Recovery, risk and adapting to a post-GFC world

Local insight by Channel Dynamics senior consultant.

We are often asked by resellers what are we seeing in the market and how can they adapt their business to take advantage of growing trends, especially the rebounding economy and how to take advantage of the post-GFC world. Green shoots, V, W and L shaped recovery are the new financial buzz words at the moment. It may not yet be clear as to what type of recovery we are in, but with the ASX rebounding 50 per cent off the March lows in the last week, it is clear we have stared into the abyss but confidence is now starting to return.

As with any dramatic event, our world as we know it will never be the same. Resellers who understand these subtle differences and adapt their business to take advantage of them will be far better positioned to reap the benefits in 2010, and well beyond the effect of the Government stimulus packages.

Reduced appetite for risk by the banks and corporate boards is the most prominent example of this changed environment. This impacts the customer’s ability to obtain approval for and fund the IT projects being proposed. These now include projects which are affected by:

  • Needing to rapidly show a positive ROI with minimal risk, yet still add value by being aligned with the company’s strategy horizon;
  • Funding becoming more expensive as the cost of credit (cost associated with borrowing money) has risen, and will continue to rise with increases in interest rates expected before the end of the year;
  • Funding that is harder to obtain as the criteria set by banks to lend money to customers has also risen. In contrast, as the economy rebounds, growth and expansion pressures will increase, requiring revisiting delayed projects or new projects as customers try to meet the competitive demands placed upon them by their customers.

    How then can integrators help their customers get their project approved and adapt to the funding constraints within a new expansive economy? One simple answer is to provide solutions and vendor offerings which remove some of the project risk and also the requirement for large upfront investments. For example, we have seen an exponential growth in software-as-a-service solutions. Part of the appeal of SaaS is reduced risk through easy trial or proof of concept, along with the removal of large upfront investments.

    Most SaaS offerings are based on an annuity model allowing customers to pay per month or by usage. This removes the requirement for the customer to access upfront funds to pay for expensive application licences, but also the cost of the infrastructure to house, run and manage the applications.

    SaaS is also ideal to meet the customers’ growth requirements as it provides the flexibility to meet a rapidly expanding customer environment. It is the SaaS vendor, and not the customer, who is investing in the “on-demand” infrastructure.

    In summary, the rebound is here, but what we rebound to will be different due to opposing forces. The cost and requirements of obtaining credit will increase, feeding into the requirement to reduce risk in project outcomes. But customers will also have increased demands for expansion as a result of the rebounding economy.

    Partners that recognise these subtle differences and adapt their business to offer “non-traditional” solutions, such as SaaS, will reap the benefi ts of their own stimulus package.

    Dean Vaughan is a senior consultant at Channel Dynamics.