The Channel`s Anti-Recession TrendsBy Pedro Pereira | Posted 2008-03-20 Email Print
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It may be a different kind of recession, but some fundamentals about the solution provider business still hold true.
It’s starting to feel silly. Since the fall, I have taken every opportunity to ask solution providers whether they are feeling any effects of the economic downturn.
Counter to any reasonable expectations, considering the ongoing barrage of bad news about the economy, the answer has remained essentially the same. Since the fall, most solution providers say they have felt little or no effects, and some say they are even enjoying healthy growth.
Still, a few acknowledge that customers are putting off certain capital purchases, if for no reason other than reacting to the constant pundit pounding about the economy.
That the economy is floundering seems indisputable at this point, and some experts believe we are already in recession. But of course we won’t know for sure until months from now when all the relevant figures are collected and digested. It’s a funny thing, almost like someone telling you, "Yes, that sensation of stillness you’ve had for a while is indeed because you’ve been dead for a while."
Among solution providers, despite their experiences thus far, the worry that things could take a turn for the worse is palpable. During a recent conversation, one solution provider, after going out of his way to tell me it’s business as usual, tempered his comments with words to this effect: "But the downturn will come sooner or later, and we’ll have to be ready for that."
The channel, after all, has seen bad times. Anyone who’s been around more than five or six years knows all too well how meager business prospects can get. By the time the recession that followed the Y2K craze, the dot-com bust and the Sept. 11 terror attacks gripped the community at large, the IT sector and the channel already had been feeling the pain for a while.
But what’s encouraging about the current situation, the failure of Vista to boost channel business notwithstanding, is the evolution of certain channel trends with serious potential for solution providers.
Managed services, which not long ago were dismissed by skeptics as hype or a myth, are definitely catching fire. In a recent Ziff Davis Enterprise survey, 39 percent of IT managers polled said they plan to increase spending on managed services. Poll results also indicated that IT managers are embracing remote backup and business continuity services as well as the outsourcing of some IT functions to service providers.
The ongoing trend toward virtualization and server consolidation also bodes well for solution providers, especially those serving midsize companies that stand to benefit financially by cutting down the costs of processing, cooling and electricity.
Other IT trends such as network access control (NAC), unified communications and digital signage are sure to continue generating respectable profits for channel companies specializing in those areas.
And, of course, let’s not forget the power of small and midsize businesses to keep the economy humming. While large corporations leap, crouch, merge and fall apart, the SMB market continues to spend.
Realistically, even those companies will be extra cautious about their IT spending as other costs of doing business, such as gasoline and heating, increase, but that will play to the hands of the channel to some extent because models such as managed services and software as a service will increasingly make more sense for them.
With these trends in mind, the apparent dismissal of an economic downturn by solution providers is justifiable. At least for now. Things have changed since the last recession. What hasn’t changed is what solution providers already know: They must remain diligent about the business, and they must stay on top of technical and market developments with the potential to move the business forward.
Pedro Pereira is editor of eWEEK Strategic Partner and a contributing editor for The Channel Insider. He is at email@example.com.