The publication of next week's issue of CRN coincides with the release of our second Top VARs report, which includes a rundown of the UK's 100 biggest VARs and a comprehensive survey into the budgets and priorities of IT decision makers across a range of verticals.
There are plenty of positives for the UK channel to take from the report this year. But dig a little below the surface and the challenges facing resellers, about which we write so frequently - declining end-user budgets, extended sales cycles, the move towards cloud and the decimation of traditional systems revenue - become evident.
Some VARs on the list - particularly those deeply invested in big-ticket public sector projects - have seen revenue take a battering. But the trend is still very much towards top-line growth, with most companies reporting sales expansion.
Certainly towards the top end of the list, we see the big continuing to get bigger; comparing this year's top 10 with last year shows that combined revenues have grown 10 per cent to £4.63bn. This equates to an extra £419.5m in sales, despite the fact that the UK's biggest VAR saw UK turnover decline by about £130m.
Comparing this year's top 50 with last year reveals that cumulative revenue has spiked 12 per cent to £8.19bn. This represents an extra £900m of sales.
And, if we look at the make-up of the list, it becomes clear that the growth is coming from established players. Nine of this year's top 10 were also in the leading dectet in 2011, with 19 of the top 20 and 40 of the top 50 making a repeat appearance. Across the top 100, we find 19 new entrants, with 81 featuring for the second year in a row.
Sadly, a picture that emerges time and again among our top VARs is of operating profit growth failing to keep pace with sales increases or, worse still, actually going backwards. Margins are under pressure and some firms are creeping uncomfortably close to operating at a loss.
Our end-user survey this year, in which we quiz more than 500 private and public sector IT decision makers, makes for mixed reading for VARs. The headline figures are not too discouraging: more than a quarter of CIOs expect a budget increase of at least five per cent in 2013, with over half claiming their war chest will be flat on last year.
Certain verticals emerge as particularly bright spots. In the legal sector, 42.9 per cent of IT chiefs expect a budget increase, and four in five claim to have the money and remit to invest in innovation.
But in the local and central government sectors, budgets appear massively challenged, with focus being on cost cutting and unavoidable refreshes rather than driving innovation. Some 71.4 per cent of local government CIOs will have less money to spend next year, while only one in 15 of their central government counterparts will enjoy a budget increase.
The good news for VARs is that we see both enterprises and public sector bodies reporting a need for core infrastructure: at least half of our survey respondents will be buying storage, servers and network hardware, respectively, next year. Demand for both desktops and laptops is at about 45 per cent, with 34.1 per cent putting tablets on the shopping list.
The bad news is, with budgets being eaten into, we can surely expect product margins to come under even more pressure.
But resellers have always been an adaptable bunch, and many companies report that their product-services revenue split is now at least 70-30 and continuing to shift. The UK managing director of our number-one VAR expects 50 per cent of his firm's 2012 sales to come from services.
Indeed, we are sure that many of our top 100 would wince at even being referred to as a "VAR". But we have always considered the term "reseller" to be a badge of honour. Not least because ICT Solutions, Software and Services Provider News (ICTSSSPN) does not have quite the same ring to it.
So, if you are a Top VAR, we offer our sincerest congratulations. We hope you enjoy this year's report, and we look forward to seeing you again in 2013.
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