Stick with services, VARs told
Despite reports that UK software and IT services market will shrink for the second year running
Resellers should stick to services, despite reports that the UK software and IT services market is set to shrink for the second year in a row, according to new research.
Analyst Ovum Holway has predicted in its Market Trends 2003 study that total revenues in the sector will decline to £22bn this year, down three per cent on last year in real terms (excluding inflation).
In 2002, the market shrank by just over four per cent, making it the worst year for UK software and services market growth.
Ovum Holway also predicted that the software and services market growth rate will remain below that of GDP until at least 2006.
Anthony Miller, research director at Ovum Holway, and lead author of the report, said: "The message is still very much 'get into services', considering the low margins in box shifting."
Some areas such as managed services and outsourcing are healthier than others and worth chasing, Miller said. But those markets "could be a problem for the smaller resellers as they require critical mass".
He added: "If you are a large-scale reseller such as Computacenter you can end up running desktop services, but lower down the food chain it will be tougher making a sale as customers wanting new solutions are thin on the ground."
The study found that money being earmarked for IT is primarily destined for existing systems, while fresh IT projects have to be able to demonstrate a sound return in the same financial year.
Judith Jordan, analyst at Ovum Holway, said that resellers should capitalise on this information.
"Resellers should help customers sweat their software and get the most out of what they have as sometimes there are services on the back of what customers already have," she said.
Tony Kingston, marketing manager at reseller Deverill, said: "We are growing in services but this has a lot to do with our focus on it.
"The biggest areas for us are managed and outsourced services such as remote network and IT infrastructure management."
Additional reporting by Karl Flinders.