U.K. VARs Face Stormy 2008By Sara Driscoll | Posted 2007-11-19 Email Print
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The year ahead could be tough for U.K. solution providers if they don't cut costs or go niche.U.K. VARs have been told to batten down the hatches for a tough 2008 by channel analyst firm Plimsoll Consulting.
The uncertain economy in both the United Kingdom and the United States is driving solution providers to sit tight and weather the possible storm, and some will need to make quick cost cuts if they are to survive, according to David Pattison, senior analyst at Plimsoll. However, he said, others will be able to take advantage of the economy by making acquisitions at bargain prices.
"With pressure on sales certain to come, some companies will need to cut costs in 2008. Sadly, for most the term 'cost cutting' translates into 'job losses,'" Pattison said. "Ernst and Young is already offering services to help firms implement cost reduction programs, and more of this will come as the pressure increases. My advice is to reduce costs as part of a planned long-term strategy, rather than doing so in panic mode. But don't be too hasty2007 was not a bad year overall, with margins averaging 1.9 percent."
Pattison said at the other end of the scale there has never been a better time to go on the offensive. "Companies with large cash surpluses will be able to make some dirt-cheap acquisitions in 2008 as others begin to fail," he said. "The predators in cases like this are likely to see growth much greater than the industry average during the coming 12 months. Takeover targets are probably relatively safe for the next few months, but once the early jitters of 2008 are over, the buyers will circle and pounce."