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Y2K worries threaten network sales

Y2K worries threaten network sales

The channel's troubled enterprise data networking hardware market faces the cold reality of slim pickings for the remainder of this year as some resellers report the once-buoyant niche is facing tough times.

Channel players cite Y2K projects as the most common inhibitor to networking market growth with at least one networking vendor also admitting sales are slow at the top end of the enterprise business.

The source, who asked not to be named, said the com- pany is working its way through a pre-Y2K quiet period and commented that few enterprise customers such as banks and universities have networking-related tenders on offer.

Nick Verykios, chief marketing officer at networking distributor LAN Systems, agrees, stating "brown outs" will most likely occur in the enterprise networking market.

As a result, he says networking-focused resellers or integrators are looking to the booming SMB market to achieve growth because it appears to remain unaffected by a pre-Y2K spending freeze.

Verykios argues networking resellers in this segment should have seen a slowdown in Y2K spending over a year ago and concentrated on offering services to customers earlier to avoid potential profit shortfalls.

"If you think you will just survive Y2K, what the hell are you going to do when the next problem comes around?" he asked. "It's not Y2K that's going to kill [a reseller's] business, it's their thinking."

Steve Dixon, managing director of enterprise network management provider Full Spectrum, agrees, stating his company has noticed some customers delay purchasing decisions in his segment of the market.

"When we talk to large companies about enterprise management, they say come back and see us in the new year," he said.

However, Full Spectrum is still growing at a healthy pace and looking for another six engineers, buoyed by a number of enterprise system projects which include Y2K work.

Logical Pacific's CEO, Lyle Potgieter, said some companies have predicted a downturn, while others have predicted increasing data networking hardware sales in the final lead-up to the new year.

"It looks as though the real top end of town is slowing down purchasing towards Y2K, medium-sized businesses are still completing projects and the small business market is reactive," he said.

Potgieter said Logical's financial forecast for the last quarter of this year and first quarter of next year remains strong.

Ian Ramsay, managing director of distributor Avnet/Hall-Mark Australia/ New Zealand, said he is not of the opinion that Y2K is affecting data networking hardware sales in the final months leading up to the millennium. "Our sales are getting stronger month by month," Ramsay said.

However, he concedes there is a huge backlog of IT projects looming. "Of course people are putting off doing anything exciting at the moment. They're deferring a lot of that activity until they see what happens.

"Certainly by February you'll see some major new IT initiatives and projects going out for tender and being pursued."

Ramsay argues data networking resellers and systems integrators are currently capitalising on market demand for e-commerce projects.

Examples Ramsay cites are demand for production-level storage systems and storage area networks, which "are being driven by e-commerce activities because massive amounts of data are being stored and now it's both cost-effective to store and manage it", he said.

NetStar manager of business development/strategic marketing, Mitch Radomir, agrees that Y2K will affect data networking hardware sales, but only in segments, and that the effect will be short-lived.

Radomir believes growth will continue for the remainder of the year as companies discover last-minute needs for hardware to upgrade infrastructure supporting the likes of e-commerce systems and Internet-enabled call centres.

"Companies will spend on developing systems to be GST-enabled. They realise they still need money for new things which tend to be network-centric," he said.

Com Tech Communications director of technical marketing, Darron Lonstein, said that Com Tech has not witnessed a slowdown in data networking projects. "We feel, from a data networking perspective, there are still business drivers and requirements and those are going to continue," he said.

Lonstein argues that because the company has not seen any particular slowdown, he was not expecting any particular boom.

"I guess from Com Tech's perspective, we expect to see the number of projects really continuing as normal. We have seen a growth and we are continuing to see a growth. This is happening because of a number of factors," he said, citing e-commerce initiatives as one example.

"Everybody had concerns about Y2K, but the reality is that business continues and we haven't seen a slowdown and don't expect it to have a major impact next year either."

Analysts Inform's director, David Hancock, commented: "The general message is that sales for network hardware and software is very high right now even though most resellers were expecting spending to be wound down by corporates in preparation for Y2K. Some resellers are even receiving large orders from corporations who have had a spending freeze in place for the Y2K issue.

"There are no indications that this trend will alter in the first quarter of 2000."


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