While writing the reseller report in this month’s issue, I was struck by how positive the people to whom I spoke appeared to be about 2012 so far. I think I could be forgiven for finding this positivity a bit strange because you only have to listen to the radio, watch or read the news (paper or Web), to know that things are definitely far from rosy in Ireland right now, nor have they been for quite a while.
Nevertheless, James Finglas, managing director at MJ Flood Technology, told me that 2012 has started off so well that he has "never been so busy in my entire life". Meanwhile, Datapac director Patrick Kickham said 2012 was "shaping up to be our best year ever" (and that’s in the context of a company celebrating its 30th anniversary).
Obviously, this gives rise to a number of questions. For instance, why are these companies doing so well when the domestic Irish economy (exports aside) isn’t? And is their performance in line with the rest of the channel, or are they doing better than others?
Pragmatism
The first point could be just a phenomenon confined to the IT industry. As Finglas argued, many businesses have been holding off on projects and deploying technology in favour of sweating their existing assets for as long as they can. But there comes a time for organisations when the need to upgrade and initiate projects becomes almost impossible to delay. There may also be an underlying stoicism where Irish people and businesses have become anaesthetised to the shock of their economic circumstance, having witnessed such a huge upheaval in the past three years or so. With no apparent let up in sight, they are starting to adopt a level of pragmatism. They have adapted to their circumstances and decided to make the best of it. Life goes on.
It also helps that the IT industry is moving in a direction that fits so neatly with the times that are in it. As credit and cash flow issues eddy out from the economic crash of 2009, businesses are looking for ways to reduce capital expenditure. By happy coincidence, the IT world is shifting progressively towards an operational expenditure model in areas such as the cloud, unified communications, managed services and managed print services.
This happy confluence of factors is being borne out on the ground (or in the cloud) according to Kickham. He said a large number of SMBs have signed up for managed services and the trend is likely to continue throughout the year. He also predicted cloud adoption could triple this year, particularly as companies become more comfortable with utility style OpEx billing. And while he might not say it, it’s probably fair to say that one factor helping them to become more comfortable with an OpEx approach is if the alternative, CapEx, becomes too onerous to persevere with.
So what about the issue of whether the strong performances being reported by MJ Flood Technology and Datapac are common to other businesses in the channel? Finglas hasn’t spent enough time trying to find out, but Kickham reckoned the channel is performing reasonably well and appears to have settled down compared to previous years.
Counterpoint
Paul Hourican, CEO at PFH Technology, doesn’t agree, arguing that a number of channel partners are likely to be struggling, especially those that in niche areas that are reliant on a small number of key relationships. He claimed these types of companies will come under pressure as their areas of specialisation fall victim to the continued commoditisation of ICT. Of course, he advanced this argument in favour of PFH’s strategy of aggressive acquisitions, which has significantly expanded its own portfolio to enable it to "provide a comprehensive suite of solutions across all the pieces to give customers a one stop shop".
He believes this will also help PFH to continue gaining market share from competitors. Obviously, if PFH is gaining market share, the expectation is that some of its competitors will be losing theirs, so there must be some losers in this scenario. This could be why Hourican thinks 2012 will be a difficult year overall, even if PFH itself will gain market share and increase its penetration into chosen markets.
It’s not unnatural for some businesses to do well at a time when others are struggling, but the big issue is just how many fall into the two camps. Too many in the struggling camp would suggest very tough times.
At the moment, I’m inclined to give the channel the benefit of the doubt and believe that the significant evolution taking place in the delivery of technology and how it is paid for will help the IT industry. Of course, it raises questions for channel partners in terms of the role they will play in this evolving IT model.
Of necessity, this will mean they have to make changes in how they deliver and support technology. As with any business that owns the customer relationship, however, it will be up to partners to develop those existing relationships to justify their continued presence in the IT model. The great advantage channel partners have is that the industry they operate in is already moving to a model that so neatly matches the times. The great danger is that if they are not careful, they might not match the times – or the model.
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