Q&A: How 2009 Will Impact Your Business
The crystal balls come out as channel industry experts predict the changes that VARs and integrators can expect in 2009.
How will the predicted 2009 economy impact the IT channel?
Tiffani Bova, vice president of research, indirect channel programs & sales strategies, Gartner: Those channel companies that did not have healthy and profitable businesses prior to the market changes will face extremely hard and challenging times. A lack of focus on profitability versus top-line revenue is the first area that will get highlighted. Keep in mind that IT spending decreases lag the general economy by at least two quarters. And, IT spending growth for 2009 will slow at a greater rate than we previously projected. The 2009 IT spending forecast has been lowered to 2.3%, down from an earlier projection of 5.8%.
Todd Thibodeaux, president and CEO, Computing Technology Industry Association (CompTIA): Companies will certainly look more closely at technology spending for 2009 because of the uncertainty over how long the economic downturn will last and how deep it will be. But this is also a time for the IT channel to shine. The smart use of IT can support businesses even in the most unfortunate economic climate. Companies that offer products and services that are truly original, save time, boost productivity, and demonstrate cost savings will prosper in a downturn.
Will there be significant changes in customer expectations in 2009 with regard to the
Bova: Customers are looking for IT to help them improve efficiencies, reduce costs, innovate, and grow. What will change is the time customers will take to truly understand the ROI of the IT investments they are making. Customers want to ensure they are buying technology they need today, technology that will scale with their company in the future, and technology that will integrate with what they already have in place.
Thibodeaux: With budgets flat or shrinking, companies will need to be more creative in maximizing their existing assets. They're trying to get better use out of existing technology. They're also looking to third parties for hosted technology services.
In times of economic uncertainty, price becomes more of an issue as a decision-making factor for IT purchases, but it's not the only factor. Among the key selection criteria when companies are evaluating tech vendors are high-quality service, vendors that truly understand their business needs, and vendors' ability to provide customized, scalable solutions. Technology providers who focus on these core values while helping customers understand the business case for IT investments should see continued success in the coming year.
How should VARs expect their average margins to fare in 2009?
Bova: Profitability may be impacted if partners are too tied to low-margin products and services. Building up higher margins tied to services may actually drive up expenses due to the cost of delivery (headcount) personnel. Finding ways to automate and leverage tools to better manage existing customers may actually improve existing margins. While looking at new customer acquisition, adjusting margins accordingly to take into account new cost models will make deals more attractive up front.
What technology focus areas will be the strongest sectors for 2009 for VARs?
Bova: Gartner found the majority of projected IT spending among North American SMBs in 2009 will consist of discrete projects that improve business processes. PC upgrades, security hardware, and server virtualization are cited as the top hardware initiatives. Web applications and development, security software, and database management were the top software initiatives, while hardware and software maintenance and support were the top service investments.
Thibodeaux: Security and business continuity continue to be at the top of priority lists for many companies. There are also signs of a shift from basic infrastructure investments to solutions that are more focused on driving revenue and efficiency. Vendors that are positioned effectively to communicate the business value of technology should continue to see opportunities. Businesses are focusing on IT that can make an impact on top-line revenues in the form of improved marketing and sales and on bottom-line profitability in the form of increased productivity and reduced operational costs.
On the revenue side, customer relationship management (CRM) solutions, desktop publishing, and more advanced printing solutions for marketing collateral are investments where business is likely to pick up. On the profitability side, an increasing number of businesses are eyeing investments in supply chain management solutions, storage area networks, and network attached storage to extract value from business intelligence and open source solutions to avoid the potential of costly proprietary systems.
Are there any significant changes in business processes or operations that VARs should consider or implement in 2009?
Bova: Evolving the traditional resale/implementation model to a more consultative/management model will be key during the next three to five years. Leveraging alternative delivery and acquisition models (ADAM) such as SaaS (software as a service), HaaS (hardware as a service), or cloud computing is a way to drive out the complex, custom projects and find a way to be more consistent in solutions and delivery.
Will there be any advancement in technology or technology usage that will greatly impact a large number of VARs?
Bova: Yes. Again, ADAM will be an area which the entire channel will start to leverage more heavily as vendors, customers, and service providers continue to invest.
What is the single piece of advice or insight you would give VARs as they prepare to do business in 2009?
Bova: Don't be afraid of change. We have all been through it many times, but the market is changing. Customers are changing. Vendors are changing. So, if you expect to get the same reward for the next 10 years by doing what you have been doing for the past 10 years, you will be disappointed. Vendors will want different things from you, which may mean you need to adjust your business, acquire another company to gain the expertise, or partner with other vendors. Either way, the net result will be a change.
Thibodeaux: Change customers' assumptions about how they use IT.