Channel Says It’s Confident About State of Business

As the fourth quarter kicks off, IT channel executives say they are optimistic that the overall positive trends they have seen so far in 2006 will continue through the end of the year and beyond.

Customers, particularly in the small and midsize business space, have been fueling channel sales growth with their technology purchases, and are expected to continue doing so into 2007, according to channel and vendor executives gathered in Palm Springs this week for distributor Ingram Micro’s Venturetech Network conference.

In a report published in late September, investment and research firm Raymond James and Associates, St. Petersburg, Fla., said IT distribution grew at a 6 percent rate during the third quarter.

Ingram Micro CEO Greg Spierkel attributed much of the growth to affordability. Products of all categories, from desktop displays to complex networking devices, have stabilized at price points that are attractive to the SMB customers that buy technology from channel companies, he said.

Other factors, he said, such as a relatively low cost of borrowing money to run their businesses and federal regulations that require businesses to invest in their IT infrastructure, are contributing to VARs’ profits.

Investments in IT infrastructure include purchases of storage equipment and applications, databases, security products and blade technology.

David Pansen, vice president of U.S. distribution at Hewlett-Packard, Palo Alto, Calif., said server consolidation and virtualization are also driving sales.

Pansen and Ingram Micro executives said that as they have met with solution providers at the Palm Springs event, the feedback they have received about the health of the market is positive.

“Everyone says their numbers are up, which is good and consistent with our own business,” said Spierkel.

The positive mood owes partly to the fact that VentureTech members, an elite group that does business with Santa Ana, Calif.-based distributor, have made great strides to refocus their businesses on solution selling and services.

Some of them are among the pioneers of the managed services model, through which providers remotely take over some or all of their clients’ IT functions.

Because of the recurring revenue that managed services generate, providers feel more confident they can survive any economic downturn that may occur.

Click here to view exclusive channel research from Amazon Consulting.

And while they are focusing more on services, they are not abandoning product sales altogether, providers say. But they report that how they approach the sale has changed.

The conversation now revolves around using the technology to meet business needs and challenges, as opposed to what Pansen called the 1990s “frenetic” buying pace of acquiring technology.

“Customers really have shifted their buying from aggressive technology acquisition to discriminating investments around delivering measurable value to their businesses,” Pansen said.

Ingram Micro president Kevin Murai said the IT industry has reached a maturity level at which a stable flow of purchasing has taken the place of the ups and downs of yesteryear.

“This is a fairly young market still, and it’s now kind of reaching a level of maturity,” said Murai. With that, he added, comes an equilibrium in which the vendors are selling technology the way customers want to buy it.

As a result, there is a lot more value and a greater focus on multi-vendor solutions at the distributor and VAR levels to get technology in the hands of customers, he said.