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Channel touts 2005 as year of opportunity

Channel touts 2005 as year of opportunity

Consolidation and integration have proved to be the key trends of 2004 but it will be the way the channel utilises these which will provide business opportunities in 2005, industry representatives claim.

The amalgamation of Tech Pacific and Ingram Micro, along with the Lenovo acquisition of IBM's PC business, are expected to have whole-of-industry ramifications in the new year. The local IT community has also seen a raft of mergers and acquisitions across the systems integration market as solution providers try to come up with new ways of improving their profitability and expanding their client base.

Kaz Group managing director of technology services, Andrew Richardson, said Telstra's acquisition of the company in July gave it access to a wealth of new customer relationships. The deal would also allow the integrator to employ the telco's intellectual property to construct more extensive solutions for its existing client base, he said.

On the other side of the coin, rival companies see the acquisition trend as positive for the whole industry - provided players are able to differentiate their own product sets and services from the pack.

BCN managing director, Ken Lowe, said the elimination of a potential competitor in Tech Pacific would leave room for additional profits and opportunities for growth.

What was now important was developing an individual set of products which would allow BCN to stand out from the rest of the market, he said.

The distributor would concentrate more of its efforts on research and development to improve its product design, packaging and overall customisation of hardware for the local market, Lowe said.

"We are taking on more products to address opportunities in other areas, rather than just desktop PCs, which have been our primary business for the last 10 years," he said. "Home automation, information management, project deployments, product integration and embedded technologies - these are not the traditional fields of the PC market.

"The whitebox industry is being challenged, so we need to develop other segments." Similarly, Westan is increasing the scope of its product lines by adding more systems platforms.

The distributor's marketing director, Phil Jackson, said it was also coming up with ways to boost its services and support to partners as a way of securing a future against low margins.

"IT distributors need to mature their relationships with partners for long-term sustainability," he said. "From a margin point of view, it's about adding tangibles into the relationship. You can no longer just do supply and pricing."

Express Data software division manager, Donna Adam, said it would be putting more effort into training and certifications for partners in order to add depth to its reseller base.

The distributor's communications division manager, Derville Hannon, added the company had spent the majority of the year investing in the skills of partners in non-metro areas to utilise in the next 12 months.

This would create a bigger sales pool, she said.

Such a sentiment is also being echoed further down the sales channel.

Resellers agree the key driver for their businesses in 2005 will be differentiating their offerings from competitors to avoid the slide in sales margins.

While it's nothing new, building up the depth of product sets and introducing additional services to customers will be focal points in Plus Corporation's sales strategy next year.

The Sydney-based reseller's managing director, Nigel Fernandes, said it was putting more effort into building its own higher-end gaming and server machines as a way of overcoming shrinking margins.

"There is little margin left in the $2000 basic system," he said. "We need to differentiate ourselves better through our level of equipment."

Infocom Computer Systems account manager, Aaron Arblaster, said it planned to tackle this concern in 2005 by providing more solutions and services.

"Pricing this year was a big obstacle," he said. "We've had to chop our margins, but we realised we couldn't match everyone's pricing. What we're doing is trying to give great after-sales service."

For example, Infocom introduced networking technologies and onsite services as ways of improving its bottom line, Arblaster said.

"We have also started signing customers to services contracts for our own security," he said.

Technologies to watch

Resellers and distributors also identified the release of Microsoft Windows Media Center Edition (MCE) as a technology delivering new opportunities in the convergence space. Arblaster said Infocom would approach hi-fi retailers next year to try and converge our solutions.

"They don't have access to our products, so we have an opportunity to make an alliance with them," he said.

On the integration front, Dimension Data's chief technology officer, Gerard Florian, said there were two customer concerns which would provide the basis for most IT projects in 2005: reduction of cost and consolidation of server and storage technology.

"Everybody is trying to increase productivity but at a reduced cost," he said. "There is now more out-tasking of IT operations - for example, telephony, information management and back-up services. In the security space, people are looking into assessment services.

"We see this as a big growth area and we will be bringing more services to market in that space."

Florian highlighted security, VoIP, storage and wireless as continuing to be the top priority technologies for the next year.

Richardson said Kaz had also seen a rise in select outsourcing.

As a result, the integrator was now partnering with traditional competitors in a bid to provide more value to customers, he said.

Optimism returns

While still conscious of IT expenditure, both integrators and vendors agreed the market would become increasingly optimistic in 2005.

Florian said companies had stopped trying to cut costs out of IT and were now looking at ways to build on existing technologies for business growth.

"This year people started to innovate again," Florian said. 'We are seeing the vitality back in the market. With instant messenger for instance, people have stopped thinking of it as a nuisance and are now looking at it for its beneficial use."

Microsoft partner group director, Kerstin Baxter, said it had identified integrated and value-focused solutions across infrastructure as an area of growth for channel partners. Like Florian, she pointed to companies using existing investments as a way of gaining efficiencies from their IT operations.

Baxter said Microsoft had a positive outlook for 2005, and predicted growth in its small business sector would increase from 100 per cent this year, to 150 per cent.

"We have seen the pendulum sway from cautiously negative to cautiously optimistic," Kaz's Richardson said. "Customers are still focused on cost efficiency but increasing levels of investment are being made."

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