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2020: A year of living dangerously for the South African channel

Feb 10, 2020

There are few signs that 2020 is going to be an easier year for South African technology resellers than 2019 was. In fact, we can expect to see demand for traditional IT products and services continue to slow, in turn, leading to further consolidation among value-added resellers and systems integrators.

The challenge that the market faces is two-fold: firstly, end-users are continuing to move away from purchasing and owning IT infrastructure in favour of as-a-service, subscription and cloud solutions, and secondly, economic conditions in South Africa remain difficult. Until the economy starts growing, many companies will continue to sweat IT assets and demand will remain tepid at best.

Against this backdrop, resellers cannot continue to operate as they did in the past. In a slow economy, they will find themselves challenged to not only become more productive and price competitive, but also to find new ways to demonstrate their value to the market. Those that have traded on brand and customer relationships may find that these differentiators are no longer enough to ensure customer loyalty.

Surviving the storm

So what is it going to take to survive? The starting point for each reseller and integrator – large or small – should be to look at its internal operations and identify opportunities to improve efficiencies and cut fat from the business. This can be an opportunity for resellers themselves to become best practice examples of how effective use of IT can help a business to thrive in difficult  times.

The next step should be to re-evaluate whether the company’s mix of products and services is right for the market in which it operates. For example, many resellers that have made a comfortable living off the margins from hardware sales, might need to look at branching into managed services or other higher-margin sectors of the industry.

Others might want to look at how they can climb the value chain, for example, by creating bespoke business solutions for their clients. This could mean a networking specialist expanding into telecoms and software to create packaged collaboration solutions, as one example, or a hardware company with a strong printer business could offer an office automation solution complete with document management and workflow software.

Those resellers that cannot provide a single point of contact and integrated solutions that truly simplify the customer’s life will be facing a difficult year ahead. At the other extreme, companies that provide solutions that are in high demand (such as cybersecurity, IOT or AI/ML) will be well positioned for success.

Digital and cloud opportunities

Another model is to focus on digital and cloud enablement – an area where growth hasn’t stalled as much as it has in hardware and software sales, since many enterprises are embracing the cloud to operationalise IT expenditure, gain more flexibility, improve performance and scalability, and bring predictability to IT costs.

There is room for resellers of all sizes to survive and even thrive, but they will succeed in different ways. Larger companies will be able to use their resources to expand into new markets and position for big contracts, and smaller players will survive by being nimble and running  lean. There are multiple models that can work – but the key is to focus on the customer’s needs.

Resellers have heard for years about how they need to prepare for disruption via the cloud, to add more value and to become true partners to their clients. And now, those that are not moving in the right direction will soon run out of road. Those that have already started to re-invent themselves, meanwhile, have the opportunity to increase market share and position for the next wave of growth.

 

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