What recession? A break in the clouds

Despite all the gloom there are still plenty of silver linings out there. In part one of a two-part feature on the economy so far, Sara Yirrell delves deeper

Back in January we at CRN discovered that the channel's outlook for 2009 was overwhelmingly positive.

But six months on, what is the feeling? Are there still opportunities out there or are we stuck firmly in a rut?

Richard Cook, managing director of integrator Blue Chip said the key is not to follow the pack.

"With doom and gloom saturating the media, it is sometimes difficult to assess your own situation and how best to counter the economic crisis," he said. "This year is all about the survival of the fittest - the tactics, business reputation and determination that you take to market will inevitably determine your survival.

"Like everyone, Blue Chip started off 2009 unsure of what the year would bring but we have continued to invest heavily in our marketing engine, launched new initiatives and services and held events to set us apart from our competitors.

"We have also successfully targeted pockets within the public sector that have money to spend but without metres of red tape. Having experienced a positive start to the year, especially with large projects, our pipeline looks strong and we anticipate a steady stream of orders to follow suit."

Rob Leggett, sales director of VAD Siracom said his firm has experienced a strong quarter one.

"One of the drivers for VARs is to create opportunities for new business into existing customers," he said.

He explained that these firms need solutions to help work their existing IT assets harder, solve end-user network or communication problems, cut communications costs, solve deployment problems or offer genuine business advantage such as voice over Wi-Fi, IP videoconferencing and networking over existing cabling infrastructure.

"End users are very likely to resist or delay major capital investment in new systems or substantial system upgrades unless they can be shown to bring immediate cost benefit. Resellers that help their customers cut costs and extract maximum value from existing systems will thrive," he added.

Petra Heinrich, EMEA channel director at Red Hat, said the vendor was taking full advantage of the move towards open-source software.

"The power of open source and Red Hat's momentum is evident in our growing partner eco-system," she said. "Our partners and customers are taking advantage of the global shift away from proprietary software."

Robin Price, sales director at VAR KBR IT & Networking Solutions, said his firm has bucked the trend so far this year.

"We have had a great 2009 so far and we are set for further expansion with new nationwide contracts, which means we are forecast to grow our annual turnover from £2m to £5m by next year. For us it has really been - recession? What recession?"

Price said KBR had capitalised on its expertise in wireless broadband to target new customers.

"Our focus on customer satisfaction has meant that we have built up a strong reputation for delivering carrier-class wireless mesh solutions that enable service providers, government, health and emergency services to rapidly deploy cost-effective broadband access, voice over IP, public and private Wi-Fi access and video surveillance," he added.

David Alexander, director of managed service provider NetworkFlow said convergence was still in demand.

"Spending on IT networks, computer hardware and support services by large companies has fallen off a cliff," he said. "However, the benefits of converged networks and continued price depreciation are making MPLS and IP VPN networks attractive. It is enabling companies to dramatically reduce travel budgets; home working together with voice and video conferencing is increasing dramatically."

Phil Jones, chief technology officer at Shoden Data Systems UK, said: "We have seen a more conservative market emerging over the last six months; organisations know they have to invest in IT, but are looking for a very quick RoI to justify capital outlay. They also need to be seen to enhance their ‘green' credentials while delivering rock-solid IT infrastructures."

Shoden said that despite his firm experiencing a positive 2009, other firms have not been so lucky.

"Success very much depends on your offerings and how well you meet the combination of demands made by your potential and existing customers," he said. "The IT industry has suffered dips before, notably in the mid-1970s and in the aftermath of the dot-com boom in 2001/03. In both cases a stronger, vibrant IT economy has emerged, and I believe it will do so again."

Jim Scott, general manager enterprise mid-market division at Sage, said there is still growth in the market.

"2009 has been extremely challenging, but some of our business partners are not just surviving - they are actually growing," he said.

Scott said Sage was helping its partners close deals.

"Through their intimate relationship with Sage, we can help them to manage their costs, support them when resources are tight and increasingly importantly, come to the table with them to close deals with their prospects," he said. "These partners have also balanced their strategy. They are investing their efforts in both maintaining focus on their existing install base and continue to build new business for the future."

David Ellis, director of IT security at distributor Computerlinks, said customers are more demanding for a return on their investment.

"The broader IT market is undoubtedly tough, whereas the IT security market is more resilient to the overall economic conditions as end-user companies still have to comply with corporate governance. Also end users need to remember that security threats don't go away just because it is a hard economic environment - network security needs to be upheld."

Ellis said resellers and distributors alike are having to work harder to justify expenditure and show true RoI to close projects.

"There is also more pressure on margins, but we are cautiously optimistic about the remainder of the year," he said.

Martin Saunders, marketing director of MSP Claranet, said pricing pressures had caused wobbles in the early part of the year, but he felt confidence was improving.

"Many of the business customers of our channel partners had a tough start to the year, focusing solely on saving money. However, confidence has been returning and appreciation of the benefits of outsourcing has been growing. Partner are capitalising on this and providing businesses with outsourced services that both save costs and allow them to focus on what they do best; service customers, compete and grow the business."

Stephen Read, head of SME at SAP UK, said increased pressure on budgets and greater competition for contracts meant it was no surprise the year has been tough. But there were pinpoints of light, he said.

"Efficient financing solutions can help companies plan the overall cost of IT investment so whole projects can be financed to preserve cash while realising benefits.

"Additionally the last year has also brought opportunities for businesses to streamline their technology and scrutinise business essentials, resulting in companies reassessing their IT systems. SAP and our channel partners have also seen some strong momentum in the SME space, with SMEs realising that investment in tailored technology can only help their prospects and help them monitor the business processes. With this momentum continuing to build, green shoots have started to emerge and things are looking up for the rest of 2009."

Neil Robertson, chief executive of Compleat Software, said 2009 had been a mixed year but spending habits had changed.

"A star performer has been spend control software which fully automates the purchase-to-pay cycle, driving huge productivity gains while enabling the management to lock down spend and drive better prices through supplier consolidation," he said.

"The software market has been different. In bad times, people add extensions to their houses rather than move, and the same is happening with software. There are less new significant sales opportunities, but this is being countered by a lot of add-on sales to increase the benefits from existing solutions."

John Wood, sales and marketing director at unified communications vendor C3 agreed.

"In the main, people are completely habitualised in using web services such as VoIP and IM for everyday communications. While the monetisation of these services is nothing new, the range of possible services is limited.

"Because our platform is SIP enabled, it gives our customers the power to create truly unified communications services, which can connect them with new markets and customers."

Danny White, sales director at security service provider Pentura, said: "Pentura has identified a number of areas that remain strong including data governance. That, and our continued focus on consolidation and virtualisation which provides long-term cost reduction, is serving us well."

Tune into Channelweb for the concluding part of the analysis next week.