Return of the bull market

Trade

1 May 2012

Six months ago, Irish Computer asked a number of reseller luminaries for their impressions of 2011 and what they thought the rest of the year would bring. Now we’ve gone back and asked them what actually happened and how they think 2012 is shaping up.

Patrick Kickham, Datapac
Back in October 2011, Datapac general manager David Kirby described the year as being "very strong", predicting growth of around 10% for the year. Judging by the comments of company director Patrick Kickham six months later, Kirby was right to be so bullish. "Overall, 2011 was an excellent year for Datapac," Kickham reports. "We achieved impressive business growth across our organisation, won a large number of new contracts and strengthened many of our partnerships with our vendor community, including Microsoft, HP, VMware, EMC and Cisco. We also took the opportunity to recruit and enhance our team with excellent highly skilled individuals."

In terms of success stories, it has won "a significant number of new contracts in managed services, and implemented a wide range of ICT and managed print solutions across enterprise, education and government sectors". In addition, the unified communications and virtualisation business "continues to grow from strength to strength".

Kickham backs up his argument with the example of a EUR*500,000 investment by Mason, Hayes and Curran in private cloud infrastructure, bringing it in line with best IT industry practice globally, maximising hardware potential, improving overall energy management and reducing its cost base and expenditure.

This year has begun particularly well, he adds, with the awarding of an EUR*8 million ICT consumables contract by the National Procurement Service which has the potential to create up to 25 new jobs for Datapac across its national business over the next three years.

Datapac has also recently won the Irish Cisco Premier Partner of the Year, which Kickham argues recognises its ability to deliver and support a comprehensive range of Cisco solutions including borderless networks, collaboration, data centre and virtualisation technologies.

Datapac’s managed print (pay-per-print) solution, which provides customers with a simple and clear TCO proposition, is getting a strong response because it allows customers to manage their print requirements and print budgets much more effectively. "In fact, we’re aware that some customers have saved up to 60% on their overall annual print budget by switching to this service," he reports.

There has also been a significant increase in demand for IT managed services. "We have been investing in our people and technology at our managed services centre and this has really paid dividends," Kickham claims. He has noticed a larger number of SMBs are signing up for managed IT services than before "and we expect this trend to continue as companies look to focus on their business rather than their technology". He reveals Datapac has won more than 150 new accounts in the first quarter of 2012.

Cloud take-up should increase this year, perhaps even treble, particularly as Irish companies become more comfortable with utility-style billing rather than CAPEX spend. He says Microsoft Office 365 will be a big spur for SMBs in this area.

Although customers’ IT budgets will continue to be constrained, particularly in sectors which have been most negatively affected by the recent economic turmoil, Datapac is not overly concerned about threats to its own growth. He puts this down to strategic decisions taken in recent years to focus on services and technologies that provide demonstrable savings and return on investment for customers.

Kickham thinks that overall the channel is performing reasonably well at the moment. "There were a number of mergers and acquisitions in recent years, but this is settling down." He says Datapac is "delighted with the proactive and collaborative approach" from its vendors. It has worked on a number of recent initiatives that proved popular with the Irish business community. For example, an event in the National Conference Centre late last year with EMC, Cisco and VMware offering business and technology advice on the journey to the private cloud drew more than 400 attendees.

This year is Datapac’s 30th anniversary and Kickham says it’s "shaping up to be our best year ever". The company has witnessed huge economic and technological changes in its lifetime but the fundamentals of doing business "are still the same". Customers want to deal with people and organisations that are financially sound, that they can trust and build good relationships with. "We will continue to listen to our customers and provide them with solutions and services that best suit their needs, rather than push the latest product on offer," he pledges.

Datapac is "looking forward to the next 30 years. Without doubt, there are some very good times ahead for Datapac, our customers and the wider business community in Ireland".

James Finglas, MJ Flood Technology
Back in October 2011, MJ Flood managing director Paul Finglas predicted the outlook for 2012 would be reasonably bright, but judging by his comments six months later, he may well have erred rather well on the side of caution. "I’ve never been so busy in my entire life," he says.

Things seem to be picking up strongly. The company experienced a significant increase in turnover and profitability in 2011 and Finglas describes it as a very good year, although he puts it in the context of a few tough years preceding it. He believes the market is "getting back to normal running".

Why is this? A lot of companies had put a freeze on projects because of the fears around the economic situation. But with a long way to go, a level of pragmatism has started to come in. It’s almost as if people have become anaesthetised to it and are starting to get on with things again, so the projects are coming back. This was something Finglas identified back in October 2011 when he revealed there had been a strong return of projects which he attributed to many businesses having reached the point where they had to invest in technology again.

