Channel shows resilience in face of challenges

The channel is well known for its ability to evolve to changing technologies, and it is being forced to develop the same resilience as it faces economic headwinds.

Last year saw the impact of inflation and ongoing uncertainty, with wars in Ukraine and the Middle East, yet despite those conditions, many channel players came through with growth.

The ability to do that again in a year that has already seen further uncertainty, sparked by the Iran conflict, as well as the impact of hardware price rises caused by component shortages, is a prospect that is causing some concern across the channel.

Last week, Omdia research found that almost 60% of global channel partners expect the economic conditions to hit profitability, with more than half expecting double-digit declines in the first three months of the year.

Alastair Edwards, chief analyst at Omdia, said the component price rises were impacting profitability, and the situation was being exacerbated by the expanding war in the Middle East.

“Conflict in the Middle East threatens to intensify the crisis, with oil prices surging and supply chains disrupted. Distributor profits will come under greater pressure, particularly if delivery and logistics costs rise sharply. If conditions continue to deteriorate, the risk of channel bankruptcies is set to increase dramatically,” he said.

However, reports from listed channel firms have remained encouraging, with Computacenter achieving a record-breaking set of numbers last week, followed by a strong first-half performance from Softcat.

Softcat’s executive director and chief executive, Graham Charlton, shared a sense of optimism about the rest of this year and beyond as he aims for further growth.

“We’re certainly mindful and watchful of it. As you know, we continue to grow at double-digit rates through high inflation and interest rates, so our ability to grow and my confidence in our ability to continue to take market share is absolute. I’d love that to be in a benign environment. If it’s not, and if it’s in a challenging environment, then that’s fine. We can deal with that too,” he said.

“We’re definitely mindful of it and helping customers navigate it, with how it affects them and their budgets, too. But I think it’s too early to understand how that plays out, so I remain optimistic,” Charlton added.

Softcat has always viewed the UK market as one that contains scope for further growth, which can be gained by delivering a wide portfolio of technologies backed by high levels of customer service.

“It’s a very fragmented market, and fragmentation doesn’t suit customers. We’ve only got a 5% share, despite being the biggest. There’s no reason that share of market can’t one day be 20% or more, and the market, by the time we could get anywhere near that, will have probably grown four or five, maybe 10 times. The opportunity for us to grow is huge,” he said.