EDITORIAL - Network boom has channel all at sea

The sheer scale of the impact of networking on the channel cannot be underestimated. On behalf of PC Dealer, Compubase has just completed its annual look at networking and its role in the UK channel.

This is the second year the research has been carried out and 12 months has proved to be a deceptively long time in the tale of resellers and networking. The key finding shows that the number of resellers either selling network products or services has rocketed by 80 per cent, a massive leap that proves yet again the decline in importance of the PC to the channel. Just as important, resellers were canvassed for their views on distributors.

There are a number of reasons for the shift in resellers' resources.

Firstly, the PC is not the money-spinner it once was, which means alternative sources of revenue must be sought. In the UK, networking products are seen as the next big opportunity, with resellers flocking to sell products that are increasingly seen as 'plug-ins'. This means that you no longer need a crack team of hairy, paisley-shirted nerds from MIT to get your cabling sorted out. The main advantage here is that resellers can get into networking relatively cheaply, selling low-end products without having to invest in technical whiz-kids.

And that's just what they are doing.

This is borne out by the research which has found resellers in the SME sector going through the roof, in line with growth in that market. But the number of corporate resellers - those that derive more than 50 per cent of their income from corporate or government clients - has dropped significantly. An analysis of their turnover break down from different users showed that fewer resellers are making much money from leading user accounts. It hasn't helped that large networking vendors have taken to selling direct to clients over the internet. Despite the platitudes from those vendors saying: 'customers are offered the choice of buying from one of our partners, or from us', there's not much chance that a customer is going to choose to deal with a 10-strong reseller against dealing directly with a billion pound industry giant. In fact, vendors going direct surpassed price competition and shrinking margins as the main threat perceived by resellers.

Resellers may be taking a battering by the Net in one sense, but they've been quick to latch onto the potential here. The research showed that the number of resellers now calling themselves internet Vars, or who acknowledge the potential of the Net and e-commerce for their business, was substantially higher this year. The development of NT was seen as a most important area overall by resellers in 1998, but only SME resellers felt that way this year. Corporate resellers now believe internet/intranet and e-commerce offer more chances.

Voice over IP, while a much-hyped development, was not seen by most resellers as being important to their future business, although this is expected to change once vendors start to offer more and better products.

One big surprise of the survey was the rapidly worsening attitude of resellers towards distributors. Most now admit to having no loyalty to any particular distributor. Those that do, cited a preference for dealing with broadline distributors instead of specialist networking distributors. One notable exception was Azlan, now number three in the ranks of the top 10 distributors, behind Computer 2000 and Ingram. But while Azlan champions the specialist distributors' corner, it's the broadliners that will continue to take the lion's share of the business.