While a number of vendors and distributors are redefining their relationships, market players say changes in the channel space are part of a natural business cycle.
However, they maintain that it does speak to the general economic pressures being experienced. The consolidation that has started to occur within this space is not expected to stop any time soon, they say.
Pierre Spies, CEO of Tarsus Technologies, says there is a lot of pressure in the channel, with interest rates impacting heavily and a general shortage of cash-flow.
"We can expect big changes in the next 18 months," he says. "The situation is not short-term and there is a lot of speculation in the market about who's talking to whom."
Spies says, despite the demise of Lightedge, which he says caught a lot of people by surprise, the channel is "not at panic stations yet". However, if another big channel partner were to go under, the picture could change dramatically.
A number of channel shifts have taken place lately. HP ended its long-standing relationship with Rectron and moved a range of business over to Axiz, which also scored Acer's server and EasyStorage business.
EMC introduced a new focus on the channel, while Pinnacle Micro was given the exclusive rights to Ritek's optical media and flash memory products. Drive Control walked away with the rights to SMC's entire range of network products, while Bytes ended its Xerox distribution relationship with Square One, and Konica Minolta Business Solutions dumped Teropa Technologies. In addition, Pinnacle Micro and Verbatim called it quits after working together for 13 years.
Planning for change
Craig Brunsden, chief marketing officer of Axiz, says the current market flux is something that happens from time to time. The channel has been through a phase of relative stability and changes to various relationships were inevitable, he notes.
"We certainly expected to see some of this and are not surprised - to some degree we even planned for it," he says. "There is nothing sinister behind it and there is no reason to panic as a reseller customer."
Even though SA is facing a difficult year, the channel has experienced tough conditions for a couple of years now, he adds.
"SA is seen as a solid emerging market that is now maturing, so there is more focus on the territory in general and more focus on vendors.
"At the same time, the market is only so big and there are going to be winners and losers - we shouldn't fall into a trap of negative sentiments.'
Lean, mean machine
Ian Duvenhage, Comztek Cape Town regional manager, is not as optimistic.
"Rising interest rates, unfavourable macroeconomic conditions and decreased customer confidence have resulted in a downturn in the local channel.
"Unfortunately, this slowdown in IT spend is likely to continue into 2008, with little reprieve until the middle of the year."
He says the corporate sector in particular is feeling the effects of this stagnation, with coastal regions being hit first.
Duvenhage suggests that, until the situation turns around, "start differentiating your company from the competition, focus on niche marketing campaigns and training and, above all, customer service. The current consolidation of the market will imply that only real value added and proactive resellers, distributors and vendors will benefit from the expected upturn."
Ron Keschner, MD of Channel Capital, has a different expectation: "A drop in the interest rate will be the first sign of a turn and that will not be in 2008," he predicts. His advice for the next 12 to 18 months is, therefore: "Be lean, mean, and conservative."
Keschner says, while the interest rates and rand volatility squeeze account for about half of the current market activity, the other half is a logical consequence of the boom that has been experienced.
"The deals have been getting bigger and bigger after three years of growth," he explains. "The problem now is: how do you pay for it? The pressure on cash is enormous and we will start to see a lot of consolidation.
"In a sense, people have become the victims of their own success."
Related stories:
Axiz signs with HP
EMC prioritises channel
Lightedge sticks to BEE accusation
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