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Where to now?

Where to now?

"Hopefully things will get back to normal," said Logan Ringland, senior analyst at research group International Data Corp (IDC) when asked what changes the new year will bring to the channel. "The cyclical nature will return to business and we should know more or less what to expect each month as we see more seasonality in sales patterns."

While the IT boom is not expected to slow any time soon, analysts such as Ringland are forecasting an overall slowdown in growth. Most believe the spectacular figures seen in recent years will not continue. The theme is more one of consolidation, as the Australian IT market matures.

However, the Australian dollar's recent performance, rising unemployment and a general nationwide economic slowdown do not bode well for the channel. A Federal Election is also sitting on the horizon, threatening those in the channel with the insecurity of not knowing which way to hedge their bets.

Nonetheless, for those who survived 2000, 2001 will be interesting, as new and exciting opportunities arise from the quakes which shook the channel this year.

Show us the gizmos

Analysts across the board are predicting that wireless and handheld products are going to be the most prominent offerings of 2001. Vendors are jumping on the bandwagon, taking the thinner, faster, lighter to whole new levels of creativity. According to Toshiba, we are not all that far away from a mobile computing offering that can be rolled up and carried in a coat pocket.

Overall, pocket-size solutions will force the convergence of different technologies as vendors come up with different ways to overcome the problems with efficient data entry and retrieval.

According to many industry players, 2001 may also see a resurgence of the games market, courtesy of Sony PlayStation 2, which is definitely creating a spike in software sales.

However, many of the exciting IT innovations to come next year are already here, but lack the bandwidth to get off the ground. With digital TV tipped to provide a major competitor to online offerings, Internet interests are lining up to determine how to combat the incursion on the information-on-demand space.

Increased bandwidth will provide a significant boost to technologies such as videoconferencing and online games, as well as B2B and ASP offerings.

As a result, 2001 looks like the year of the bandwidth boom, with ADSL and cable becoming increasingly the norm in business and residential developments.

David Henderson, director of categories for Australia's largest IT distributor Tech Pacific, is tipping networking to expand, driven by telcos and the uptake of wireless.

Regional and rural centres will increasingly be brought into the loop with high-level enterprise becoming involved with local companies. More widely recognised as a stop off on the way to the snow, Cooma promises to be the first in a series of country towns where Internet connectivity will be better than in most Melbourne suburbs.

Cooma ISP Smart Radio Systems announced the planned optical fiber infrastructure earlier this year in a combined deal with communications infrastructure vendor Enterasys.

In a different approach, telco PowerTel recently completed the Pacific Innovations Corridor, which will see high-bandwidth Internet services reach the Gold Coast, thanks to improved infrastructure running out of Brisbane.

Earlier in the year, PowerTel also scored a NSW Government contract, largely on the basis of a "rural development fund" designed to maintain regional services.

However, despite promised improvements in infrastructure and regional services, many of the newer telcos are concerned they may not get a big enough piece of the pie. According to Fay Steward, group corporate services manager of broadband access provider Flowcom, her greatest concern for the coming year is companies in the Internet access market being provided with sufficient access to existing copper lines.

"We are going to be keeping a close eye on the incumbent telco, along with all the other parties with a vested interest in a freeing up of access to the copper network," Steward said.

While many dot-com startups have already fallen by the wayside, e-commerce integration companies are starting to feel the heat. After recent staff cuts, David Bowie, general manager of the online group at Sydney-based integrator Com Tech Communications, forecasts a shrinking of new economy-generated demand for e-commerce integration.

"We are already seeing a big drop off in demand from the new economy companies," Bowie said. "In 2001 we will be focussing more intensely on our traditional market base, formulating e-commerce strategies for the more traditional bricks-and-mortar type companies."

Bowie added that 2001 will see increasing convergence of online and call centre services, as more traditional corporations increasingly offer their services online. "I wouldn't want to be starting up in e-commerce integration in 2001, but for established companies it should be a good year, with stable demand for services," he said.

