Is the A/NZ channel shrinking?

Is the A/NZ channel shrinking?

With A/NZ’s M&A momentum showing no signs of slowing down, what are the market implications for an increasingly consolidated channel?

Mark Iles (TRA)

Mark Iles (TRA)

Credit: TRA

However, in terms of vendors facing a tight channel market, Iles acknowledged there is an issue of “mindshare”. 

“Partners want to skill up and they are looking for vendors to help them with education programs, funding and certifications but they have every vendor knocking on their door and vendors are now fighting for attention to build the skills they need in the channel,” he said.  

This could have some benefits for the partner community, with TRA predicting that vendors could start making larger bets with the bigger partners to build scale. Talent will naturally continue to remain an issue for the channel regardless as Australia’s borders remain closed due to the coronavirus pandemic. 

As a result, the need for certain skillsets will continue to be a big driver of M&A activity as 2021 progresses, which may solve a skill shortage for a large vendor or partner in the short term, but does not alleviate the overall issue in the longer term.  

“The talent issue is a broader question and we don’t have the breadth or depth of skills we need locally,” Iles said. "Just try hiring anyone at the moment with security or deep data expertise regardless of which organisation they work for and it’s true to say that a lot of the M&A activity we are seeing over the last couple of years has been organisations choosing to buy rather than build the skills they need.”

Even with the recent acquisition of Servian, Cognizant said the Australian players’ capabilities in data and artificial intelligence, digital engineering, cloud and internet of things (IoT) worldwide were a key driver behind the deal.  

Meanwhile, this week's announcement of Infosys’ acquisition of design agency Carter Digital proves Iles’ point that larger channel players are choosing to acquire talent rather than build their own practices. Neither Iles nor Richards anticipate the M&A market will slow down at all in A/NZ, especially now private equity players have stepped up as serious competitors to strategic buyers. 

Indeed, as TMT’s Mark Nesbitt claimed during EDGE 2020, there is now a deep pool of capital coming from Australian institutional investors, as seen with the recent bidding war between Uniti Group and Aware Super for Opticomm.  

“We fully expect the current rate of acquisition and mergers to continue. Money is cheap if you can access it and there is a lot of private equity interest in IT at the moment creating competition with strategic buyers and we don’t see that changing,” Iles added.   

“All of this doesn’t help the skills shortage though and at some point we just need be building more skills across the market. A lot of partners are realising they are going to have to figure out how to do this themselves and not just hiring in as the salaries will continue to trend up.” 

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