Making the most of madness
- 13 June, 2007 16:14
Traditionally, June has been a time of make or break in the local IT channel because anybody who couldn't make some money in the year's bumper month was probably in the wrong game. But there's evidence to suggest that wisdom doesn't hold sway any more; at least not to the extent it used to.
For tier-one and tier-two integrators, who predominantly ply their trade in the corporate market, June is still a wonderful time of year when IT managers are frantically trying to dispose of their remaining annual budgets. But for those focused on SMB, signs suggest the June rush might be little more than a slight acceleration. Distribution Central CEO, Scott Frew, said his distribution company, including its Firewall Systems and NetWorld Systems subsidiaries, recorded its best ever month in May and has massive back orders to deal with. He highlighted major security projects, wireless, intrusion prevention and government network spending as key drivers.
"It's an especially busy end of year, above and beyond general buoyancy in the market," he said. "Only one or two of our vendors are not way over budget and they are smaller players without a presence in this country. We have been through a couple of years' hard yakka establishing the managed services model and developing the Web engine but the moons are starting to align."
Similarly, Frew said the majority of tier-one and tier-two integrators buying through Firewall and NetWorld were also in a very positive frame of mind. He said the number of requests for increased credit levels was unprecedented.
"Anybody who isn't doing well at the moment must have something critically wrong with their business," he said.
A tale of two markets
Dicker Data also registered a record month in May but sales manager, Chris Price, said it was difficult to compare current performance with last year because the distributor was beating its June 2006 number almost every month. While the corporate market was going totally mad, SMB had not picked up to the same degree.
"The IT managers in large corporates have to spend budget before they are allocated a new one. If they leave money on the table, they get a lower allocation next year," he said. "It used to be the same in the SMB space but now small businesses operate quarterly rather than yearly so the spending is not as big as it used to be at this time of year."
Price said smarter corporates were also aware that vendors would be making deals this month. December was also busy for the same reasons.
"December is the other anomaly because most vendors run to a calendar year," he said. "IBM does a huge amount of business in the few days between Christmas and New Year."
Data#3 CEO, John Grant, said the ASX-listed integrator felt comfortable about the healthy business environment continuing into the next financial year but its immediate focus was on delivering the best possible result between now and the end of June.
"It's a solid market with plenty of opportunity but there is also no shortage of issues to deal with including competition, managing expense levels and retaining skilled people," he said. "These are the problems you are faced with in a buoyant market."
Attitudes towards ICT had certainly improved, according to Grant, with more customers now looking for greater levels of engagement and prepared to look externally for levels of expertise they don't possess.
"They are exploring new options rather than falling back on old models," he said. "Up until a couple of years ago, we and the vendors were the central point of information but now they are using the Web and their expectations have changed because they are more aware of what technology can do."
Same as it ever was
Allcom Networks technical director, Andrew Leigh, said the run-in to June 30 was typically hectic and as busy if not busier than the same period last year. Allcom used to attribute its fourth quarter hockey stick to winning more than 70 per cent of its business in government but that number was now below half and the end of year rush hadn't gone away.
"Jobs are coming out of the woodwork as people look to empty budgets. It's not being driven by special offers or marketing; it's just the usual 'use it or lose it' work you get at the end of financial year," he said. "We are transitioning how we sell [to get away from the end of financial year rush] but aren't seeing that change reflected in the buying habits of our clients."
Page BreakFujitsu's local operation closed its financial year back in March, posting annual growth of 7.7 per cent, but was still enjoying life in a buoyant market at the top end of the IT services landscape. "People are cleaning up their infrastructure and working to a blueprint as they look to become more efficient and productive," CEO, Rod Vawdrey, said. "There are three main drivers - server optimization and consolidation in the datacentre; the desire to create more secure environments; and regulatory reporting requirements, especially in financial services and government."
He also noted a spike in demand for ERP software in the SMB market but suggested IT was still lagging behind a general business upturn. This was evident from record share markets and company profits, a strong local dollar and the perception that Australia was currently a great place to invest.
Small business going retail
Ingram Micro product and marketing manager, Matt Sanderson, said the country's largest distributor was seeing growth across most segments of its business and was busier than during the same period last year. Retail was very strong in terms of moving systems and its Solutions Division was also performing well.
"We had a very good May, more so than last year, so maybe things are being pulled forward a little earlier," he said. "Retail tends to get stock in early because they do tax promotions at this time of year and a lot of SMBs are buying there these days.
"That's a gradual change we are seeing globally. The big retailers get very good terms from the vendors, and can be very aggressive in holding stock, so it is very easy for small business owners to walk in and pick up what they need." Dicker's Price agreed with Sanderson that traditional resellers were losing small business to the big retailers, which he blamed partly on the rise of the prosumer - professionals working for small companies that buy laptops for work but also use them to store their personal digital content. "This market is being dominated by Asus. The major vendors have a big gap in their models between the big retailers, with their heavy rebates, and the traditional corporate channel that doesn't want to touch people looking to buy Web cameras and that type of stuff," he said. "The growth being recorded by Asus has been a red flag and the major vendors are moving to open up their product sets."
Not everybody is killing it
In the components market, volatile pricing was creating hesitancy, according to Altech southern region sales manager, Adrian Blong. Resellers were no longer prepared to hold stock and, where they might have previously ordered 30 monitors in June to take advantage of special offers, the same company was now buying three or five. Triforce managing director, Abbas Aly, said the past two months had been fairly solid for his reseller business after a first half of peaks and troughs that made it very difficult to assess what was likely to happen.
"When business is good you can generate extra business by taking risks and when it is bad you cut back," he said. "It hasn't been a bad year but then it hasn't been a good one either. A lot of businesses are now more process driven and everything takes longer to get over the line."
While the mad rush associated with end of financial year still existed to some degree, Aly said it wasn't as big because many companies had stopped purchasing departments operating that way. The fact that major vendors didn't run to the same financial year as Australia also reduced the focus on June. HP, for example, will finish its third quarter at the end of July and report its financial year in October.
"The vendors are not aligned to our financial year and they are not holding as much inventory," Aly said. "It's more build-to-order and demand generation has reduced substantially."
Out with the old, in with the new
Although the past couple of months had been quiet for his business, Total Computer Technology (TCT) managing director, Robert Brown, said the next three months would be flat out as people looked to spend existing budgets or were allocated new ones.
"Some are on hold until July while others need doing straight away. We have clients in the media industry where everything is very traditional and June budgets are still the way it is," he said. "At the other end of the scale, more entrepreneurial companies with younger management teams tend to do things whenever they need to be done."
Express Data is currently in its Q3 but general manager of sales, Mal Shaw, said the distributor had beaten its forecast for May despite posting a very good performance in that month last year. The June rush was just getting underway. "We are starting to see some pick up coming into June and there will be very strong software licensing at the end of the quarter," he said.