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Editorial: A new world order?

Editorial: A new world order?

The old adage that no news is good news couldn’t be any further from the truth as a journalist but it is sometimes applicable if you turn it on its head — good news is generally considered less worthy than a decent tale of doom and gloom. But the exception proves the rule (there’s another proverb for you) and the lead story in this week’s ARN is a case in point.

At the height of the IT industry’s insanity phase everything was so easy. Vendors added as many distributors as possible in the hope that throwing enough darts would see some stick and wholesalers often took the same approach with their reseller partners.

But the greed of over-distribution saw prices plummet — an inherent problem in any industry where today’s latest and greatest products are next year’s relics — the dotcom crash wiped out a generation of bedroom millionaires and everything suddenly got significantly leaner and a whole lot meaner.

Speaking generally, the past four years have been tough times for the IT channel in Australia and further afield as customers demanded greater return on investment and asked increasingly awkward questions about total cost of ownership. At the other end of the chain, vendorland realised the days of putting products in boxes and watching them walk out of the door had quite rudely drawn to a close.

What was needed now was a new world order and, although it has already been about half a decade in the making, there are signs that the industry is moving in the right direction. The best evidence of a resurgence to date came with the bullish end of financial year results announced by many of the leading distributors last week. While one swallow doesn’t make a summer (there I go again), a bumper June is undoubtedly a step in the right direction.

The turnaround for some distributors has been little short of drastic but what have been the key drivers? Well, it would be foolish to ignore the movements of the Australian dollar against its American cousin during recent months. Having reached a seven-year high towards the end of February, breaking the unthinkable $US0.80 mark in the process, the little Aussie battler has since fallen gradually to an altogether more realistic mark. And its downward arc presents local IT distributors, together with the rest of the nation’s importers, with their most productive market conditions.

But perhaps a more significant factor, and certainly one that will last longer, has been the general trend among vendors to cut back on distribution partners in an attempt to put some meat on the bones for those that have been retained. It seems barely a week has gone past in recent months without a leading multinational vendor announcing it was reviewing its distribution arrangements or giving one or more partners the elbow.

While this was generally painful for those that were jilted, the trend has been important in the building of more structured relationships that can only prove positive for both sides. The proof of the pudding is in the eating (last one I promise), and September will be a better indication of whether a corner really has been turned. But the general mood of optimism that has been building this year seems justified to date. What do you think?

Brian Corrigan is Editor of ARN. Reach him at brian_corrigan@idg.com.au


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