History repeats for network resellers

History repeats for network resellers

A continuing tightening of margins for network resellers will see many abandon the business in 1997 unless they can add more value to what are becoming commodity items for the average network.

"Anyone that can remember the PC business of 10 years ago will know what the networking business is going through now," says Datacraft Australia's Dolores Diez-Simson.

Recently appointed the company's business communications manager, Diez-Simson has extensive experience in networking - with UB Networks - and the Unix market with Sun Microsystems.

"There's been a big increase in network resellers but many of them are not adding any further value to the equipment they resell," she says. Datacraft is repositioning itself as a solutions integrator specialising in networking - with particular emphasis on larger networks.

Echoing the thoughts of Diez-Simson, Ian Fewtrell, general manager of Anite Networks Australia, agrees that the network market is changing. "It's more driven by commodity items just like the PC market of a few years ago."

Formerly Cray Communications, Anite's business consists of consultancy and technology services and network support. "We've looked hard at our business to see what further value we can provide," said Fewtrell.

"It's clear that network technology is no longer seen as a black art, but it still requires a lot of expertise to get it right."

One area being developed by Anite is network support services, where its own technical people are working on-site for clients.

"We see this as becoming big business as many companies look at outsourcing part of their IT operations," said Fewtrell.

"We don't believe companies will want to outsource all their IT operations - that would be like giving away the crown jewels. But one area that can be easily outsourced is network support."

For one major customer, Anite has a technical support person at each one of 18 locations - each with several sub-contractors - all supporting the client company's networking operations.

"Having the right expertise is the key to being able to offer this sort of service," said Fewtrell.

Datacraft's Diez-Simson agrees. "If you look at the companies we represent, some of them compete with each other. It's up to us with our expertise to integrate the components required to give the client the best network solution," she said. Datacraft is tipped to announce good results for its networking business in the near future.

Kit Craig, general manager of Future Technologies, says the trend towards the network market becoming commodity-driven has been there for some time. "Certainly, smaller resellers will have to partner but we see medium-sized resellers will grow based on their greater skills."

Fuelling this growth in the medium and large resellers will be an acceleration of the move to electronic commerce this year. "Electronic commerce will be a real hot button but only the larger resellers will have the necessary skills to take advantage of this," said Craig.

But not everyone agrees margins will continue to get tighter as the market becomes more commodity-oriented. Colin Kempter, general manager for international sales and marketing at Scitec, agrees there is pressure now on margins. "But new technology is coming that will give resellers more room with margins.

"The market is looking good from our perspective," he said. "We're making profits."

Kempter says the changes in the market would also see network resellers and integrators specialise in some aspects of the total business. "Our expertise is in wide area networking and voice/data networking," he said. Scitec recently signed a major deal with Arnott's Biscuits, which involves the installation of a frame relay network for voice and data.

At the supplier's end of the market, Digital's network marketing manager, John Koole, agreed with the prevailing view that margins are the biggest challenge facing network resellers.

"Customers are focused on price and product delivery," he said. "The differentiating factor for many resellers will be the level of service they offer - from the way they answer the phone to delivering accurate RFPs.

"End-users don't have time to waste - they won't put up with bad service but could pay a premium for good service. It's up to the reseller," Koole said.

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