Rule Britannia

The UK is leading Europe in terms of channel growth, according to exclusive research from Context revealed at our recent Partner Connect event in Coventry

Despite continuing tough economic conditions, the UK channel is very much alive and kicking, according to a leading market watcher.

Speaking at CRN’ s recent Partner Connect event, Jeremy Davies, chief executive of Context, said the SMB market had been identified as the main driving force behind the success of the UK channel, as vendors look to partner with trusted IT advisors to smaller firms.

Based on sell through data gathered from its distribution panel which tracks $2bn of sales across 18 countries in EMEA, Davies said the UK had performed better than Germany in the first quarter of 2012, seeing total growth of 20.8 per cent, compared with a 2.3 per cent decline in Germany. “This came as a surprise because we never expected that sort of decline in Germany,” Davies said.

Drilling down into the differences between the UK and Germany – six sectors in the German market: Storage, Networking, Printers, PC Components, Displays and Warranties & Services – all saw a drop in growth levels for the first quarter of the year.

Vendors not faring so well in Germany included HP, which saw revenues decline by 7.1 per cent, IBM which had a 10.4 per cent drop, Acer, which suffered at 33.2 per cent drop, Western Digital whose revenues plummeted 34.5 per cent mainly due to Thai floods, and Lexmark which experienced a 10.1 per cent decline in Q1 revenues in Germany. Toshiba saw sales drop 8.2 per cent, with Fujitsu suffering the smallest decline of 1.1 per cent.

In comparison, the UK had three sectors that suffered from a drop in growth levels: storage, printers and PC components.

But conversely,six sectors in the UK saw growth for the quarter: computers, networking, consumables, telecoms, displays and warranties and services.

“There is still demand for computers,” Davies said. “This includes servers, and Unix. Smartphone sales are still growing fast after a first quarter boost. “We know these have been growing very quickly through distribution. What is interesting is that we see the difference between mobiles and smartphones has levelled out.”

Three vendors saw astounding growth in the UK for the quarter according to Context: Apple (120 per cent), Asus (106 per cent) and Oracle (313.7 per cent). Other vendors to see 50 per cent plus growth were IBM (53.2 per cent), Lenovo (63.3 per cent) and Symantec (75.5 per cent).

Another point Davies alluded to was that UK distributors are decreasing reliance on the major brands and are widening their product portfolios as new players come to the market.

“There is more competition coming into the UK, for example Huawei, and they are choosing distribution as their route to market,” Davies said. “Distribution is still there and the channel is stronger than it ever was before.”

Hot topics for the PC market, Davies said, were Windows 8, Ultra portables and tablets. But he warned that vendors need to get their pricing right to ensure takeup.

“If you look at Vista vs Windows Seven - After two years virtually all machines had Vista business installed,” Davies said. “But with Windows Seven, by month 13 it was virtually 100 per cent. The reason is that Vista machines were more expensive. If machines are competitively priced there will be the same surge of uptake for Windows 8 as there was for Windows 7.”

Looking at Ultrabooks, Davies said price would again decide whether they make it in the market, particularly as netbooks have gone into a ‘terminal decline’. In terms of tablets, they already account for 11 per cent of revenues in the UK and is still enjoying triple figure percentage growth. And the main driver for sales is the channel, Davies said.

For example, splitting tablet growth into a value stream – business channel and volume –consumers – the fastest growing track is the value channel, he said.

“And the most growth is happening with the SME sector,” he added. “Consumer sales have dropped off and the corporate side is not doing so well,” he said. “This mirrors the fact that distributors are focusing on the SMB sector. There is a lot more activity in that space from vendors.

“The share of SMB business through the channel was gradually increasing through the whole of 2011. The channel is vibrant, alive and doing business,” he concluded.