Gartner Group report reveals that wholesale distributors must reinvent their business to survive the impact of the Internet.

FT. LAUDERDALE, Fla.--(BUSINESS WIRE)--April 16, 1997--

MicroAge Acknowledged For Its Strategies

At its second annual Supply Chain Management conference today, Gartner Group (NASDAQ:GART) announced a new report that concludes that wholesale distributors must reinvent their businesses to survive.

While numerous market observers are predicting the demise of the distributor because of "the Internet effect," this report introduces the Gartner Group Business Model for Wholesaler Survival, which advises distributors on how to avoid being forced out of business as manufacturers gain direct access to customers via the Internet. The report also presents a case study of MicroAge, which has successfully used the model.

The study acknowledges that as the role of the Internet increases, the threat to distributor survival will become greater. "Although there has been much discussion about how the Internet will affect the supply chain," said Art Mesher, research director, Gartner Group, "this report goes a step further and provides actionable advice to distributors on survival strategies."

The key to survival will hinge on adopting new value propositions aimed at enhancing the flow and consumption of goods and information between manufacturers and customers. By 2002, 60 percent of wholesale distributors will earn a majority of their profits from post-sale services (e.g., information services, delivery, installation, warranty and training (0.7 probability)). "This will be a radical shift from today's buy low, sell high business model," added Mesher.

Three key elements of the Gartner Group Business Model for Wholesaler Survival are designed to:

-- Enhance the Flow of Physical Goods -- Many enterprises that

do not want to do their own on-site logistics and

manufacturing-related activities will look to outsource

these activities to distributors. For example, distributors

that offer assembly, consolidation and in-transit inventory

merging (e.g., merging a keyboard, a monitor and a CPU to

fulfill a specific order) will garner new customers.

-- Enhance the Flow of Information -- Distributors that provide

value-added information, such as inventory availability,

trading and delivery, and warranty terms to clients and

suppliers, will have a critical advantage. Moreover,

distributors that can improve forecast accuracy by facilitating

information flow between suppliers and customers will

become essential partners for enterprises that rely on this

aggregation to improve their internal processes.

-- Enhance the Rate of Consumption -- Surviving distributors

will realize that the sale of an item is the start of a

relationship, and they will focus major funds on post-sales

services. These distributors will redefine a customer's

concept of products by embedding logistics services around them.

Surviving food service distributors, for example, will expand

to provide ready-to-eat meals to grocery stores, while

surviving computer distributors will offer new-product

introductory training programs to improve sell-through.

MicroAge, a global technology services provider, reinvented itself by applying the concepts from the Gartner Group Business Model for Wholesaler Survival. "Our approach to the IT value chain redefined our role as a services provider coordinating procurement, logistics, integration, installation services for customers, and other PC lifecycle services," said MicroAge president Bob O'Malley.

The report also includes a Disintermediation Risk Assessment Scorecard to determine the degree of danger the distributor is in. The scorecard considers:

-- Can the product be digitized?

-- Is the product consumed by computer-literate buyers?

-- Is the product assembled from commodity components with a

non-asset-intensive conversion process?

-- Is the product of high value?

-- Can the product be shipped by airplane?

-- Is the product of low value, with no manufacturing content?

Gartner Group, Inc. is the world's leading provider of IT research, advisory and market research services. Founded in 1979 with headquarters in Stamford, Conn., Gartner Group serves nearly 7,500 client organizations worldwide. Additional information about the company is available on the World Wide Web at http://www.gartner.com .

CONTACT: Gartner Group

Jean Tom, 203/316-3272

[e-mail]

or

Edelman World Wide

Jennifer Castro, 212/704-8288

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