As we enter 2012, sentiment on funding for the channel and its prospects is vastly different from last year. At the start of 2011, there was considerable optimism that the economic recovery was taking hold, with the recovery in provision of credit to the channel not far behind. However, the onset of the eurozone crisis has sparked a change in sentiment, as uncertainties dominate the headlines again.
While UK banks are likely to come through the eurozone crisis relatively unscathed, there are a considerable number of continental European lenders to the channel that are going to be committing more capital to repairing their balance sheets than expanding lending to their customers.
Bank lending is likely to remain under considerable pressure and alternative funding arrangements will need to be sought.
Resellers should continue to see considerable demand in 2012. For resellers, customer demand will need to be met by increased numbers of alternative funding arrangements. Businesses will be looking for more innovative ways to fund capital investment.
In the workplace, for example, we are seeing that businesses are increasingly using new technology such as tablets and smartphones to gain a competitive edge in client service and to keep their staff constantly connected, often via the cloud. Resellers will need to assemble attractive finance packages in order to capture sales of related tech.
Market analyst Forrester has predicted that 60 million tablets and 175 million smartphones will be used in the workplace by 2015.
More apps are also being designed specifically for new technology, sometimes exclusively on platforms such as Android or iOS. Apps are also playing a greater role in the mobile business environment, where management is more stretched geographically.
Similarly, the cloud model continues to spread. The challenge for ISVs this year continues to be finding a way to serve this growing demand, often handled on a subscription or pay-as-you-go basis but within a traditional economic model. One way the channel can overcome this is by agreeing a finance solution with an independent funder - something we are increasingly being asked to do.
Security takes the lead
Opportunities for channel credit may also arise in the security software market, as the spread of new technology opens up greater risk of security breaches. We are seeing more requests for funding for security-related software packages. Security is an area no business can afford to ignore, as proven by the string of major leaks in 2011.
A wave of public interest in security products, prompted by events such as the phone hacking scandal and the cyber attacks on embassies and businesses across the globe, could see the birth of a new industry in the coming year, with reseller opportunities emerging in testing, certifying or creating global standards for data security.
Outside the private sector, Syscap will continue to monitor the public sector, where large-scale cuts are driving new ways of working and financing projects.
Research by Syscap last year found that most of the schools surveyed would be looking to mitigate the impact of the budget cuts by using new budget management techniques to save money.
With school budgets likely to be even more stretched this year, many schools are increasingly having to look for more innovative ways to fund technology upgrades. The harsh reality of the cuts may mean that schools will be forced to adopt the financial management practices of businesses, and this could boost demand for new IT funding arrangements in the education sector.
In particular, schools must balance their tight budgets against government demands that the curriculum be more ICT-centric. An Ofsted report has criticised the way in which schools manage their IT investment. Ofsted argued that assets have been allocated inefficiently and that schools must improve the effectiveness of their tech budget management.
Resellers able to package the right service lines with attractive financing arrangements could do well.
It is clear that businesses know what they need, and with bank lending unlikely to revive, vendor finance is going to play an even bigger part in helping them achieve it. Last year we saw more businesses turn to vendor finance because it allows them to acquire expensive assets such as machine tools and IT infrastructure from revenue rather than capital expenditure. That means budget for capital expenditure can be used for other projects.
However, if businesses cannot get the funding they need to keep up capital investment, the UK economy will risk losing more business to overseas competitors.
It is clear there will be demand in 2012. But the question for vendors is whether the availability of funding will recover in time to meet the demand. This will largely depend on the ability of leaders to resolve the eurozone crisis and return confidence to the private sector.
Philip White is chief executive officer of Syscap
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