Arc squares up to credit crunch with rise in sales

Arc Technology HQ

Security distributor Arc Technology claims a stark divide is emerging between the fortunes of value-add and broadline distributors, after posting a 61 per cent increase in its half-year sales.

Stuart Reay, managing director of the Sheffield-based outfit, said that distributors with a strong services focus have more room for manoeuvre during these tough times, and that many are still taking on staff.

“We have almost doubled the size of our sales force in the past two years and have recruited four people in the past six weeks,” said Reay. “The broadliners are having to shed costs because they work on cost-plus-one margins and have nowhere to go.”

He attributed the rise in sales for Arc’s fiscal first-half to December to a mix of services growth and rising demand for data loss prevention (DLP) solutions.

Professional services and training generated 10 per cent of total sales, up from four per cent in the same period last year, he said.

“We were early adopters in the encryption space in 2004, so were well positioned to take advantage of the DLP explosion in 2008.”

Reay admitted that Arc’s growth meant the distributor, which completed a management buyout in 2007, is receiving an increasing number of enquiries from potential suitors.

And he predicted that cloud computing, which generates just five per cent of Arc’s sales, would be among the distributor’s growth hotspots in 2009. “Cloud computing is an interesting challenge for distribution as vendors have rarely gone through a two-tier channel. But a number of vendors are using us and it is working.

“We are not being complacent and are keeping a strong hand on the rudder,” he said.

Alastair Edwards, senior analyst at research firm Canalys, agreed that some areas of the value security distribution channel are still enjoying high growth.

“Security distributors in particular seem to be fairly optimistic about their performance at the end of last year,” he said.

“Other value-add areas are still seeing investment, such as virtualisation, which will benefit some of the other value add distributors.”

Chris Green, marketing manager at security VAR Networks Unlimited, felt that specialist resellers would be less likely to turn to broadliners in today’s cold climate as they retrench to their core business.

“As resellers are squeezed, they will focus on their core portfolio and will probably not need to use broadliners for other peripherals,” he said.