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EDITORIAL: Sing, zing and ring

EDITORIAL: Sing, zing and ring

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We have seen a lot of channel consolidation of late in the stark reality of today's economic environment. Just about every week this year has brought tidings of some enterprise somewhere in the IT supply chain engaging in some good old-fashioned rationalising, downsizing and restructuring.

Sing, zing and ring. There's a sustainable pun there somewhere but we'll leave that for another day.

One of the definitions proffered by the latest Macquarie dictionary for the word "consolidate" reads: "to strengthen by rearranging the position of ground combat troops after a successful attack". Another says: "to become solid or firm".

ARN pages have been littered this year with tales of consolidation, and there has been no indication the flow of retrenchments, acquisitions and liquidations is going to ebb in the near future.

True to the military derivative of the word, as defined above, many of those at the centre of recent consolidations mounted successful attacks in the latter part of the last century. As a result, they now have substantial empires to protect and need to dig in for the winter. Now is the time to consolidate.

It is therefore important for resellers to remember that alliances forged and nurtured during the good times should not be rattled by the odd staff cutback or name change.

Certainly amongst distributors, you'd be hard pressed finding a mainstream player with tier-one vendor partners that hasn't had to consolidate its operations in the last six months. The same applies for the once-ballistic hardware vendors who are veterans of recent conquests. They are also discovering that glory is short-lived when you run out of easy prey to conquer.

Unfortunately some of those terrific value-adds which bore no cost to channel partners, and therefore introduced no revenue stream to suppliers, are already falling by the wayside. Similarly, many of the generous credit terms on offer only 12 months ago have been reeled in faster than a jagged mullet.

Yet there is no logic in abandoning partners simply because of the tightening of trading terms, or less access to support troops on the ground. It is all part of the consolidation process designed to help make the whole scenario for these suppliers "become solid or firm".

I'm not for a minute suggesting channels should put up with shoddy suppliers or bad service. The beauty of a free market is that buyers have the choice to take business wherever they see fit. What I am suggesting is that the whole environment is changing, and that means there are going to be changes to the processes and methodologies with which you deal with suppliers and customers.

You could say the industry is in mid-flight executing a quantum leap. News of a supplier's staff rationalisation should not be viewed as the beginning of the end and therefore time to go looking for a suitable replacement. It is symbolic of a shift in market dynamics and a signal to reassess the ways in which you conduct your own business.

One of the fundamental rules of business implores that costs should never outweigh revenues, so you would have to question the sanity of any company sitting on expensive staff overheads while they wait for the buyers to return.

With revenue growth slowing, putting the brakes on overheads is good business practice and, when it comes to bean-counting, unfortunately staff and marketing programs are the first to feel the cost-control razor.

Gerard Norsa is editor of Australian Reseller News.

Reach him at gerard_norsa@idg.com.au


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