One area that is beginning to generate a lot more interest is cloud adoption although it still represents "a small percentage of overall IT spend". Nevertheless, it chimes nicely with the prevailing trend for companies to look at ways to reduce costs and overheads.

Products such as Office 365 are proving popular. Finglas dismisses suggestions that Office 365 could be a danger for resellers and a threat to their relationship with customers. It’s true that the reseller community did not widely adopt Office 365 because the margins were very thin, (they still are, he adds), but MJ Flood took the view that it still had the services wrap around it. "We built a profitable model around it and ended up as a centre of excellence for Office 365 support and activation services. It still requires value add from value added resellers and I don’t see that disappearing. Besides, not everything is going to go to the cloud."

Virtual desktop infrastructure is still struggling to meet the hype, Finglas observes. This chimes with his observation in October 2011 that there was still "a massive amount to be done" around desktop virtualisation. There are projects out there, he reports, but it hasn’t been as widely adopted as might have been expected, Unified communications, however, is growing in popularity. As with cloud, companies can see the benefit of making it an operational cost rather than a large capital outlay, so they want to look at it. The market has some way to go to weed out some of the players, so there’s a lot of jockeying for position at the moment.

As for 2012, the first quarter was up almost 40% on 2011. What’s caused this upturn? There’s been a lot more consultancy business, a reasonable amount on out-tasking and outsourcing, while managed services witnessed steady growth. "I don’t think we’re doing anything any different," Finglas says, "it’s still all couched in the same types of solutions, but it seems as if there’s confidence in market." He puts it down to companies that held off for a long time being forced to take on projects and refresh product.

As for the overall performance of the channel, Finglas admits he hasn’t spent a lot of time examining what his competitors are doing because he is spending most of his time "trying to secure our own business. I don’t have a feel for how other companies are doing. The market has bounced back, there are more projects out there than this time last year to tangibly go after and we’re probably winning our fair share of those projects."

He reveals that the second quarter "started very very strongly" for MJ Flood Technology and he believes 2012 will continue that way: "I’d be very bullish about growth over 2012. It’s going to be a very good year, an exciting year. We’re going to be setting the platform for jobs and growth."

Paul Hourican, PFH Technology Group
It’s been over a year since we last spoke to PFH for a reseller report. Back in March 2011, managing director Declan Van Esbeck reported that the company was "very optimistic for the year ahead" after a fantastic start to 2011. History appears to have borne him out. According to CEO Paul Hourican, PFH had "an excellent year" in 2011: "We successfully integrated two new businesses into PFH and began to see the synergies to be gained through the integration." He hails the company’s "magnificent" achievement as the only indigenous IT provider to make it into IDC’s top three service providers in Ireland. "This means PFH is a meaningful player, nationally, across all sectors," Hourican argues.

He claims that PFH is continuing to gain market share from competitors, primarily on the back of a detailed strategy it has implemented, identifying the customers the company wants to serve, what it wants to serve them with and how it intends to go about it. "Some of the big wins we had are where we successfully sold new services into existing accounts," he reveals, as well as selling new products and services to new accounts.

Looking at the main opportunities for growth over 2012 and beyond, Hourican says PFH has identified seven core offerings that it believes will be attractive to customers: infrastructure optimisation, communications and collaboration, client and access services, Custodian managed services, procurement, training, and cloud services. He claims PFH is one of the few companies "uniquely positioned to deliver services across these offerings and provide our customers with an integrated approach".

The main threats, as for everyone else, are the global and local economic situations. In that context, asked how he thinks the channel is performing overall, Hourican suggests it is struggling. "Niche players with key relationships will continue to come under pressure," he predicts, "as the commoditisation of ICT continues." He says PFH set about acquiring companies to ensure it didn’t fall into the trap and was in a position to "provide a comprehensive suite of solutions across all the pieces to give customers a one stop shop".

As to what role the vendors play and what level of support they provide, Hourican is pretty realistic. "Vendors are interested in selling their products," he states. "We are the largest reseller of product in Ireland, so yes they are interested in us." But he stresses that PFH’s business is about solutions for its customers, not just product.

Unlike his counterparts at MJ Flood Technology and Datapac, PFH thinks 2012 will be a difficult year overall, "but we will continue to execute on our strategy and therefore gain market share and increase our depth of penetration into our chosen markets".

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