Get ready for fancy footwork

I'll let you in on a secret - the final quarter of 1998 was terrible for most distributors. Some leading players saw a rise in business of only 10 per cent and that's not great in a margin-squeezing market.

January has got off to a shaky start after the Christmas break was unexpectedly extended thanks to the flu epidemic.

So watch out, the lid is about to come off. Some distributors are convinced that this three-month period will be a record for them - simply because it always is and the bubble just has to burst. The first quarter of the calendar year is usually the best for volume and, of course, the cardinal sin of the broadline distributor is a failure to meet demand.

So, we're due to see an increase in marketing campaigns, more hard selling and plenty of smoky deals. All decent stuff for resellers.

Meanwhile, distributors will be recruiting staff and raising stock levels to cope with the expected rise in orders. Distributors stocking up will risk being left with a lot of dead product and a damaged stock turn figure if the market doesn't surge as it usually does. Even if it does, they will have to be cautious as they will be forced to increase the amount of credit they put out into the channel. Expect to have your lines extended this quarter.

Those who don't speculatively increase trading levels may not be able to buy stock at short notice and will then fail to reap the rewards when demand peaks. They will be left to face the lean spring quarter with a weakened balance sheet.

Whoever gets it right will come out stronger and that could spell the beginning of another spate of management changes and M&A activity. Some distributors remain keenly acquisitive, albeit behind the scenes.

Another incentive for distributors in the PC market is the changes in the Ts&Cs of one main vendor. These will not please some resellers, but they will put hundreds of thousands of pounds worth of extra business through the books of some of their distributors. For the vendor, the theory is that costs will be cut , which will improve its competitiveness. Resellers won't like it since more of them will have to deal with distributors rather than the vendor, but they shouldn't jump to conclusions - all but the largest resellers might end up better off. Distribution will mean easier, overnight ordering on low quantities and a fairer stock allocation system - ie first come, first served instead of biggest served first.

Also expect an increase in distributor activity in systems building.

The IBM AAP hasn't found its wings, but demand for unbranded building and configuration services is swelling. This is a risky business; few firms have made a real success out of it and a lot of resellers prefer to do it themselves.

Finally, gear up for more bluster about the SME market. Vendors and distributors have enough to worry about this winter. Perhaps they ought to leave the SMEs to the experts - the dealers.

Simon Meredith is a freelance IT journalist.