In a climate of intense competition it’s rare for companies to agree on anything. But many IT distributors are currently singing the same song, claiming June was the best month in their history.
Distributors have faced several major challenges in recent years including falling prices and market consolidation but the technology market is inherently cyclical — following the natural boom and bust wave of technology adoption and renewal.
Now, having endured a long spell of belt-tightening and cost-cutting, it seems a number of factors have combined to ensure financial year-end numbers make pleasant reading for many of the country’s leading distributors.
Aided by vendors moving into new markets, a strengthening economy and the time passed since Y2K, sales are significantly up.
“There was a whopping year four years ago spurred on by the need for Y2K compliance but we’ve just beaten it for growth,” CEO at Alstom IT, Laurie Sellars, said. “We’re 50 per cent up on Q1 2003.”
Express Data’s general manager of marketing, Peter Masters, agreed.
“Our figures have shown 80 per cent growth on June 2003 so it’s been spectacular for us,” he said.
“The old belief that June and July will be your biggest months still holds true.”
Hitech Distribution marketing manager, David Hein, was also delighted with his company’s end to the financial year.
“June was the biggest month in history and caps off a great time for us,” he said.
A recent trend for vendors to cut back on over-distribution has slowly restructured an industry that thrives on close, long-term partnerships with manufacturers and resellers alike. The channel is very different to how it was pre-Y2K.
“Over-distribution damages the market and many large vendors have consolidated their channel,” managing director of Westan, Victor Aghtan, said.
“We have restructured over the past 12 months to add CRM and a new sales structure to double our customer support area.”
Alstom’s Sellers said the face of his company had also changed over the years.
“The mix of our business is different — we’re seeing more concentration on software as the prices haven’t fallen so much and, with the need for support, the margins are better,” he said.
“There’s also more business from SMBs as the vendors begin to introduce ranges for lower-end products.
All we can do is make sure we get a slice of that pie.”
It’s not just the distributors that are changing — customers have evolved too, according to Avnet’s managing director, Colin McKenna.
“The end-users are now technologically savvy,” he said.
“They are pragmatic about upgrading. If there isn’t a clear ROI, they won’t go for it.”
For most purchasers of IT equipment, June often heralds a year-end rush to spend IT budgets before the next year’s is allocated. Could the record returns be just a result of some large customers quickly spending their dollars, or have we just witnessed a shift towards more permanent growth on the horizon?
“Interest rates are low, the dollar is strong, and as vendors compete and lower their prices our purchasing power is better than it’s ever been,” Sellers said.
“Economists are saying that the market is stronger than it’s been in 30 years.”
Altech sales director, Safa Joumaa, said hype had been building for some time but claimed people now wanted to get on top of the new technology.
“The hardware choices are increasing ... but in the end it’s about selling high quality products and maintaining good relationships — not dumping the price,” he said.
On the surface of it, the distributor community could easily be justified in crowing about a sea-change in the market. But although it was bolstered by the results, most of the major players have seen it all before and remain pragmatic.
“No-one’s saying it’s the end of all our troubles as some industry sectors are still marginal, but it’s a good sign,” Masters said.
“We’re not expecting a June-style success every month but this is about a shift back to long-term growth.”