Get services savvy

In the never-ending battle for profitability, vendors are tipped to spend 2001 looking for more efficient ways of taking their product to market. However, the direct sales models implemented in 2000 by vendors such as Compaq look unlikely to spread much further.

"In the SME market, the vendors can't touch the customer directly," says Chris Spring, director of Sydney-based distributor Brocker Technology Group. "If consolidation occurs in this sector, vendors will lose their edge."

Meanwhile, the spread of IT into traditional bricks-and-mortar industries is allowing channel players to tap new sectors. Nick Verykios, general manager of distributor LAN Systems, says small players who have developed sound relationships in vertical markets will find themselves in a good position for a takeover by larger distributors.

New clients are also being discovered in the telecommunications market, as telcos and ISP carriers take a more active role in feeding products to consumers. Vendors are being more selective about distribution partners, selecting one or two who can push product to the right markets rather than appointing three or four in a saturation approach.

The channel is going to take on more of an accreditation role driven by value-added services. Verykios is one of many predicting a year characterised by innovative business models, partnerships and an increasing focus on services.

"Smaller resellers who can't afford specialist engineers in-house are going to lean more heavily on service partners for technical support and training," said Verykios.

Ian Bertram, regional director of hardware platforms for research group Dataquest Asia/Pacific, believes resellers should take the time to identify their core business and steer it in specific directions. "Channel players need to work out where they are adding value in the supply chain. If they are adding cost into this process they will start to lose money and could eventually go out of business."

Bertram counts himself among the multitude of channel commentators predicting the rapid demise of the box-pushing sales model, although he still predicts an important role for those in the channel that can perfect the art of logistics management. IDC's Ringland agrees and describes the increasing tendency towards partnerships as a reflection of increasing demands placed on individual resellers.

"You have to provide everything these days. If you are a hardware provider you have to work with a software provider and partner with someone who can provide the installation and training," Ringland said.

Hitech Distribution's Hein believes 2001 will be the year of the partnership, with resellers increasingly branching out from IT into different spheres.

"For resellers, 2001 will be the year of convergence with other sectors," Hein said. "Take areas such as home automation or networking for example - channel players who are able to negotiate the right deals with the construction industry are potentially sitting on a whole new market."

It is becoming increasingly clear that, however it is forced to metamorphose, the channel will survive consolidation, specialisation, convergence, online fulfilment, ASP business models, direct sales and even a new tax system. If analysts are to be believed, 2001 is going to be, if nothing else, a significant improvement on 2000. In the meantime, ARN wishes all our readers a Merry Christmas and a happy and prosperous New Year.

Carry on consolidation

by Gerard Norsa

If 2000 was the year of the plunging dollar, then the next 12 months is shaping up as a sustained period of channel consolidation.

One consistent theme of the last 12 months which is sure to continue in the new millennium is consolidation - a trusted measuring stick of just how mature any particular market is. Going by 2000's events, the IT channel is maturing very rapidly.

Continued competitive pressures, rapid technology evolution and a tough economic climate mean it is still rife for a bit of trimming here and a degree of tightening there.

Any way you look at it, there are still too many distributors and resellers that rely too much on too few supply partners. Never mind that these vendors are often the same organisations that continue to squeeze their channels on margins, while all the time continuing to gather data on the end users.

Look for more vendors finding creative ways to bypass channels which will render many existing reseller business models obsolete.

Meanwhile, there are still too many distributors and resellers that are also not heeding the warnings that shifting boxes for margin is not the sustainable business model it was just a few years ago.

It doesn't matter how big or small you are, shifting boxes and doing little else will not cut it in the future.

Therefore, it is only logical that the bad resellers will die a slow and painful death at the hands of the more nimble and better evolved species. On the other hand, the good ones will survive and prosper, or be snapped up by cashed up suitors.

Never before has the expression "shape up or ship out" applied more to the business models of channel partners than it will over the next 12 months.


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