Editorial: The big boys are coming

Editorial: The big boys are coming

Ironically, after all the speculation and rumour regarding the serious entry of the giant international distributors into the Australian market in 1998, in the end it only took the turning of a new year to begin the avalanche.

The big guns are coming and there's nothing anybody can do to stop them. Perhaps more poignant, however, is the fact that nobody seems to want to stop them.

Nationalism is all good and well, and sure it would be nice if all the hot-shot distributors were locally owned, but this is business and business is rarely patriotic.

And let's face it, who's left to protect? Our biggest distributors, Tech Pacific and Express Data, are both at least partly foreign owned. And it's hard to sympathise with many of the smaller guys when you hear they're desperately trying to hawk their company to the highest international bidder.

Like I said, business is rarely patriotic - on either side of the fence.

The buyers are certainly there. Rest assured, Ingram Micro is not the only one looking to establish a serious foothold here. One prominent distributor told ARN last week that any distributor that had not had discussions with foreign buyers was doing something very wrong.

These words don't come easy to me, because I'm fiercely passionate about the need for Australia to build a strong, competitive and profitable - and preferably locally owned - IT industry.

It's just that distribution is probably not the place to do it. Being a large broad-based distributor is all about economies of scale. You need size and money and lots of it.

Playing the distribution market

That's not to say Australian companies won't be able to play in distribution. If that old creed of get big, get niche or get out applies anywhere it's in the distribution market. The perfect example of an Australian company doing it right is LAN Systems, which has had phenomenal growth because it is providing something unique - value-added network distribution and services.

But back to my original comment regarding the fact that no one seems to want to impede the march of the big international distributors. Certainly, the resellers that ARN spoke to last week only saw more competition for their business which should mean better prices and services. Already Ingram have promised to bring programs and offerings here, which it claims will be unique to the local market. That will surely kick the likes of Tech Pac into action as they attempt to thwart the Ingram threat.

Perhaps there is one thing resellers should be concerned about, though, and that is over-consolidation.

While we are likely to see fierce competition for resellers' business while there are a good number of players battling for it, what if we end up with only a couple of overly-dominant distributors?

History has shown that in that case, competitiveness can slump dramatically. The last thing resellers need is a scenario like the telecommunications industry, where overly-large, slow-moving players dictate terms, or where companies like Microsoft and Cisco have too much power for their own good.

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