Banking on banks to save the day

At the height of the 80s, services were hailed as the sector that would drive the whole of the UK economy. No need for dirty industries like steel and coal, which saw us through the old boom times. The new boom was to be based on services.

Whether that worked or not, I couldn't say. But banking is still the main sector driving the IT industry - particularly the PC market.

Most of the major distributors in this industry began trading in the early 80s, with the development of the PC and the huge market that it spawned.

And just like the Scottish PC sub-assembly industry, which never managed to develop beyond a huge screwdriver operation, the major distributors have not managed to break out of the confines of the UK and expand into Europe. Some have tried and have been driven back. With few exceptions, they remain local players.

There was always a danger in their approach. That danger has become more than a mere spectre and is knocking at the door of almost every UK distributor. It is the spectre of monopolisation and consolidation.

The big US players are buying at an incredible rate and the outlook for the average reseller could be serious if this pace of change continues.

Tech Data's plans to buy Computer 2000 and CHS' purchase of Metrologie are part of a general trend towards concentration of power in the channel.

Its effect could be to freeze local players out of any expansion into Europe.

The channel across Europe is still fragmented. In most European countries, the channel is at the same stage it was in the UK about 10 years ago.

The time to expand into Europe has probably passed for most distributors, and the giants are reaping the benefits.

There may be some for resellers, too. Yes, lines of credit may narrow even more, but if resellers really focus on services such as support, networking, internet and intranet services, and supporting the customer well after the boxes have moved out through their doors, there is a possibility of real life in the UK channel.

And many distributors are taking online ordering very seriously, despite the average reseller's complete apathy, or rank hostility, to the idea.

But as the year 2000 and European Monetary Union compliance make their demands across the whole of Europe, that engine of the services sector - banking and finance across investment banking, retail banking and retail insurance - looks likely to expand its spend dramatically in the next three years to about $44.5 billion in 2001.

And according to a recent IDC report, with PC shipments rising this quarter to 6.42 million units, the market is set to revive, helped by the sub-#1,000 PC.

If resellers are smart, particularly the bigger ones, there are huge opportunities waiting. The big vendors may take the lions' share, but the reseller with attitude could carve out a decent niche, particularly in electronic distribution and the internet.