Buy in or sell up and get out

Mike Bradley says no reseller can afford to ignore the approaching cloud and related consolidation

The IT sector is set for further shake out, rationalisation and optimisation, so now is a good time to define and refine a vision, be brutal about market realities and plot a course for achieving goals. Sensible decisions can influence stability, growth and value.

The IT market has for many years been based on halving price and doubling the power. IT companies have had to retain a Sun Tzu Art of War approach to beating the competition. These principles have remained largely unchanged, and based on a combination of software, hardware and some form of service and support for the end user.

But cloud technology is changing the supply and purchase dynamics. I believe we are seeing an electronic services revolution. The sector has not changed so radically since the arrival of the PC in the 1980s.

Cloud and SaaS models ease the obtaining and managing of IT resources in the organisation. SMBs especially will adopt simple, efficient and effective cloud offerings rapidly, since they stand to gain most from refocusing IT management, time and resources on core activities.

New delivery models will change how SMBs access, use and manage their businesses. Existing resellers need to metamorphose rapidly, and adopt new business models. In my view, mergers and buyouts are a quick way to adopt new technologies and business approaches.

Traditional resellers should therefore either be seeking to acquire service-oriented businesses that can offer a new technological dimension, or capitalise on their existing strong client base by putting their business up for sale to local competitors or new entrants.

Maintaining the status quo is not an option.

What's more, after two fallow years in terms of merger and acquisition activity, with companies previously focusing on restructuring, cost reduction and retrenchment, many have built up a war chest.

Such companies are starting to look for ways to optimise and prepare for an upturn in demand. The focus of their attention will be those businesses that can help increase productivity, performance and profit. They will be looking for healthy revenues, good cost control and long-term stable customer bases or contracts.

Meanwhile, some organisations will seek to expand into new locations and regions. Developing partnerships or joint ventures in new geographies takes considerable time and consultation, in addition to a mutual desire for alignment and partnership. And they may be limited by conflicting corporate objectives, financial constraints and a degree of inherent mistrust.

It is often faster and easier to acquire a local business that has already done all the legwork.

Mike Bradley is chief executive officer of ii Group