Channel looks rash and volatile: IDC

Channel looks rash and volatile: IDC

Recent bold business developments in the channel proved resellers and vendors were getting greedy and forgoing the end-user for profits in their channel strategy, according to IDC senior analyst Bernie Esner.

Citing a string of lucrative acquisitions and deals in the past six months, Esner believes vendors and resellers alike were hungry for a slab of channel pie. The biggest and best example of this was Volante's proposed $30 million acquisition of AAG Technology Services, a move which Esner speculated could see the ASX-listed Volante overtake the systems integration arm of IT giant ComTech.

The day of the traditional distributor was also past, and had long been replaced by a new "distribution subculture", Esner said. "There's not just the Ingrams or the Tech Pacs, but white boxes have exploded as well."

"Traditional definitions of distributor get murky here. It's open slather for the whole PC, telecommunications and communications arena."

"VARS, systems integrators, e-stores turning into bricks and mortar stores -- to me, these definitions have no meaning anymore. The market is becoming more volatile and fragmented," he said.

"Australia's becoming a major PC channel, but how many PC channels does a population of 19 million need?," Esner continued. "Look at the big gorillas like Volante and AAG. Who's controlling who?"

"When we look at IBM, Compaq and Hewlett-Packard, I doubt they have all the right channels to distribute their portfolio. They have a dedicated brand management mentality. Compaq's perception of true 'market connection' is so broad, despite their Connect stores."

"But look at Harvey Noman -- they're the true retailers who talk to the 'ma and pa' customer and pick the right markets. PC vendors have a pure business mindset. We need to get (vendors) to think outside this common square. Vendors need branding consistency and less product branding," he said.

However, Esner warned there were two major hurdles to get over before making the shift to an end-user focus.

"First and foremost, the challenge is profitability, then the risk of oversupply by resellers and vendors."

Current winners in the IT channel were whitebox resellers, he believed, who comprised 35 per cent of the local PC business. Esner predicted the channel would see tighter market consolidation among high-end service providers over the next few years, forming small, specialised full-service integration teams for the SME market.

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