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A light at the end of the tunnel

It could be the sun shining outside, or it could be a train coming the other way. Fleur Doidge finds out if we're getting back on track in 2010

Cross purposes: The channel sees good and bad aplenty ahead for 2010

Those of us still here have presumably been fortunate enough not to steam straight ahead into destruction in 2009. Many of us still have our jobs and businesses, and some of us are even still making money. The overall feeling in the channel seems to hint less of impending doom than a few months ago – and in any case, it’s too late to go back now, isn’t it?

There are conflicting reports every day in the news about whether we are on track for economic recovery or not. The best we can say for sure is that things don’t seem as bad as they did this time last year, or even in March last year, or June. Some people are more optimistic than others, and for different reasons.

The Technology Channel Association (TCA), for one, says its members are definitely registering optimism about their prospects in 2010. The lobby group went so far as conducting a poll, where almost three-quarters (72 per cent) of the 56 of its 700 reseller, service provider, distributor and vendor members who responded said they expected their turnover to rise this year.

Some 57 per cent further said that their turnover will grow more than 10 per cent, with 61 per cent saying they predicted an increase in profitability of 10 per cent or more. Just 12.5 per cent of the 56 said they believed their profitability would decline through 2010.

A pleasing 72 per cent of the 56 tipped their businesses to have returned to pre-recessionary levels by the end of 2010. A third of respondents, however, claimed that this had already happened by the time of the survey in the fourth quarter of last year.

Adam Harris, chief executive officer at TCA, notes that 2009 was definitely a tough year in general for the IT industry. Everywhere, customers were cutting budgets, negotiating better deals with their suppliers and delaying spending decisions.

“But it appears that this has taught the channel to work more efficiently, w ith many expecting to grow in profit and turnover next year without hiring new staff,” Harris says. “Although the UK is taking longer than some other countries to emerge from the recession, it seems that the technology sector is in a good position to lead the economy on a positive upward path.”

The TCA survey, however, suggested unsurprisingly that recovery could take some time. About 44 per cent of respondents to the poll said they were already planning to hire more staff in 2010. Half said they expected to keep the number of staff they had at the end of 2009 – so it seems unlikely that the IT jobs market will pick up immediately.

As we go to press, ICT industry analyst Gartner is preparing to launch its predictions for 2010 report. Daryl Plummer, chief of research at Gartner, says the IT business this year is going to go in a lot of different directions. “There will be a lot of things that businesses will want to take advantage of, and other things they will want to shift down and out of,” he says. “Businesses will really be competing to be as efficient as they can.”

The year would see customers seeking to further optimise their IT costs, and focus more tightly than ever on what they do well. This means that sourcing is going to continue to develop.

“This is where something like cloud computing comes in. Where 2009 was a year of experimentation with cloud computing, 2010 will be the year it begins its high-growth curve. It won’t hit the mainstream completely, but will grow rapidly.”

He points to cloud services brokerage as a “real head-turner” for technology providers. Cloud customers won’t want to deal with cloud breadth and complexity, so will need a middleman between them -- the end users -- and cloud providers.

“Cloud services brokers exist just to take cloud services delivered to businesses and make [those services] work better. No business really wants to do that itself because costs will go up,” Plummer says. “I believe this is the largest opportunity for new and long-term revenue growth. I think in 2010 that fact will become very visible.”

Plummer says organisations will also grapple increasingly with how to interact profitably with people through mobile and social access channels.
The vendor view for 2010
Caroline Hodson, channel sales and marketing director at Trend Micro, says that in some ways the security scene for the channel will be similar to 2009, with a continuing uptick in malware complexity and the threats it poses to businesses.

“We will get more and more threats that aim to make money,” she says. “Just look at the way you can go online and buy any sort of underground capability.”

Cost-consciousness would still be important, so while organisations may well be aware of the threats and a need to invest more in IT security – especially as more organisations moved to a virtualised environment and involvement in social networking grows – they still won’t be easily convinced to open their wallets.

“Traditional security solutions are not going to be enough,” Hodson says. “IT departments are going to be pushed more and more to innovate to keep organisations in front of their competition.”

She says a recent analysis using a live rather than the usual controlled environment suggests that Trend Micro products may keep out up to about 95 per cent of wannabe network intruders.

