Distributors in line for bumper 2021
We’re at the midpoint of the second quarter and things are looking up, according to IT market research specialist Context, which has forecast distribution revenues could grow by up to 10% for the three months to the end of June.
By any standard, that’s not a figure to be sniffed at. Context acknowledges that 10% is a “more optimistic figure” and supply chain issues may reduce that growth to 8%, – but that’s still far from shabby. Looking further into the future, Context predicts 5% growth in the third quarter and 5.5% in the fourth, although the best case scenario is for 8.5% and 8% growth respectively.
“As a result of the pandemic, we’re seeing more remote workers invest in home office equipment and employers kitting out the workplace to support a new hybrid model,” comments Context global managing director Adam Simon. “These are just some of the reasons why we’re forecasting impressive channel growth for the rest of 2021, despite strong year-on-year comparatives.”
He highlights “two other factors” that would increasingly influence the market going into 2022, “the environmental concerns of consumer and B2B IT buyers, and the EU’s huge €1.8 trillion recovery fund, much of which will be spent on digital”.
Europe-wide trend
Commenting on Context’s forecasts, Tech Data’s sales director for Ireland, Gerry Harvey, describes them as “a good reflection of what’s happening in the wider European market”.
When it comes to Ireland, there is still “strong demand for endpoint devices and products that empower home working. In addition, we are now beginning to see infrastructure projects re-starting with enablement of hybrid working, increased cloud adoption, and enhanced security the prime areas of focus”.
He believes “there is every reason for the channel to be positive” looking ahead. “Business transformation is being accelerated and as a channel, we will need to work more closely than ever to meet the needs of customers who want to use technology to achieve positive business outcomes,” Harvey states.
Paul Marnane, country manager for Arrow’s enterprise computing business in Ireland, says the distributor posted strong results in the first quarter and there is “potential for further improvements in the second half of this year”.
He cites a number of reasons, such as the lifting of rules and restrictions governing on-site work: “As people return to the office, we are seeing signs that IT spending priorities are shifting towards more complex transformational projects as we move into the second half of the year.”
Marnane says there is “some evidence that the traditional data centre environment is starting to perk up a little bit, too”. Arrow’s hardware business grew year-on-year for Intel servers and proprietary servers, as well as storage. He describes those as “good indicators” for a strong third and fourth quarter.
But he cautions that traditional application environments “are still somewhat subdued. We are optimistic that throughout the year, as things open up and there’s more access to the data centre, we’re going to see this normalise.”
He adds that there is “continued demand for security-related solutions to protect the new working environments that have been set up over the past 12 months. Our cloud business, including that through our platform ArrowSphere, continues to accelerate at even faster rates than it did last year and even the year before”.
Michael Conway, director at Renaissance, says Context’s research broadly “reflects our experience”. On the subject of chip shortages, he notes they “are definitely beginning to bite and with infrastructure refreshes likely later this year, after a quiet 15 minutes with many infrastructure freezes, the chip issue will dominate”.
Projects have moved forward but have been “slower and more difficult to get finalised and kicked off, so we would expect a push from mid-year”.
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