Services keeps channel afloat

Services keeps channel afloat

-- Services are becoming the lifeblood of the channel as shrinking margins and the homogeneity of products continue to take their toll on hardware and software revenues.

A straw poll conducted by ARN has found Australian organisations support the findings of the Inform Channel Trends Australia 98 survey which indicates services will overtake hardware as the primary source of channel revenues during the next 12 months.

"I would absolutely agree with the findings," Scott Cameron, managing director of Softco Solutions, told ARN. " Services are an opportunity to value-add for your customers, but they also give you more control over your margins."

Already, services comprise 37.75 per cent of channel revenues, up 4.75 per cent from the same time last year. Conversely, hardware revenues have fallen 1.25 per cent to 39.75 per cent, while software revenues tumbled even more sharply, down 3.5 per cent to 22.5 per cent.

"Software took the biggest drop and I was surprised that it dropped so much," David Hancock, director of Inform Research, told ARN. "I should however point out that the figure does not include software development."

But the channel itself is not surprised that product revenues took such a hit.

"Services is where our specialists can add most value to our clients," Richard Baecher, general manager, services at GE Capital IT Solutions, said. "But services also provide a good annuity stream for our business while on the other side of the coin, product revenues and margins are affected as technology life cycles evolve."

Bruce Castleman, director of Abacus Consulting agrees.

"Certainly services are the focus for most of our clients," Castleman said. "There's not the variety in products that's existed in the past but more importantly, people are looking for solutions so hardware and software are not as significant as getting the whole project put in place."

During the next 12 months, Hancock expects services to grow to 41 per cent, with hardware and software dropping 1 or 2 per cent over the same period.

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