Simon Quicke

5 August 2008

Six months into the year and all the talk is about credit crunch, dropping house prices and the soaring cost of oil.

But in the channel spirits have remained high and most of the technology segments have backers keen to point out that the demand for IT is no longer an option that can be easily switched off, frozen, or cut in the budget, and sensible customers will continue to invest in technology to exploit the weakness of competitors.

Software

The theme of the year so far has to be the continuing growth of hosted services. The software as a service (SaaS) bandwagon keeps rolling on, with hardly any vendors left to reveal a cloud computing strategy.

Research from AMI-Partners quoted by Microsoft reveals that traditional shrink-wrapped products will continue to grow at around 6% a year, but hosted products will have a compound annual growth rate of closer to 14%.

"The days when software was only available on a floppy disk or CD and installed locally on PCs and servers are long gone," says Simon Gautrey, group manager, partner marketing at Microsoft.

Sticking with a Microsoft theme there was a fair amount of activity caused by the launch of Server 2008.

Jon Rolls, senior director of product management at ScriptLogic, says: "There have been lots of revisions by independent software vendors to get their applications ready but for most this was straightforward.

"Windows Server 2008 has good backwards compatibility for -applications and a lot of the work needed to function within the tighter security framework had -already been done when Vista was released."

Although it gets lumped in with storage there has also been a strong first half year for software virtualisation vendors.

"The first six months of 2008 have seen the server virtualisation players such as VMware, and competitors such as Citrix with XenServer, laying out strategies to address the increasing demand for disaster recovery for virtual environments," says John Banfield, EMEA director at SteelEye Technology.

The next task for those that are selling virtualisation is to get the customers onto the wider pitch with virtual desktops.

"Sales of virtualisation software have increased month on month this year. Resellers have really taken to the technology and are seeing many different types of
opportunity to sell it.

"Our channel partners have found that more and more of their customers are looking to optimise their data centre environments," says Russell Blackburn, country manager at Parallels.

Hardware

In the world of hardware the continuing shift away from desktops to laptops has continued to gain pace but there has also been a considerable focus on the server side of the market.

With energy costs spiralling, the spotlight has fallen on those parts of the hardware infrastructure that have the potential to suck up a lot of electricity and emit heat that in turn demands air conditioners.

"Although the economic climate doesn't appear to have had an effect so far on IT spending, with costs for commodities such as energy ever increasing, it's clear that businesses will have to adapt quickly to mounting economic pressures in order to maintain growth and profitability through the remainder of the year," says Phil McLean, ISS business development manager at Hewlett-Packard UK & Ireland.

"We encourage all of our customers to think in terms of the total cost of ownership of both their existing infrastructure and future investments. Going forward, this will give them a clearer picture that takes into consideration not just the overall cost of the hardware and software, but also the staffing and additional facility costs such as power, cooling and floor space," he adds.

In the printer space there have been healthy sales of multifunction devices according to analysts and those producing products understand the requirement for keen pricing combined with reasonable levels of functionality.

"The print market has become increasingly aggressive, with vendors and resellers becoming more competitive on pricing and less reliant on keeping functionality and product innovation at the forefront of every sale," says Marcus Harvey, UK channel sales director at Lexmark.

"With the onset of the credit crunch, consumers and businesses across all sectors are purchasing more cautiously. This has resulted in vendors bringing down prices to ensure sales remain stable or developing new products aimed at adding more value for long term gains," he adds.

"The key challenge over the next six months will be finding a happy medium between pricing and solutions that fits a customer's needs."

In terms of products the market continues to be dominated by laser printers, according to Robin Edwardes, vice president and managing director for EMEA at Tally Genicom.

"Many organisations are using laser printers for the wrong applications. Workgroup laser printers are ideal to support large departments, but we find many organisations using laser printers in places such as warehouse floors. Many vendors are more focused on shifting units than on the greater picture," he says. 

Networking/comms

The trend towards mobility has continued this year, with an increasing number of people working away from their desks, a sales pitch that also taps into the green requirement for less time spent travelling.

"The last six months have seen workers increasingly move away from their desks. More and more organisations are seeing the benefit of a mobile workforce - whether operating outside the company's four walls, working inside the offices in a number of locations or "hot desking", a desktop PC is becoming an increasingly less practical tool," says Andy McBain, senior product manager at Motorola EMb.

As well as the obvious pieces of mobile technology there has also been an impact on the traditional infrastructure.

