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Testing the channel

Testing the channel

Periodically, ARN does the ring around to chew the fat with resellers and find out what, if anything, is getting on their nerves. As usual, most find very little to complain about. There are, however, certain issues which are worthy of mention because of the different ways in which solutions are being created.

The pre-GST PC sales slump did little to dampen channel enthusiasm for the changes to the tax system, although there was some concern regarding prices and margins.

Most resellers contacted believed they were prepared for the GST and were generally positive about the effects the new tax system would have on demand in the IT sector long-term.

John Perkins, managing director of Sydney-based reseller Balanced IT Services, typified an attitude echoing throughout the channel.

"There was certainly quite a downturn toward the end of June; end users either over spent on Y2K or were holding out for expected price falls with the new tax system. We expect a pick up at the end of August," Perkins said.

The lead-up to the introduction of the GST proved tense. Although most resellers confirmed they were confident their own internal systems were 100 per cent GST-ready, many were relieved when the July 1 change over finally arrived.

One such relieved channel player was systems integrator BCA IT's national marketing manager, John Hayley.

"We have no qualms about our internal operation, we have been well prepared for months. Now the GST is finally here we can relax a little and get on with building our business," Hayley said.

To the dismay of some resellers, cuts to wholesale sales tax on hardware items have been largely swallowed up by the GST levy on both software and services.

Chris Spring, group general manager for Sydney-based distributor Sealcorp Australia, explained why the introduction of the GST would not automatically result in price cuts the channel could pass on to its customers.

"There are savings to be made on hardware, but it only represents about 15-20 per cent of the overall price of a computer system. So there won't be much of a price change at the end of the line," Spring explained.

One advantage of the GST is that it will supposedly spell the end of dodgy dealers and cash-based businesses. Dean Calvert, director of DA Calvert and Associates in Adelaide, was adamant the new tax system will benefit the channel by making it harder for illegitimate companies to function.

"The implementation of the GST should see the industry cleaned up," Calvert said, mentioning that he did not want the channel to end up with a reputation similar to that of the used car sales market.

Vendor relationships

Resellers and integrators were quick to point out the combined direct sales and partnership approach adopted by some vendors presented an ongoing concern.

Anthony Roberts, business development manager of integrator and Web site architects Adaptive Technology, expressed doubt that vendors adopting this approach are sufficiently aware of the importance of the channel in certain markets.

"The [vendors] know they need the specialist channel approach, especially in the SME markets, but there is often a lack of support for the channel in this area," he said. "[Vendors] have to realise the devil is in the detail, they enter into partnerships without providing appropriate channel support. This works against them because they are wasting important opportunities," Roberts told ARN.

Roberts believes vendors are quick to sign partnerships, but slow to follow through with functional partnership programs. He also pointed out it is unreasonable for vendors to insist on partner loyalty, especially if they are competing in the same market.

"A lot of vendors ask for loyalty but offer nothing of the sort themselves. They seem to forget resellers have to integrate packages to suit their end-users rather than the vendors," Roberts said.

The smaller end of the channel that focuses on SME markets is particularly sensitive to competing with vendors. Many of the partnership difficulties arise because of vendors chasing poorly defined markets.

Tony Iannuzzelli, managing director of systems integrator Vertex Technology, agrees with Roberts, and pointed out that while vendors are well positioned to target the enterprise market, they often lack the skills to move products into the SME arena.

"Vendors have the size and scope to manage resources appropriately for larger projects. But they often overlook the fact that the smaller technology providers can become champions for the platform," Iannuzzelli said.

While it is common to hear vendors talk about the importance of VARs, Iannuzzelli suggests the onus for adding value falls as much on the vendor as it does on the reseller. He claims that vendors would do well to focus their marketing on developing a service component for their offerings.

"To be effective, partnerships have to provide resellers with access to resources that enable them to value add. Vendors are well positioned to offer support services to significantly increase the value of their offerings, both to the reseller and ultimately to the end user. Ongoing vendor-based support can only be of benefit," Iannuzzelli explained.

Channel support programs also came under the microscope, especially in smaller metropolitan and regional areas.

Calvert was of the opinion that even large vendors often overlooked Adelaide when it comes to training and promotional campaigns.

"We are left out of the seminar circuit all too often," Calvert said.

"Adelaide is a goldmine for those vendors actually willing to put in the effort. The channel here is very strong, and vendors should focus more on this region and make sure we are included in their partnership programs."Mehran Rad, manager of Rockhampton-based networking consultancy and reseller XGT Computer Services, expressed similar concerns. While Rad conceded he does not expect vendors to be overly anxious to capture the Rockhampton market, he is keen to remind vendors that local knowledge is invaluable when pitching to a regional community.

"We don't hear from vendors all that often, but when we do it is important they involve the local channel. [Vendors] come up with marketing ideas, try them out and they don't work because they haven't consulted us about how to go about selling in this area," Rad commented.

"It is like a self-fulfilling prophecy - [vendors] don't think a roadshow, for example, will result in any real increase in their sales. They [don't take] advantage of local knowledge. And when they don't get a good result, they shrug their shoulders and walk away again.

"There is money to be made here, they just have to use the right approaches," Rad said.

IT skills shortage

Apart from vendor relationships, another ongoing reseller concern is the IT skills shortage.

Rather than complaining however, resellers are adopting a pragmatic approach and are looking for ways to work through lack of quality staffing issues.

The competitive nature of IT recruitment is forcing a quiet revolution in human resources management. The dynamic nature of the industry has resulted in a dramatic increase in employer-driven education, and a focus on the general well being of skilled employees.

Vertex Technology's Iannuzzelli explains that the IT skills shortage has given rise to a change in the philosophy associated with human resource management.

"We don't even think about it [HR] as a [separate] concern anymore. It's just a part of our daily business. It is a long-term problem and as such, the solution involves careful consideration not just about who you employ but also what kinds of work options and responsibilities employees should have," Iannuzzelli said.

Rad of XGT Computer Services, pointed out that geographical isolation tended to limit his staffing options, and has led him to employ staff on a predominantly contractual basis.

"I generally have to source staff from the major capitals. I find people are more likely to take on work in Rockhampton as long as they don't feel trapped, so they work on a contractual basis and many of them renew after the initial period.

"A lot of locals move away to get their training and experience, then come back for the lifestyle. Once we adopted the right approach, skills shortages became less of a problem," Rad said.

Calvert is similarly confident, commenting that although getting good staff is a constant battle, his focus on continuing education and maintaining a pleasant working environment has had some positive results.

"It is important to look for the sort of person that can learn the skills you require, rather than aiming for an exact academic and technical mix. We find the right people and make sure they have the right skills.

"Working in Adelaide is a lifestyle choice. The wages are not necessarily as high as they are in places like Sydney or Melbourne, but they are very competitive because the cost of living is less. People are beginning to realise Adelaide is a nice place to live and work," Calvert said.

In a nutshell, channel concerns can be summed up as "getting used to GST", "problem partnerships", and the "IT skills shortage". Overall, channel feedback was positive and reflected an industry taking notice of its concerns and working towards creative solutions. It would seem that the real winners are IT workers, whose scarcity is making them veritable golden eggs of the IT goose.


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