South African channel looks on the bright side

South African channel looks on the bright side

South African channel companies are looking ahead to increased growth and new opportunities, despite the challenges of selling IT equipment in a harsh financial and social environment.

A report by IDC South Africa's IT research arm, BMI TechKnowledge Group, has revealed that 82.3 per cent of over 200 qualified IT channel respondents believe their revenues will increase during 2000.

In addition, the global trend towards the direct sales model does not represent such a threat to the local players, but presents an opportunity for companies to redefine their business models, the report states.

Author of the report, IDC analyst Lauren Sprong, states the words "direct" and "indirect" are passe.

"It's a customer-driven model when the industry is moving toward value-added solutions and fulfillment is a small piece of the puzzle," she said.

However, Sprong argues that, like many countries in the world, SA companies unable to migrate their businesses away from simple delivery to services-centric models or applications will not survive.

"IDC would argue that these resellers have already begun to change their businesses or are gone," she said.

IDC figures from 1998 report South Africa's IT market was worth $R24.9 billion in 1998, with that figure rising to $R28.6 billion in 1999. It predicts the market will be worth around $R33.4 billion in 2000.

Peter Dixon, director of network integration house PQ Networks - a division of Comparex subsidiary PQ Africa - said the channel is continuing to shift away from its distribution roots to become more service and solution driven.

"Everyone has moved up the distribution food chain," he said.

PQ Networks partners with three main networking vendors; Cisco, Nortel Networks and Newbridge.

Despite US trends, Cisco and other leading vendors in South Africa are unlikely to go direct to the user. "We still haven't seen the manufacturers go direct, except in the service provider market," he said.

Dixon believes the channel will continue to adapt to the changing global market. "South Africans became very innovative through the whole embargo days," he said.

Cisco's Southern Africa channel sales manager, Steve Midgley, also reflects the optimisim in the channel.

According to Midgley, Cisco South Africa achieved 80 per cent growth last year, with revenues for the year to July 2000 expected to come in at around $US130 million.

That's good news, he claims, given that Cisco conducts almost 100 per cent of its business through the channel. The only exception is its lucrative account with the monopoly carrier, Telkom, which Midgley reports is too important to allow the channel to handle alone.

With healthy interest rates and a good balance of payments, he believes the economy is slowly taking shape. "We've probably got a boom on its way and people have got to invest in that," he said.

Cisco South Africa uses a two-tier channel model. It has two distributors, Siltek Distribution Dynamics and Westcon, with support from around 600 resellers.

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