How resellers see the future

Everyone in the channel has an idea of how they think the market is going to go in the next few years. Some are downbeat — based on the grim experiences of the past few years — but others have seized on the admission by Dell that it needs to sell indirect as evidence that there is a healthy future.


Everyone in the channel has an idea of how they think the market is going to go in the next few years. Some are downbeat — based on the grim experiences of the past few years — but others have seized on the admission by Dell that it needs to sell indirect as evidence that there is a healthy future for resellers.


Whenever a milestone is reached, there is always an opportunity to look back and raise a glass to the good old days. But technology rarely stays still and rather than talk to the channel about how it thinks the industry has matured, the 25th anniversary of MicroScope provided an ideal moment to ask it about the future.

The most obvious question to ask the channel was what its gut feeling was about the future. In recent years, average sale prices and margins have tumbled, vendors have dithered about being loyal to the indirect model and marketing funds have become increasingly difficult to get hold of.


Just over half the reseller respondents in the MicroScope survey said that they were slightly optimistic, 52 per cent, but add that to the 35 per cent that were very optimistic, and you can see there is a high level of belief in a positive future for the IT channel.

That optimism came despite an acknowledgement that margins would not be returning to the glory days of the mid-1980s, when they ran into healthy double figures. Some 66 per cent expected margins to be slightly squeezed in the future and 28 per cent were bracing themselves for a heavy reduction in the amount they could make off each product.



Support for specialists

When it came to getting the views of resellers about distribution, the reaction was surprising given the increasing move towards consolidation. There was strong support for specialists, with half of those surveyed believing that there might even be more specialists and fewer broadliners in the future.


Just shy of 30 per cent thought that the broadliners would muscle out their specialist rivals, a trend that does seem to be borne out by the current high levels of channel consolidation.


When resellers were asked how the expected changes to margins and distribution would impact on their businesses, 75 per cent agreed that they would be positive and very few expected the current wave of consolidation in the market to end in the near future.


More than 90 per cent expected more mergers and acquisitions to add to what has already been a very busy year in the market, with recent examples including Avnet and Magirus.


Nobody surveyed took the view that there would not be any more consolidation in the near future, indicating that it has become a feature of the market that has become accepted as near the norm.



Increase in interaction

One of the most contentious issues in the channel is the relationship between the reseller and the vendor. Comments about mushrooms — being fed crap and kept in the dark — are usually used to describe the interaction between the two ends of the channel.


But in the age of Web 2.0, vendors have done a great deal to invest in tools that are meant to increase the level of interaction between themselves and resellers. Look at nearly any vendor and online environments are being seen as the answer to bridging the gap between them and their partners.


Those online efforts need to be made because the channel is not convinced that the relationship has been getting any better over the past few years. The majority (42 per cent) felt that things had been improving, 24 per cent thought they had stayed the same and 34 per cent believed that things had worsened.


But the interesting bit was when resellers were asked how they thought things would go in the future, and whether manufacturers would continue to support the indirect model.


Resellers were divided, with 45 per cent believing that vendors would support the indirect model for the foreseeable future, but an almost equal number, 42 per cent, being more cautious — expecting support for the next few years, but not indefinitely. Compared with other questions where those replying in the negative were reasonably low, a slightly higher minority of nine per cent said that they expected the support for the indirect model to reduce.



Products get personal

Apart from spending time thinking about the direction that relationships with vendors might take, resellers are also trying to invest their time and money in gaining the skills to support those technologies that are going to be popular in the future.


If there is a theme to what the channel expects on the technology front, then it is around the idea of more personal technology — providing products and services that make it easier for people to work anywhere.


As a result, converged voice and data, remote working solutions and mobile communications are all expected to have a high impact on the channel. The digital home is also expected to feature more highly, as more users look to increase and improve the technology that goes through their front doors.


In terms of ranking the results, the immediate priority appeared to be going towards getting a handle on the convergence market — more than half of the respondents predicted it would have a high impact on them in the next year.



Crumbling confidence

But it was a different picture when the channel was asked if it felt in a position to exploit those technologies as they became increasingly popular.


The level of confidence was nowhere near as high as it was on the question of predicting growth areas. Very few resellers felt that they were in a position where they were able to exploit emerging technologies.


But the figures reflected a movement away from being completely unprepared, with most halfway or slightly more towards getting into a position where they can meet the challenges the latest technology presents.


Those results will spark debate because there is inevitably a question to be asked of the vendors to try to work out why more has not been done to get resellers ready.

Some of the messages that the vendors have been drumming into resellers over the past few years, however, do appear to have sunk in and are being acted on in the channel.



Selling a solution

A healthy 82 per cent of respondents said that they had already moved to a sales model where the emphasis was on solution selling and not pushing point products.

There appeared to be more willingness to engage in partnerships between resellers. In a sign that would bear out a message that software vendors have been pushing, particularly recently, the age of collaboration seems to have already dawned for 43 per cent of the channel.


But those vendors hoping that the route towards increasing partnerships and solution selling is via an ecosystem or an online environment such as Second Life will be left wondering what they have to do to engage with a reseller base that has 43 per cent and 59 per cent never planning to join an ecosystem or develop a virtual relationship.

There was also a slightly lower than expected appetite for resellers to launch divisions to target high margin growth areas — one feature of the market some industry watchers had expected to increase.



Favourable future

The positive result of the MicroScope channel survey is that taking the pulse of the industry shows that it is in healthy condition, with a fair amount of optimism about the future.

But there are still question marks over the relationships between vendors and partners, with forms of communication possibly being pushed at one end of the channel but not being readily accepted at the other.


That should give pause for thought and vendors that are keen to continue engagement with the channel might have to go back to the drawing board over ecosystems and virtual relationships.

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