State of play: Concern colours slow start

State of play: Concern colours slow start

But it’s not all doom and gloom despite some experts predicting the “death of the traditional reseller”

It isn’t easy out there. Over the past quarter, some resellers have hit the wall and consolidation is rife at all levels of the channel, according to key industry players who also expect to see more big deals like the Dicker Data takeover of Express Data and a further squeezing of margins, the latter contributing to some poor results for some tier-one resellers.

But it’s not all doom and gloom despite some experts predicting the “death of the traditional reseller”. Business confidence is picking up after an election year, while Cloud, analytics, security, storage, mobility and converged infrastructure in the datacentre are all driving the market to a solid result in March after a modest start to 2014.

But with players like Atlassian packing up and heading for the greener pastures of the UK, many in the channel are still lamenting a lack of government incentives to drive investment in the sector. Channel leaders also are urging the government to get on with the construction of the NBN.

Distribution Central managing director, Nick Verykios, said he was surprised to see so many businesses hitting the wall, despite them being in the right parts of the market. But he was optimistic about the outlook for the next quarter.

“Everyone’s predicting that the ‘traditional’ reseller is dead or dying but I don’t see any of them going bust right now,” he said. “If you are getting at least modest revenue growth and better profit growth then you are in line with the healthier part of the market right now.”

He said the consensus for the channel was that a lot of resellers were calling it a very soft January-February. Much of the slowdown in billed revenue is being attributed to the unseasonably massive October-December quarter.

“The big winners for us have been contemporary threat management solutions, all technologies related to accelerating and optimising applications and data access and movement, solutions stacks based on multi-vendor storage-based reference architectures, video, mobility data analytics,” he said.

“Cloud is still threatening to be significant but the reality is it hasn’t been overwhelming yet.” Verykios predicted the key profit sectors in the next six months would be: Machine and human generated data analysis and security; Application acceleration, availability and security; Data analytics and “storage, storage and storage”; Contemporary threat management solutions; Application/data performance/optimisation; Mobile workforce integration.

Cull marketing speak But he urged the industry to cull the tidal wave of oversimplified marketing speak. “The political, social and economic environment in Australia has been quite stable and sober,” he said. “However, businesses are struggling with what to believe in when it comes to how to solve their contemporary business problems and there is confusion with all the buzz words and crap being thrown around.

“The industry is hurting the industry, not the economy. The economy is strong. Very strong. The industry needs to learn to shut up and talk to their customers in a sensible way again, not paraphrase ridiculous nomenclatures that don’t even make grammatical sense, that make the deliverer sound stupid, and the customer feel stupid. It’s a nonsense.”

WhiteGold Solutions commercial director, Leigh Howard, said resellers needed to be prepared to be innovative if they want to thrive in a “flat” market. “Some resellers have gone into receivership and some have reported the poorest results they ever had,” he said. “Looking at that you would think it’s all doom and gloom, but resellers are beginning to figure it out.

“Gen-Y is becoming the future decision makers and it’s those new fresh resellers that are prepared to work with challenger brands that will succeed. The losers are any resellers that continue to sell the same stuff from legacy tier-one vendors which no longer offer as much value or technology leadership as they once did.”

The winners are …

In the winners' margin, Howard notes the usual suspects: “Big Data, mobility, and storage are not going away but people need to find better ways of managing storage and better ways of analysing Big Data. “All the early players in MDM are struggling big-time and they missed the big opportunity of merging apps. Hot for us is converged infrastructure in the datacentre.”

Howard said consolidation would permeate the industry in the coming months and joined the chorus of tech leaders calling for acceleration of the NBN, while keeping a watchful eye on a return of the tech bubble after some very big valuations.

“We will see more consolidation at every level,” he said. “More vendors buying vendors, more distributors buying distributors and more resellers buying resellers or going out of business,” he said. “And the NBN continues to be a bit of schmozzle.”

Anittel managing director, Peter Kazacos, said it was interesting to see telcos posting generally strong results, while hardware and software providers had not fared as well.

“The other interesting thing to see was in the datacentre space,” he said. “It was surprising not that profits hadn’t increased but that the increase in revenue was quite small. We may get into a position of oversupply in the datacentre co-locations space.”

Kazacos was pleased to see Telstra chief executive, David Thodey, indicate that he would look to make the company a worldwide player.

“It’s important to have Telstra match it with some of our American counterparts. It’s a sound move.” In the ever-growing area of Cloud, Kazacos does not see a direct leader. “With Cloud, it’s not a situation of if, but when, and how do we store it?,” he said. “You can also host apps in the Cloud and telephony as well, and Voice over Internet Protocol [VoIP] will take off. The key is in providing a full service rather than just a commodity. I like the fact that Cloud providers from overseas won’t get too much of our market space unless they can provide the integration.”

Kazacos pointed to the loss of software developer Atlassian to the UK and the NBN construction slowdown as examples of lost opportunity for Australia.

“In reality if all that money heaped into manufacturing was put into the technology space we would not have a problem,” he said. “But I can’t see that on either the Liberal party or the Labor party agendas.” Channel Dynamics director, Cam Wayland, said resellers needed to scrap the jargon and look for a return-on-investment.

“It is not sexy stuff, but having a conversation with your client will flesh out where the weaknesses [security] are and customer satisfaction is what it’s really all about. Technology is an enabler of business outcomes, so how can they use technology to get better business outcomes for their clients.”

Brennan IT managing director, Dave Stevens, said the year had begun slowly, but March was looking like a “cracker”. “We had a record Q2, which was a great result,” he said. “The first half of Q3 is always tough, March to June for us is always massive and we’re looking for more record revenue and sales months”.

Stevens said products which allow clients to rationalise costs through efficient use of capital or productivity gains would be hot over the next six months as the market remained conservative. “The big shocks that have been factored in to the market haven’t materialised and if the ASX is anything to go by we are seeing new all-time highs in the market,” he said.

Driving sales

Intel A/NZ channel manager, V.R. Rajkumar, said the 2014 calendar year would be a strong year overall for the channel, with the Next Unit of Computing [a small form factor PC], Galileo and SSD storage playing a key role in driving sales for channel partners.

“Intel is broadening its SSD offering and the channel has key role in addressing this space,” he said. “I am also seeing a growth in the Next Unit of Computing and, similarly, we are seeing significant growth of tablet take up in the channel. With our channel access program and Android-based original device manufacturer [ODM], this gives a great opportunity for channel to play a bigger role.”

Infoready managing director, Tristan Sternson, said the start of the year had been mediocre, but his company had exceeded expections due to 2013 projects spilling over into the new year.

He said analytics and marketing would cross over to drive demand from businesses who want to use their data. However, he described the economic outlook as uncertain and bemoaned further job cuts and movement of companies off shore.”

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Tags Cloudcloud computingNBNTelstraintelstorageanalyticsTelecommunicationsBrennan ITdistribution centralwhitegold solutionsChannel DynamicsatlassianAnittelInfoReadycontemporary threat management solutionsconverged infrastructure in the datacentre

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