Services sector leads the channel

The Australian IT channel has continued its march towards a services-oriented industry sector, with services now overtaking hardware as its biggest source of revenue.

This was one of the most significant results from Inform's Channelvision research reported at the inaugural ChannelWorld '99 conference in Sydney last week.

Inform Business Development research director David Hancock presented some updated trends on what is happening in the IT channel at the conference.

"In last year's survey, services revenue was approaching hardware, and this pattern has continued to the point where our estimate is now 42.5 per cent is services, and 39.5 per cent hardware. Software revenues account for 18 per cent," Hancock said.

"By mid next year, we expect the gap to widen to 45 per cent services and 35 per cent hardware, while software revenues are expected to stabilise at 20 per cent," he added.

According to Hancock, the dynamics of the channel, and particularly the composition, have continued to change over the last two years. "We're seeing major growth in the software developer sector, which has rocketed from 13.7 to 25 per cent of the channel. Prominent among them are one-and-two person operations, as well as the larger organisations," he said.

Over the same period, the number of retailers has fallen from 30.1 to 21 per cent, and the decline of VARs has continued its trend, falling from 18 to 11 per cent.

Healthy growth

Those in the channel described as IT service providers, which include professional consultants, now comprise 6.5 per cent of the channel.

In answer to the question "How do you expect to perform in sales and profit performance in the next 12 months?" most in the channel reported an expectation of healthy growth, especially system integrators and VARs. Although Hancock warned that, while most are healthy, 10 per cent of respondents reported an expectation of a downfall in profit, and IT service providers can expect to face significantly increased competition.