ARN: How did Inform come into being and why did you decide to focus on the channel?
David Hancock: The channel is really the engine room of the IT industry. In Australia, 3500 companies are responsible for 80 per cent of IT sales. Without us, there would be no reliable data on this part of the market.
In the mid 90s, I was working for a distribution company when my compatriot Terry Wiley pointed out that in the UK distributors had access to a wealth of information on sales in the IT industry that just wasn't available here. Because we were in the industry, we knew there was a need for a channel-based research company, because before we came along, no research company focused on the reseller channel in Australia.
Inform was formed in January 1995 and it is already considered the leading authority on the trends and activities of the reseller channel in this country.
What role does Inform play in the channel and why is your research so important to resellers?
Inform plays a vital role in the channel. Resellers that participate in our Reseller Panel have free access to the information we collect, in return for their monthly sales data. We also provide the channel with unlimited access to our market analysts to discuss the industry or obtain more information on particular markets. They can just call up and have a conversation with an analyst and find out what is going on.
This market knowledge gives members a competitive edge; it allows them to compare their sales trends with the overall market and, most importantly, it places them in a far stronger position when negotiating with their suppliers.
We can't survive without our resellers giving us information. That's why we give it back to them for free.
How does Inform formulate its methodologies?
We believe our methodologies offer the most accurate results regarding the channel because when it comes to collecting shipment data, we go to the resellers and not the vendors. Quite simply, this is far more reliable, as the figures are independent and therefore more accurate.
Essentially, our services can broadly be divided into three different areas: our database service, our monthly sales reports and our qualitative research.
Firstly, the hub of Inform's market intelligence is our industry database of 8000 reseller sites around Australia. We hold in-depth business and product data on each company, which we use to segment the market to gain an accurate picture of what's happening. Our telephone interviewers contact all resellers at least twice a year using an advanced computer assisted telephone interview (CATI) system, which helps with data accuracy and keeps all calls to a minimum time span.
Secondly, we derive IT product shipment data from our Reseller Panel, which currently consists of 500 resellers Australia-wide. Resellers on the panel provide us with their sales data on a monthly basis. This data is extrapolated to represent the total population and used as the basis for our monthly reports.
The third aspect of our services is our qualitative research, which focuses on the attitudes, intentions and opinions of reseller executives. We collect this information via postal and telephone questionnaires. We sell this type of research on a custom-made basis to single companies and also to syndicates. In both cases, we always keep an emphasis on value add, so we give our subscribers the opportunity to help develop the content of our surveys and we present the results to them through both in-house briefings and reports.
Is your reseller database dwindling? Why, and does this reflect any industry changes?
No, quite the opposite. In the last six months, we have seen an expansion in the total number of resellers by 5 per cent to a little under 3500. However, the industry is being restructured, and resellers are changing their operations.
Service-oriented companies like VARs, and system integrators continue to grow as a percentage of the channel. These types of companies have grown in number by 15 per cent since the beginning of this year and now accounting for around 45 per cent of the channel. In fact I believe that this growth is set to continue and they will account for more than 50 per cent of the channel by 2002.
This growth has mainly come from existing resellers that have adjusted their approach and decided to focus on services rather than new companies entering the market. This changing approach is reflected by the drop in number of traditional dealers and retailers. Since January we have seen traditional resellers fall from 21 to 7 per cent of the overall channel.
As expected, the proportion of direct marketers in the channel continues to grow. Although both true e-tailers and traditional resellers are involving themselves in more proactive direct marketing sales strategies.
Corporate dealers have showed a surprising growth rate of 24 per cent, accounting for 14 per cent of all resellers. A closer inspection of their turnover data suggests corporate reselling no longer necessarily goes hand in hand with size, as many medium-sized companies are also capturing some of the corporate market.
What are the biggest challenges facing resellers over the next 12 months?
The biggest single hurdle for resellers to overcome today is staff. Attracting and recruiting good quality staff is a challenge which always faces resellers. However, they will see it become more of an issue as the IT sector continues to grow.
Issues of personnel management and morale and motivation maintenance are often mentioned by our Reseller Panel as major concerns. Resellers we have approached believe there is generally a lack of good-quality staff available in the marketplace.
However, keeping up with changes in technology is, and always has been, a major challenge to resellers. With the industry and product innovation continuing to move at a remarkable rate, resellers are faced with the question of how to continue their tactical business as well as developing in line with the market.