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21 Sep 2009
Comments:1
Industry players are starting to see an uplift in customer orders and some have even reported a shortening of the sales cycle in recent weeks, a CRN straw poll has revealed.
CRN spoke to senior managers in a cross-section of top channel firms
to find out if it was still too early to be talking about the green shoots
of recovery.
Robert May, managing director of Ramsac, said customers have suddenly started approving purchase orders at the pre-recession rate.
Further reading
“During the downturn, the amount of hours we needed to put into a deal has practically quadrupled, because clients ask for quotes, then they request a meeting and then they take time to think about it again. However, in recent weeks we have seen a difference in clients banging back purchase orders.”
Richard Parker, managing director of recycling specialist EOL IT Services, agreed.
“Things are definitely improving,” he said. “In terms of new kit, the process seems to be speeding up and it seems that the restraint on spend has been released in some sectors. We have noticed a change in the banking sector which seems to be refreshing kit, which in turns boosts the recycling business.
“However, some economists are talking about a double dip, so we are still treading cautiously.”
Mike Norris, chief executive of Computacenter, predicted that next year will see an improvement.
“2010 will get better in the second half of the year. That is when things will start to pick up,” he said. “I think the VAT rate increase [at the end of December] will make a difference in the second half of this year but it will just be a little spike.”
Simon Aron, join managing director of Eurodata, said particular verticals specifically finance were returning to the spending patterns of old.
“These people are betting against the market and are winning, so they are saying yes to everything,” he said. “But it is certainly not the case in most sectors, such as construction, healthcare, legal and media generally people are still cautious.”
However, Aron said he is expecting a “huge” takeup of Windows 7 and Microsoft Server 2008 R2 in Q1 next year.
“I would say 90 per cent of customers are waiting for that to be launched next month before they even think of a refresh,” he said.
Damien Harold, managing director of Xact Marketing, also felt more positive.
“We are doing a lot of calling on behalf of manufacturers and channel firms, and we went through a stage over the last couple of months where end users were putting things off until January 2010,” he said.
“We are not getting that so much now we are getting a lot more leads and are surprised at the amount of activity out there. We are not hearing that sales are up, but a lot of managing directors are telling us they have a strong pipeline.”
Tom Kelly, UK managing director of Logicalis, was more cautious. “We have noticed that the order intake has gone up, but it has gone up at the expense of reduced margins,” he said.
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A word of caution to the accounting software channel
It is clear that there is a feeling that the worst is over and businesses are starting to release orders against business critical needs, particularly on IT infrastructure.
The accounting software market is less rosy. Whilst there has been a lot of activity in making the best out of the incumbent accounting software through consulting services (similar to building an extension on your house rather than move), the volume of new business software sales remains depressed. This is simply a reflection that change is not seen as business critical and the expense / disruption can be deferred with little impact to the business.
As the channel becomes hungry, margins are being eroded. In the 1990 - 1992 downturn, it became common for resellers to give the software away at cost just for the consulting revenue, and day rates were also reduced. The majority of reseller businesses failing took place 12 - 24 months after the 'recession' as too many fought to survive on the business that was available and the margins that could be achieved.
Today, it is probable that the 'recessionary tide' has gone out and is on the turn. That means that this is as bad as it is likely to get. The real question is how long will the turn take and more importantly, how long will it take to see significant growth in new business sales of non-critical IT.
The accounting software reseller community needs to find a software product that generates capital sales and consulting services at good rates to weather the next couple of years. The most obvious potential solution is one that enables businesses to maximise cash, as that will continue to be the single most business critical resource for every business for some time to come.
Posted by Neil Robertson | 25 Sep 2009
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