More consolidation

By Pedro Pereira  |  Print this article Print


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Despite signs of a weakening economy, solution providers in a recent poll by Ziff Davis Enterprise said they feel good about their profitability prospects for this ye

Keith Blake, president of Timpanogos Technologies, had another take on the challenges with an acquisition strategy. "Consolidation is a trend that will continue, but there will always be a place for the smaller companies who drive innovation," Blake said. "Larger companies will acquire for customer sets, and they do have increased efficiencies, but they cannot drive innovation like a smaller company."

Blake said his company is happy being a small software development business working in the education space, growing steadily and being a place where employees feel valued, something bigger companies also find hard, he said.

Getting credit

despite some worries in recent months that the mortgage crisis would prompt lending institutions to tighten credit not only in the housing market but also in other areas, the Outlook 2008 survey indicated that many solution providers are relatively confident about credit availability.

Thirty-two percent said credit availability is better than a year earlier, and 47 percent said it was better than three years earlier. Looking forward, 44 percent said they expect credit access to be better in one year, and 50 percent said it would be so in three years. Asked about credit sources, 52 percent named local banks; 26 percent, national finance companies; 24 percent, vendors; and 19 percent, distributors.

Dutkowsky speculated the lack of credit worry may be because many of the respondents hadn't quite processed the potential ramifications of the mortgage crisis. "That was the one issue in the survey that really caught my attention," he said.

Tech Data, he said, will continue to provide credit to its solution providers and has no plans to pull back. The same goes for Ingram Micro, said Keith Bradley, president of the distributor's North America operations, who added that his company has consultants in the field working closely with solution providers, assessing their business and doing analyses on cash flow, rather than just relying on spreadsheets to make credit decisions.

Confident in that information, Ingram Micro expects no changes in how much credit it extends, Bradley said.

However, VARs are still feeling the pinch, according to Timpanogos Technologies' Blake. "Credit is an issue and we are all feeling some strain from that," he said. "If we want to expand, we need capital to do that, and investors are nervous right now. We have looked at the equity market, which I think will open up more, but there is always risk in equity and companies will have to prove they have a good business track record if they want to get capital or investment."


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