“For resellers, everything is about margins and cashflow. Hardware and applications are going to continue to get squeezed, and I think it will get more extreme so resellers are going to need to look more and more at software and services,” Hodson says.

If 20 per cent of reseller revenue comes from services today, about half may come from services by year-end. So where, for instance, systems integrators were once seen as a route to market, they are now becoming entire markets in their own right.

“I also think we will see certain channel partners moving from a consultancy standpoint more into the channel – buying datacentres to be able to provide the different pieces, for example – and that is going to have quite an impact on the traditional channel, which will have to reform itself,” Hodson says. “So there will be ongoing consolidation.”

Alan Hatfield, channel development manager at HP, says imaging and printing will remain key revenue drivers for resellers as 2010 sees growth in managed print services accelerate alongside the business drive for cost and IT rationalisation.

“This will mean a huge growth opportunity for the channel around contractual services focused on document or workflow management and collaboration,” Hatfield says.

HP is going to develop new infrastructure and technologies that enable channel partners to streamline print-related contract management and improve its channel programmes, Hatfield says.

Jeremy Butt, vice president for worldwide channels at Avaya, says it expects more interest in converged communications as businesses seek to improve communications and efficiency.

“Proactive customer communications will enjoy a resurgence in popularity, and contact centre queues will be made to work for the benefit of both customer and company, through richer on-hold experiences, improved call centre productivity, and integration of social media,” he says.

“Contact centres will use real-time analytics and iterative process re-engineering, making business more agile.”

This would be the year of session initiation protocol (SIP) because it would help organisations reduce mobile phone bills. Flexible working would become more popular as companies seek to retain top talent and improve global operations.

“We will also focus this year on migration of the greater Nortel partner community to our partner programme.”

Solutions and partnerships will be key
Bernadette Wightman, managing director for UK and Ireland channels at Cisco, says vendors will need to take an individual approach tailored to each business customer as economic recovery takes hold.

“A key part of this will be vendors engaging with partners on their own terms. Rather than encouraging resellers to try to cover all of our programmes, all the time, we are trying to help resellers adapt their approach to their own specialisms and value proposition,” she says.

“Most big IT vendors have historically been very focused on hierarchies in their partner programmes. While the biggest partners are always going to be hugely important, 2010 will see more vendors recognising that smaller and niche partners are increasingly important, often working in collaboration with the larger partners.”

Cisco partners could look forward to new systems that reward early engagement and pre-sales work as well as partner-to-partner strategies.

It will also prove a year of solutions-based selling. All sizes of business will be attracted to virtualised, on-demand resources as well as video, software as a service (SaaS), and unified communications.

“These represent major changes for any organisation and solutions-based selling will therefore become all important as customers expect their problems to be solved quickly and efficiently,” Wightman says.

Alastair Molyneux, business development director at Kroll Ontrack, says software sales should improve in 2010 as sales cycles shorten, pipeline purchases finally come through, and business makers become more decisive.

“We seem to be witnessing history repeating itself in new technologies, especially with regards to the increased uptake of virtualisation that we witnessed last year. Mistakes happen as corners are cut and new technologies are not properly understood, implemented and supported; the end result is often data loss,” Molyneux said.

“This can even be the case with mature technologies, or existing storage media, as we have seen with the an increase in SQL server recoveries.”

Next year, Kroll Ontrack expects to see more collaborative projects with OEMs. Solid state storage (SSD) will also start to hit its straps in 2010 via an influx of high-profile, jobs, suggested Molyneux.

Brian Gammage, vice president and research fellow at Gartner, says that 2009 was certainly a difficult year, with many organisations hamstrung by economic and budget constraints.

“But for the most part, they are entering 2010 with more optimism, and some are planning a return to growth,” Gammage says. “And I think there is a shift in the balance of power for IT in the organisations that use it, and at the same time you have the ongoing democratisation of IT – the way that users in an organisation interact with it.”

In any case, the power of perseverance to produce wins in the unlikeliest of circumstances has often been remarked on. The best way out is always through – or it should at least be tried, before blowing the whistle.

A tale of heights and depths in 2009
>> www.channelweb.co.uk/2254901