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UK channel appears healthy despite the forces of change

13 January 2016 | Phil Brown

As I’ve written about previously, the ICT channel is currently having to deal with change from multiple directions – the move to cloud, the growing importance of managed services, the continued convergence of technology, changing buying behaviours, increasing concerns over security and privacy etc etc. The need to transition to new business models, and new technologies, while maintaining profitability and protecting customer relationships is a widely shared challenge.

Yet CRN’s recently-published Top VARs 2015 report shows that the UK channel appears to be standing up well to the challenges. The report revealed that the revenues of the top 100 VARs have increased by 16.1% over the last 2 years, to £11.08bn. The report also showed a high degree of stability in the channel, with 88 of the top 100, and 9 of the top 10, being the same as the previous year.

What the report doesn’t tell us is what is happening outside of the top 100. Are smaller VARs suffering as customers look to consolidate their purchasing with fewer suppliers? Are the big getting bigger while the rest decline?

There is some evidence to suggest this might be true. The revenues of the VARs in places 51 – 100 grew far more slowly – at 1.6% – than those of the top 50. And some of the big beasts of the UK channel – notably Computacenter and Softcat – clearly increased their share with double-digit growth.

However, we need to be careful about jumping to a conclusion that there’s significant consolidation happening. A number of the top 20, including SCC and Logicalis, saw sales decline (although both of those companies saw profits increase so this could just be a case of focusing more on quality rather than quantity), and a survey of customers found that more than 40% of customers have increased the number of IT providers they work with in recent years.

There is no doubt that adapting to the changes in the market will continue to provide challenging. However, there are many reasons to be optimistic that the channel will continue to prosper. One of these is a recent report from Goldman Sachs looking at the investment plans for 2,500 firms worldwide in the period 2014 – 17. The report forecast that capital spending in the internet, software, tech hardware and IT services sectors will grow significantly over the next 3 years, contrasting with most other sectors, where investment is expected to fall.

Where vendors and service providers are investing there should continue to be good opportunities for channel partners to grow and make money!