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OPINION: East meets west

OPINION: East meets west

It is really pleasing to be able to splash a $120 million networking deal across page one this week. The channel still plays a key role in the Western Australian education market and the state as a whole continues to be a bright spot in the Australian economy. This deal further emphasises that.

It would be nice to be able to talk of similar channel-friendly government deals on the east coast, but unfortunately they are few and far between.

Tourism revenues may be down in WA but the resources sector - dominant in the state's economy - is holding firm at the moment while international tension is pushing up the gold price. A buoyant gold index has the potential to breathe fresh life into the vast goldfields of the state's south-east.

Unfortunately, the good news last week out of the West of course is balanced somewhat by the alarming developments at Tech Pacific and the failure of Warranty Works. When Australia's largest distributor axes four of its senior management team and 21 others in a balancing act to trim costs, it is a clear sign that the channel is floundering in a reduced revenue pool. Obviously, that results from customers keeping their wallets shut.

It used to be said that to survive in this business you needed to either get big, get niche or get out. It now appears that it is not even good enough to be just "big" or just "niche" these days. It is a whole new ball game out there with a whole new set of rules. In the current environment, I would suggest it is much more a case of get efficient, get accountable or get out.

Today more than ever the critical issues are adding value and customer relationships but what has changed is that you have to be ruthlessly efficient to keep costs under control and infinitely accountable to know exactly what state your business is in.

Gone are the days when fat margins and bullish demand allowed for any number of excesses and free value adds. A channel company these days needs to run on the smell of an oily rag and know in real time down to the very last cent where the money is coming from and going to.

Yes, that is Business 101, but it is also something that has been very absent in channel entities from the industry's very beginning. Most resellers were (and in many cases still are) technical experts first and business people fourth or fifth. This just doesn't cut the mustard anymore.

I don't think Tech Pacific's continuing woes can necessarily be read as being the fruits of bad business practice. It is more a case of "the bigger you are, the harder you fall". In the wake of sustained enormous growth and success over the last five years, Tech Pacific became a large, unwieldy organisation that became too top heavy when the revenues slowed up.

It is merely good business to adjust overheads in line with revenues. But it is very sad when good people with significant talent and experience are told they are no longer needed by companies they have in some cases devoted many years of their life too.

You only have to look at the huge layoffs taking place not only in the Australian channel but also across most industries and many regions around the globe to understand that this was probably imminent and unavoidable.

What the channel and the economy as a whole really needs now is government expenditure to stimulate some activity. A few more deals such as the one now being implemented in Western Australia, would go a long way towards kick-starting the channel and the whole economy.

Gerard Norsa is editor of Australian Reseller News. Contact him at gerard_norsa@idg.com.auAs printed in Australian Reseller News, October 3, 2001.


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