Channel must change, warns IDC

Resellers must concentrate efforts to withstand downturn

The channel will face an "unprecedented challenge" over the coming months as volume and specialist product demand weakens, according to research firm IDC.

In its report Overview of the IT Distribution Channels in Western Europe 2001-2006 - Beyond the Box, released last week, IDC said the channel had an "inability to rapidly diversify its business model".

It predicted that direct sales would increase from 54.1 per cent of total IT spending in 2001 to 55.4 per cent in 2005.

IDC said the channel should focus on higher-margin technical products and aim for a more services-oriented role.

Brian Pearce, senior analyst for the European distribution channels programme at IDC, said: "There are not many companies that can absorb this downturn indefinitely. Unless resellers and distributors that are dependent on hardware sales can change their business models, they will struggle."

Pearce cited broadline distributors as a case in point.

However, Julian Klein, managing director of broadline distributor Computer 2000, said: "We have our volume business, but then we also have specialist business units such as our Datec unit - which is very focused on the Cad market - and our specialist Cisco unit, which also carries more technical products.

"We are perceived as a broadliner but we do have a mix of volume and higher-margin technical products."

Pearce added that resellers should invest in training to make the jump into value-added sales easier. "Channel players who do not have the focus cannot do this quickly," he said.

Simon North, managing director of UK operations at systems integrator Logical, said investment in training and technology was a good idea. But he warned that resellers must concentrate their efforts.

"Resellers must decide what to focus on, whether it be certain verticals or technologies. They must invest in depth in a few areas rather than breadth," he said.