The industry watcher says that 2001 will mark a turning point for IT distribution channels in Western Europe.
Controversially, IDC says it expects direct sales will rise — from 55.6 per cent of total IT spending in 2000 to 56.8 per cent by 2005 — while sales via the channel fall. IDC say this will be because of the reseller channel’s ‘inability to diversify’ its business model.
Distributors’ share of IT spending is divided into three categories — software, services and hardware — and IDC predict in Ireland that between now and 2005, Irish spending on software and services will grow at double the rate of hardware spending.
According to IDC, the indirect channels handled more than 44 per cent of the $278bn spending on computer hardware, software and services in Western Europe last year. Figures for Ireland broadly tally with the European average.
‘While the long-term business prospects indicate renewed market growth, the gravity of the present economic context means the indirect channels are facing an unprecedented challenge,’ said Brian Pearce, research manager for IDC’s European Distribution Channels service.
The next several months are likely to be lean ones and IDC considers that they will not only weaken the volume products channels, but will also harm specialised players in the midrange server and storage markets.
IDC has identified a number of key challenges for the sector. During prolonged periods of market turmoil ‘brutal changes’ in channel management are possible, the company said. IT vendors may be tempted to reinforce direct sales of particular product lines, a factor which is casting a shadow not only on traditional PC channels, but also on everyone distributing technical products.
The proposed merger of Compaq and HP could provide a foretaste of what is in store for IT distribution channels next year, say IDC. Once the fusion is approved, the new entity will be obliged to rationalise its business partner networks and overhaul its terms and conditions. Such a vast reorganisation, accompanied by rival vendors attempts to poach business partners, is likely to add to the channel turmoil.
IDC claimed that many of the players in the volume channels remain incapable of shifting towards higher-margin technical products or a more service-oriented role. IDC forecasts hardware’s share of IT spending will decline from 38.8 per cent in 2000 to 31.2 per cent in 2005 resulting in a major shakeout in the volume products channel.
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