2002

At this time of year it is traditional to make some predictions for the year ahead. I hesitate to make too sweeping or dramatic a statement, after all, no one likes to be wrong, but the one thing I suspect that we can be sure of is that there is change coming in the channel.

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By  Mark Sutton Published  January 3, 2002

At this time of year it is traditional to make some predictions for the year ahead. I hesitate to make too sweeping or dramatic a statement, after all, no one likes to be wrong, but the one thing I suspect that we can be sure of is that there is change coming in the channel.

The big US companies are already quoting improvements on expectations for quarters three and four of last year, but I somehow don’t think that the recession is done with us yet. Not by a long stretch.

In the Middle East, the talk seems mostly to be that there has been very little impact felt on local businesses. Quite a lot of companies report that their customers put projects on hold throughout the third quarter, but that many were back on again by the fourth. Fundamentally local businesses have not been affected by the US, and some certainty and stability seems to have returned to the global political climate.

As for the IT industry, so many of the companies that dipped are now so keen to report good news, that it almost seems to be OK to breath a sigh of relief and be thankful that aside from those in multinationals, the recession never hit here. But the problem is that the regional channel is not just suffering from the global recession. It is suffering from growing pains.

The vendors have suffered in head count, all of them, without exception I suspect, in this region. This might make them more inclined to be reliant on their channel. It also makes them leaner, more demanding of the channel, and a lot more sales-focused. While it was OK before to have a large headcount in this region, which obviously proved the company’s commitment to the region, now head office is asking for results that correlate to their investment.

If you look at some of the channel programs that are now being put in place, you can see the message that is underlying—the vendors want value from their partners. They now need those partners to get out there and sell; they want them to work cross border, they want them to be skilled, and they want to be able to trust them with their brand names and their customers. And if you cannot meet their requirements, there is someone else who will.

This month’s cover story looks at the requirements that Cisco is putting upon its authorised distributors. They are asking a lot, but they are offering the lion’s share of the business to those that can deliver.

Those that can’t may find themselves pushed in to a ‘sub-distributor’ model—but where exactly is the value in that? Too many distributors are holding onto the market through agency agreements, taking just one or two percent of the market—and the vendors are giving every indication they don’t want to see this situation go on any longer.

Then there are the services arms of multinationals. In the US, the channel is concerned that as profits are squeezed, then vendors will resort more and more to direct sales to make their money. Although we are seeing the multinationals bring their service organisations to this region, and quite aggressively buy up expertise from the channel in some cases, there is little talk of conflict between channel and vendors.

But as more and more channel partners try to measure up to the value-added, service model, will they continue to be content to allow the big name vendors to pick and choose the clients they share and those they keep to themselves?

Perhaps this year will see the channel maturing away from some of the problems of the past, perhaps not. Either way, I wish you all a prosperous and happy 2002.

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