in the electronic components market continue to increase


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