The economic trough will present a myriad challenges for vendors, distributors and channel partners alike this year.
With budgets set to be slashed, companies will need to be innovative in their use of resources and staff, and quickly prove the value of the technology they offer.
Reseller News canvassed a range of industry members for some insights into what 2009 will bring and how businesses will fare.
Analysts predict IT spending will take a hit this year, so how will local businesses cope?
Dove general manager Chris Rycroft says many firms are adopting a ‘wait and see’ stance, but he’s confident about his company’s position in the midst of reduced budgets. “We’ve certainly heard of [IT hardware] leases being extended rather than renewed. We probably don’t have a huge exposure to the large suites of PCs or servers, which tend to be done directly, rather than through distribution. So I’m not hugely concerned that we’re exposed to those cutbacks.”
However, he acknowledges there is less business activity in general, even though his company’s numbers haven’t gone down. “If there are fewer renewals then there is more maintenance, so it might be lost in one area and picked up in another.”
Value Added Distributors (VAD) is another company confident of its security amid the turmoil, but it will be keeping a close eye on costs. “We see ourselves in the value space, so it tends to be projects that are already well in progress,” says sales manager Stuart Alexander. “We’re a bit more shielded from that volume space that gets hit. I get a feeling that there is a lot of run rate spending that is coming under pressure.”
Microsoft’s local business acknowledges firms will be focusing on cost control in these uncertain times. Managing director Kevin Ackhurst says it aims to help partners and customers find the right balance between keeping costs down and investing in innovation and growth.
The local business of Hitachi Data Systems planned early for the onset of the tough economic climate, hiring a business consultant six months ago. General manager Brent Wilkinson says the downturn presents opportunities for the vendor.
“One of the key points Hitachi has been driving for the past year, year and a half, has been that people need to use their storage more effectively – and therefore more cost-effectively – and that plays to one of our major strengths.
“Everyone has to do the same things with the same amount or maybe with less money, how can we make you do that? From our perspective, this is an ideal opportunity. Where people may once have just gone out and bought more from their existing supplier, they may be looking around to see whether they can get a more effective use of their dollar.” Although HDS has heard of government projects being postponed, Wilkinson says organisations still have a requirement to store information.
Auldhouse general manager Melanie Hobcraft is similarly optimistic about the trainer’s prospects, saying it hasn’t felt any “doom and gloom” associated with the downturn. "The business is going really well. I wonder whether some of that can be attributed to the fact that, when things get a bit tough, people are really valuable in organisations and rather than not investing, companies are actually looking after their people and continuing to invest in making sure these people get their virtualisation and Windows Server 2008 training.”
Distributor Soft Solutions foresees automation of business processes as an effective way to control costs.
“The biggest cost for any business is the payroll. While none of us want to put someone out of business, you want to continue to grow without putting more bodies on. Even internally we look to automation,” says business development manager Paul Leslie.
Return on investment
Technology that pays off quickly will be more in demand this year.
Leslie says Soft Solutions has observed a slow down in the small and medium business space, but not among enterprises. “We expect as new budgets come out they will be a lot tighter, so our take on that is we need to focus on technologies that have a short ROI (return on investment).” The distributor is turning its attention to email archiving. “This is going to be driven by the Public Records Act, but companies will be pleasantly surprised with the business efficiencies from putting a mail archiving product into place that can claw back a lot of disc space.”
VAD’s Alexander picks virtualisation will quickly prove its value. “We have a strong part of our business in that value storage space, so my expectation is to see a continuation.”
HDS’ Wilkinson agrees virtualisation and archiving provide a “reasonably quick” return on investment. “Virtualisation of storage, which goes hand in hand with server virtualisation, [companies] may have done some of that already. Storage vendors have been talking about thin provisioning, which means better utilisation of storage, for a year or so as reality. Archiving may be lifted up on people’s agendas. Those things are to do with saving money.”
Microsoft's Ackhurst is another to tip virtualisation as a hot technology, along with unified communications and collaboration.
The skills shortage
The inability to fill key positions has plagued the industry in recent years. So is the outlook any brighter this year? Leslie believes the situation will worsen, saying technology is moving faster than staff can be trained.
“A problem for training organisations is they will always be behind the eight ball because they have a set curriculum. You also have the likes of Gen-i swallowing up people left, right and centre which creates a gap.”
HDS’ Wilkinson cites research by the recently formed Digital Development Council and Forum, which found schools and tertiary trainers weren’t turning out people with the skills the industry requires. He says it’s hard for HDS to find people with the skills to manage large volumes of data, but believes the shortage affects software vendors and developers more than his company.
It will become more challenging for resellers to choose which products to invest time and training in, says Leslie. “Once you’ve got the person trained up, there is no guarantee they will be with you in the next two months.”
At VAD, Alexander believes businesses will be more prudent in the projects they implement, so they will have different and reduced requirements for skills. “In certain skill areas it’s not going to improve, but in some areas there will be an over supply,” he says. “Any organisations that use contractors will find it hard to retain them as they move to more permanent work.”
Microsoft's Ackhurst says the global credit crunch may mean more skilled Kiwis return from offshore and will ease the local shortage. He says his company will work with the industry to make IT an enticing career.
Hobcraft also predicts an easing of the labour shortage at Auldhouse. “From what we can see – and it could be completely different in other industries because our market comprises the large corporate, government sector – companies seem to be continuing to invest in their people. I think we’ll see more certified Microsoft engineers and more people certified in virtualisation as we go through the year.”
At a time when many multinationals have announced cuts in staff, how secure do those in the local industry feel? Most spoken to by Reseller News were keen to stress the positive. Leslie predicts Soft Solutions will experience an upswing at the end of the year, and says he is a key member of its team. “I know that we’re going to see a bit of tightening in the year, but IT is the secret for many businesses to keep going.”
Rycroft also says Dove is well positioned amid the downturn, while Hobcraft says her company exceeded its targets in the last quarter of 2008 and is in “great shape” for the new year.
Wilkinson is “as confident as anyone can be". “Hitachi Data Systems, worldwide, has gained during times of recession,” he says.