THE information technology industry is going to see considerably more consolidation, as companies are driven by the convergence demand. Commenting on technology solutions provider Gen-i’s proposed acquisition by Telecom, IDC analyst Graeme Muller says there is room for even more consolidation in the channel and smaller resellers are going to have to either specialise or be bought out.
Reseller News put three questions to key channel players to get their take on the trend. They are:
1. What impact will the acquisition have on the local channel and IT services market?
2. What is the future of Telecom’s desktop partnership with Computerland in light of Telecom’s purchase of Gen-i?
3. How much room is there for further consolidation of the local IT industry?
Axon managing director Matt Kenealy:
1. This is a good thing for the industry in one sense as it sets a very high value on IT services companies — an even higher multiple than was paid for KAZ in Australia. It is not a trivial exercise though to merge two large and totally different organisations. There will inevitably be fallout for some individuals and customers involved. This sort of activity always presents opportunities for medium-sized, flexible companies such as ours.
2. You would have to ask Telecom and Computerland that. I can’t see it helping.
3. Certainly more room. Especially at the very large end of the market there are too many overweight companies fighting at the table for the few remaining pies.
Maclean Computing managing director Allan Maclean:
1. In more recent times, Gen-i has tended to play (and very well) in the enterprise space. I believe that Telecom is very good with larger accounts, but has never understood the SME market — and this is not about to change that. While we imagine that this purchase may encourage Telecom to push harder in their SME endeavours via Telecom Advance Solutions (TAS), this has not really impacted on our client base.
2. One would have to assume that Telecom will want to bring the delivery of its Officeware product inhouse in the long term, but I would be surprised if there was not a firm contract in place with Computerland.
The real questions are: Is Telecom making any headway (or money) with this product? And do they want to?
3. Further consolidation is inevitable. Many smaller companies are not making survivable money — we are being offered businesses for sale every month now. There are plenty of “super small” IT businesses (SSMEs?)trying to make a living, cutting margins and driving themselves to the wall in the process. One of their realities is that it is all but impossible for them to afford professional training, so the outcome is inevitable. The desktop may have got simpler, but the back room certainly has not.
Infinity Solutions CEO Stuart Robb:
It is too early to be specific — the parties say the transaction will be completed by the end of the month and naturally at this early stage there is not much detail available.
In general, I see this transaction as a positive sign of the importance placed on the IT sector, and the opportunities the sector presents.
Telecom’s purchase is a significant investment in IT, and after a few quiet years post y2k, IT is becoming “cool” again. This is reflected in this investment, the number of large projects in the market, and market activity in general.
I expect Telecom and Gen-i to develop together new network-based value propositions for customers. These will increase competition and therefore present a challenge. Equally, however, new ideas potentially unlock new customer demand, and grow the market — which benefits the suppliers, such as Infinity, who can innovate and deliver new solutions.