All eyes on the end of the year

Mehryar Hamid reflects on what Q3 meant for the final round in another tumultuous year

Recent Office for National Statistics figures were a breath of fresh air, with the economy finally displaying signs of growth. Despite warnings that the London Olympics had failed to provide a much-needed and hoped-for boost to the UK economy, the figures suggested otherwise, with the Gross Domestic Product (GDP) up one per cent in comparison to Q2 2012.

UK IT markets also did well versus Q3 last year. However, B2B channels did not fare so well, with sales volumes up only 0.1 per cent.

In value terms, the figures were even worse, with B2B IT spending down 12.7 per cent from Q3 2011. For Q3, B2B channels comprised 36 per cent of the total UK IT spend, compared with 40 per cent over the same period last year.

While consumer IT channels have been booming on the back of portable devices, such as media tablets and e-readers - as expected - the B2B channels saw slower uptake of these primarily "consumer" devices.

However, there is some good news: there were several key takeaways in the data that point to a promising future as we move towards and into 2013. The software, storage and PC markets continue to dominate the B2B channels, and in Q3 2012, these products accounted for 80 per cent of the total IT spend B2B.

Volumes up, value down

Software has continued to play an important role in the B2B market this quarter, with sales volumes up 9.5 per cent in comparison to Q3 last year. However, on the value side of things, the market was down 36.8 per cent year-on-year, and this had a significant impact on the fortunes of the channel as a whole.

Another category that has had a major impact was storage. In the aftermath of the 2011 Thai floods and their resulting impact on production across the region, the storage device availability was severely disrupted. This, coupled with a consistently high demand across both the B2B and B2C channels, resulted in skyrocketing ASPs for these devices.

Although the ASPs have begun to decrease following the normalisation of supply over the past few months, they are still nowhere near the levels experienced before the crisis. Hence, this product category experienced artificial year-on-year value growth of 11.6 per cent in Q3 2012.

On the PC side of the B2B market, all the usual form factors, such as desktops, notebooks and netbooks, were in decline in comparison to the same time last year. This was primarily due to the fact that the end-of-fiscal year contracts in Q1 had already attracted a significant portion of the IT spending for 2012.

The economic climate was also partly to blame as it extended the replacement cycle, with businesses, educational institutions and public sector organisations all cutting back spend.

There was also the factor of product evolution. Devices such as netbooks, and to some extent notebooks, have begun to feel the squeeze as media tablets continue to cannibalise their sales in the overall market.

Some might question the viability of these devices in a business environment given the various compatibility issues, but, as it is, they account for 5.7 per cent of the sales value through B2B channels, and this is only set to rise in Q4 and beyond.

And as more Windows 8-based devices hit the market, the many barriers that have prevented these devices from taking off in the business channels will fade away. However, for the time being, it's all eyes on Q4, which will determine whether media tablets can become an integral part of the B2B IT market, and whether they will be able to push B2B sales into a much more reasonable position -- as they have done for B2C.

Mehryar Hamid is an IT account manager at GfK