With the credit crunch continuing to impact the volume of large projects on offer and hardware sales falling off a cliff, there are mixed views on how the end of the financial year will play out.
On the one hand, there could be a rush of discounted deals hitting the books as organisations look to offload their remaining budget – as often occurs at this time of year. On the other, they could take a wait and see approach.
Areas of opportunity
The Australian Retailer’s Association (ARA) executive director, Richard Evans, said retailers had found some end-of-year spending filtering down from SMBs, which was being helped by market positioning.
“Retailers are reducing prices, which is reducing margins but increasing volume sales,” Evans said. “There is an increased activity in retail, that started around February and has continued through.” It is hard to say if the Government’s recent decision to lift and extend small business tax breaks from 30 to 50 per cent for the rest of the year, had any additional impact in this spending however, Evans said.
HP personal systems group marketing director, Grant Cleary, said Government tax breaks had generated a good deal of activity for the vendor around end-of-year spend. He cited rising sales of notebooks sold with docking stations and peripherals.
HP was making significant investments into helping partners take advantage of the enhancements to the tax breaks with customer’s spend, running a training program and building a number of bundles tailored for the tax breaks, Cleary said.
Symantec partner director, David Dzienciol, also reported the budget incentives were becoming topical with SMB businesses.
While the security vendor is seeing spend across all segments, Government verticals are the ones spending the greatest, Dzienciol said. He cited storage as a key opportunity, and more widely suggested partners focus on technologies that provide cost reduction as a return on investment.
“We’re finding in the enterprise spaces that customers are using the end of the financial year looking to recontract, and looking for savings by locking in longer term contracts,” Dzienciol said. “We’re finding the best way to make sales at the moment is by helping customers make those recontracts, as well as realise a ROI, ideally within a six-month window.”
As a general rule, companies are being more frugal with spending, which was resulting in a trend towards solution convergence, Sophos managing director, Rob Forsyth, said.
“Organisations are also looking for solutions that require less administration, as they might have reduced levels of staff,” he added. “What we are finding in the current climate is that customers are re-evaluating incumbent suppliers of technology. Where there are savings available through other vendors, they are proving keen to make the jump.”
Lenovo small business and consumer director, Callum Eade, said the end-of-year ramp up was beginning to happen now, and SMB customers were the main area partners were finding end-of-year spend. “We’ve invested in the Government stimulus initiatives with demand generation activities and education for our partners. Cash card and bundling techniques are finding good traction with our SMB customers,” he said. ---p---
While market focus is one piece of the puzzle, channel players should also be looking to buddy up closer to their clients and suppliers as the end of the financial year draws near, according to two industry analysts.
“We can’t really say which one is winning at the moment. If you look at some of the service providers and some of the other players, some of their numbers are going up in the services space,” Ovum principal analyst IT services, Jens Butler, said. “However, things on the hardware side are actually dropping off a cliff – which would then mean from a channel perspective they are doing it hard. There might be a bit of a run when people might see a potential bargain come the end of the year. It is a difficult one to ascertain though.”
Butler advised channel partners to ensure they had the best possible relationship with key vendors, particularly in the hardware space.
“It will up tick but the question is: When will it up tick and how do you position yourself?” he said. IDC research manager for IT spending, Jean-Marc Annonier, said resellers should also be looking to get closer to clients.
“Quite frankly, my opinion is in terms of large projects there is no point in trying to run and get more business because there is still a credit crunch out there and businesses won’t be able to spend or borrow money. As usual, there are smaller deals and as it is the end of financial year there is some activity around,” he noted. “I think they should get closer to both to their suppliers and their clients to be able to find those small pockets of opportunity.”
For both analysts, having a closer relationship along the chain between suppliers and clients is a priority to enable a quick return on investment and delivery of solutions. They also advised to not just look at the next month, but, instead, set a plan in motion to capitalise on any eventual rebound in the economy.
“I would advise not to go into hibernation but to be more active while looking at your costs, of course,” Annonier said.
Director of third-party sales training organisation Salient Communications, Elliot Epstein, also warned partners against last-minute product discounting in June. Instead, he recommended smarter ways of getting customer orders, such as delaying services invoices into the new financial year.
“Rather than dropping a price from $100,000 to $85,000, you’re keeping those product margins up and retaining price, while giving customers an incentive to buy now,” he said.