Consolidation offers relief

Consolidation offers relief

With increasing consolidation in the industry some see the narrowing market as a necessity for survival, as conditions become tougher.

Rick Jansen, Benq country manager, says commoditisation is forcing margins ever lower and manufacturers are feeling the pinch.

“Hardware margins are becoming low even for vendors, especially with competition being so tough. That means that margins get squeezed and no one wins,” he says.

Jansen believes the market will have to turn to new distribution models to secure a profitable future.

“Vendors aren’t able to invest as much, which means distributors don’t have the same resources to market to resellers. If vendors aren’t driving the business then resellers suffer.”

Brent Page, Connect NZ managing director, says growth through acquisitions is healthy.

“When Connect first opened in Auckland it tried to greenfield it and it was bloody difficult,” he says.

Page says in a tight labour market recruiting qualified engineers and account managers is often difficult and admits acquiring staff through mergers is much easier.

“Part of the joy of my job is surrounding myself with talented, energetic people and providing further opportunity for growth.”

Jenna Griffin, IDC market analyst, says acquisitions tend to be about purchasing a solid client base.

“You also have to wonder if it’s a survival strategy to bulk up before they become a target themselves,” she says.

Griffin believes there will be further consolidation as the economy slows down, “Though the economic downturn won’t impact IT spending immediately, because it is budgeted so far in advance,” she says.

On the other hand, channel veteran John Sims sees consolidation as a natural process the IT industry goes through.

“It’s a constantly moving target with some positive results. The merger of Ingram Micro and Tech Pacific left enough space for players like Synnex to come into the market,” he says.

Sims points to the merger between Computerland and Gen-i.

“When two reseller cultures merge inevitably those in management positions move on to other things. Now, when those guys are bored with playing golf they’ll re-emerge and do something exciting in the industry,” he says.

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