Editorial: Channel Consolidation

Editorial: Channel Consolidation

Weighing up the old and the new

The changing face of the channel was a key theme running through the July 8th edition of ARN.

Following news of one of the biggest consolidation stories to hit the integration and reseller space this year, ComputerCorp, S Central and Synergy Plus announced plans to rebrand under the Synergy Plus masthead and appoint S Central founder and BRW 2008 Young Rich list notable, Peter Mavridis, at the helm.

For many integrators, the ComputerCorp/S Central/ Synergy Plus deal will be just one of many we’ll see in the next 12 months. While this particular example of consolidation wasn’t solely driven by the economic downturn, there’s no doubt tougher market conditions are accelerating or triggering merger discussions.

For some organisations that aren’t run as well as others, or who are reliant on reactive sales rather than proactive annuity revenue, the downturn has created horrendous cash flow issues and tighter credit and insurance conditions. As a result, merging with or selling to a stronger player is one way to ensure the business and staff get a future. For the less fortunate, shutting up shop is more of a reality.

The tie-up between ComputerCorp, S Central and Synergy Plus certainly does shrink the number of players competing in this sector. But we’ll see more consolidation in the reseller space before the year is out. Arguably, the second largest channel announcement in this edition was the decision by Westan founder, Victor Aghtan, to retire from the IT distribution market and sell his business to ASX-listed player, Wintech.

Wintech, which acquired Magnafi eld Technology Distribution (MTD, or Multie Technology Distribution for those who remember it in its listed days), has picked up Westan to acquire a larger footprint in the IT distribution space.

Given the example we’ve just been set by Cellnet, I’m not convinced Wintech has much hope of growing Westan’s position in the market. The IT hardware commodity market is one of the hardest hit by the economic downturn, with PC, server and storage sales all dropping significantly in the first quarter of the calendar year.

Westan’s product line-up, which stretches from the traditional whitebox space into the CE market, is heavily reliant on hardware from Samsung and Western Digital. At the same time, the business, although surprisingly steady over the past three years in terms of revenue, has been slowly but surely downsizing its operations and product line-up.

The other problem is that unlike Aghtan, who is a longstanding member of the channel community and who has built up a reputation over 20 years, Wintech is a relative newcomer to the IT distribution market. According to its director, HK Tang, Wintech was a shell company formerly held by a telecommunications business, which was “reincarnated” following its acquisition of MTD.

Building relationships and loyalty is the key to being successful in the IT industry. I reckon Wintech is going to have its hands full keeping those vendors on-board and resellers convinced of its value proposition.

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Tags consolidations centralcomputercorpsynergy plusWintech

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