A tale of the heights and depths in 2009

Will 2010 be better than 2009?

It was the best of times, it was the worst of times, the age of wisdom, foolishness, and belief; the season of light and darkness, the spring of hope and the winter of despair, just like Dickens said. “We had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way.”

The channel – lagging the financial markets in many cases – has careered from the heights to the abyss and back again. It has been tough and it has been confusing. By 31 December, some will not have made it through to fight another year, but some did quite well.

Sukh Rayat, vice president of sales at Avnet Technology Solutions, says that although no one could say it had been a great year, it had been relatively good on balance. “Our numbers have fallen like everybody else’s,” Rayat says. “But all of those acquisitions got us to critical mass in the UK.”

Avnet made various acquisitions from 2005 to 2006 and through into 2008, which it now believes have got it where it needs to be, a solution-enabling organisation with
a market-leading footprint. But, Rayat adds, it might have been better not to make so many acquisitions so quickly in tough times.

“The latest acquisition went well, but the previous two or three came up very quickly at a time when the market was turning down. It is probably better to integrate business by business before you buy another new business,” Rayat says. “Sometimes those things are not under your control.”

Working for growth

Alex Cook, sales director at document management integrator Copylogic, says 2009 was a good year for it, with the opening of its Lloyd’s of London office and acquisition of new business.

“Adding solutions to hardware is the future,” says Cook. “We have seen our margins being squeezed, and more of our customers’ businesses failing. Despite this, we have been able to win more new accounts than in 2008, and grew telesales, field sales, and engineering teams.”

The answer was hard work, and a boost to headcount and marketing, especially at events, to get extra leads. New customers often did not have the capex, but you could not simply blame the economy and back down, says Cook.

Eddie Pacey, director of credit services at Bell Micro, points to the cut in trade credit insurance made available to the channel.

“The catalyst was the recessionary period that crept in during the autumn of 2007, taking further hold in 2008 with insurers facing massive claims paid to premium income ratios,” says Pacey.

However, although “some areas and sectors” had certainly suffered as a result, the overall impact was not as large as first thought. Credit in the channel had remained resilient and accommodating. Bell Micro has offered credit to four start-ups in six weeks of late, he says.

Fewer companies went bust in 2009 than expected – perhaps partly because banks and other financial institutions were focused so tightly on their own, extremely high-profile, problems. The pressure usually applied by banks to businesses in trouble was not seen so much this year, says Pacey.

“Additionally, businesses that may have collapsed were acquired by others and distributors rose to the challenge of working with troubled clients more closely,” he says.

“My guess is that pressure has built in this last quarter. Banks are now focused on getting their houses in order to repay government loans and meet new
regulatory requirements. They are undoubtedly still tough when lending to SMEs, despite government initiatives and support, and appear to be reviewing their portfolio of loans and investments. This will mean some pain.”

Scott Fletcher, chief executive of ANS Group, says 2009 has been a year of growth and investment. “What we did in the past six months in particular was take on an additional 25 people – our sales team has doubled in size and we got some really good people from the competition who were not being treated very well,” he says. “And we have had our best Q3 ever.”

Fletcher says ANS started its investment programme at the start of the year, so by the third quarter the new resources – human and otherwise – were bedded in and beginning to produce results as the mid-size and enterprise markets started to spend again.

“We have £3m in the bank; we are a very solid business,” he says.
“Virtualisation, datacentre services and storage did well. Things such as unified communications were not so good – but in the last quarter, they are starting to move again.”

Jim Kent, chief executive of communications integrator Datapoint, agrees, saying his company saw a 22 per cent decline across the board after a “highly successful” 2008.

“Large infrastructure plays didn’t take place,” says Kent.

Phil Jones, sales and marketing director at Brother, is also upbeat about the year. Things are going “really well” despite difficulties October to January and changes at Brother headquarters.

“Timing is everything, and we brought out some great products, such as the A3 multifunction printer that is effective for reducing costs,” says Jones. “But rather than trying to be everything to everybody, we moved our tanks and gave heavy fire from those positions.”

Andy Hardy, managing director of international sales at Compellent, says 2009 was its best year to date – it grew revenue for its 16th consecutive quarter, signed many new customers and continued to expand its channel.

Growth for some

“It wasn’t plain sailing this year but we were well above par,” says Hardy. “We anticipated that UK users might put IT spending on hold so they could weather the downturn. However, we knew the business-critical data that they rely on to remain competitive would continue to grow, and many UK datacentres are rapidly running out of space and power. The need to do more with less became a harsh reality in 2009.”

Mike Bienvenu, technical director at VAD Softek, says it has been a very good year for it too, as it has achieved growth via its data encryption products and Code of Connection (CoCo) compliance.

“Where people had an ongoing need, budget was made available.”

Brian Thomson, EMEA managing director at hosting provider Rackspace, says it has been a really interesting year with profits up 45 per cent in Q3 — managed services were holding their own.

“I am very pleased with the growth we achieved,” he says. “And we had very low churn.”

Dave Ellis, director of e-security, professional services and training at Computerlinks, also found

2009 positive, and expects December to do well — it is usually its strongest month.
“The market sectors we play in have been relatively immune from the recession, although certainly we have had to work harder to close projects,” he says.

"Customers have demanded stronger business cases for new technology deployments and have required demonstrations of return on investment (RoI). We have also seen continued pressure on margins as end-users shop around for the best deals.”

Be prepared

Stephane Kirchacker, managing director northern Europe for data archiving vendor Atempo, says the recession had made things tough but it has maintained single-digit growth.

“To be honest, we did make preparations the previous year across the company in anticipation. We made sure our solutions were clearly positioned within the context of cost reduction and storage optimisation,” says Kirchacker. “This approach has clearly helped our network of resellers.

Data protection and archiving remained reasonably strong, especially in areas where the RoI was clearly identifiable.”

Ian Vickerage, managing director of audiovisual distributor Imago, says the year had been “a bit weak in the middle” but otherwise reasonable, due to expanding abroad despite the downturn.

“I think that was a good move; we are in eight countries now. And probably some people didn’t take the opportunities,” he says.

Tamar Brooks, channel sales director at CA, said many end-users extended buying cycles and were more cautious. CA as a result focused on strengthening
its campaigns and partner programme.

“As a result, CA has posted sustained growth quarter by quarter. Although the economy is by no means out of the woods yet, it’s good to see that it has not
all been doom and gloom,” she says.

“This time last year I predicted that companies would be more proactive in their green buying strategies. It is good to see this taking hold. On-demand software has also gained momentum alongside virtualisation and automation.”

Andrew Binding, northern Europe vice president at distributor Magirus, says its relative success in tough times was at least partly due to its decision to focus increasingly on virtualisation and storage, which have both remained strong due to their cost and efficiency advantages.

“This year has been very difficult for everybody,” said Binding. “And there is a difference between what you budget for and what you expect to get.”

When all is said and done, this year’s Christmas break represents, perhaps, a far, far better and well-deserved rest for the channel than some have ever known.