"We are continuing to see a strong interest in the channel for distributed networking solutions that allow customers to extend their reach and make their branch office environments a cohesive part of their corporate network," says Errett Kroeter, director of channel marketing at Lantronix.

There has also been an increasing pressure on resellers to provide a solution that actually delivers performance rather than just meeting the demand for the next great thing.

"The first six months of the year have seen businesses focus on ways to get cost effective quality of service to ensure they can implement business critical applications such as voice, CRM and ERP," says Neil Watson, channel director at Viatel.

"There is currently demand for business level uncontended ADSL that offers better upstream speeds, because SDSL is not readily available and leased lines can be too expensive," he adds.

Audio-visual

The world of screens and sound has been knocked slightly by the slight decrease in education buying but there are other areas that have kept those in that market ticking over.

"Although we have seen a slightly more cautious approach to buying in the audio-visual market, we have still seen a healthy pipeline of longer projects.

"Increasingly, we are seeing a real upswing from non-education markets (such as the corporate, public sectors and healthcare) as well as niche markets like emergency services and defence," says Mark Bird, group sales and business development director at Steljes.

In terms of looking at the market from a product point of view Jon Sidwick, managing director at Maverick Presentation Products, points to short throw videoconferencing but importantly the skills in demand in the channel are starting to change.

"AV resellers are looking to acquire networking skills due to demand from users to supply the complete AV and IT solution," he says.

Storage

Although there are no signs of data growth slowing down, the first six months of the year have seen a greater interest in technologies that save costs through consolidation and the provision of increased flexibility.

"Throughout the food chain of the IT industry the need to curtail costs and maintain, or even increase, performance with existing technologies like server virtualisation, thin provisioning and data deduplication have all had the upper hand on competitors trying to shift traditional solutions," says Craig Nunes, vice president of marketing at 3PAR.

"The second half of the year will be a testing time for those who are yet to catch up with their solutions portfolios," he predicts.

John Osborne, general manager of the servers and storage business unit at Computer 2000, agrees that although storage is performing well there is a focus from customers on getting a return.

"Many customers are now taking a more strategic approach and looking to buy intelligent storage solutions that provide additional scalability and ROI.

"All this is translating into higher value projects and sales for storage solutions providers and resellers in general. It is more important than ever now to focus on the real value that storage delivers to the business, not just on the megabytes per pound - there is plenty of value to be added if you look for the opportunities."

Elsewhere the increasing interest in virtual tape libraries has breathed new life into an ageing technology, according to Chris James, EMEA marketing director at Overland Storage.

"Businesses are also starting to realise that transitioning to a VTL strategy is a straightforward process as, due to its ability to emulate a physical tape library, it won't interrupt existing backup processes and procedures," he adds.

Virtualisation swamps the market, impacting both a hardware and a software sale, and it is being used by the channel to drive purchases.

"Virtualisation is now the single biggest driver of demand and innovation in storage. Everyone is well aware that shared storage is a must for virtualisation implementations, but as new tools make it easier to automate the provisioning of virtual machines, and as virtual desktops take off, even greater demands are being made of storage, particularly from a backup point of view," says Chris Akerberg, vice president of global business development at Vizioncore.

Security 

One of the phrases that was used around the stands at April's InfoSecurity exhibition but has remained is the idea that the security sector is immune from a downturn because users have to remain protected against multiplying threats.

"Attacks are continuing to grow and more and more at the application layer; in fact, except for a few notable exceptions, most exploits are bespoke per application," says Avi Douglen, senior product manager and application security consultant for Comsec Consulting.

What has continued to help the sector has been the number of high profile data leaks, primarily coming from the government, that have highlighted the need to safeguard information and use encryption.

"The tone for the last six months was set by HMRC back in November last year when the personal data of 25 million people was 'lost in the post'. Since then everyone in the government has been trying to understand the implications and get their house in order," says Neil O'Connor, principal consultant at Activity.

One of the problems with the high profile cases of data loss is that after a while customers might switch off and fail to learn the lessons.

"Recent data scares at hospitals and with senior government officials are just the latest on a conveyor belt of data breaches. The worry is that people either become desensitised to them, or assume 'it couldn't happen to us'," says Chris Mayers, chief security architect at Citrix.

Although the prospects for the second half of the year continue to be overshadowed by economic issues the indications in the channel, particularly from a technology point of view, show there is plenty to be positive about.

If a reseller can make a pitch that taps into the key desires to save money, improve an environmental record and make management of IT easier then it should be a winning combination. Importantly though that is likely to be a solution that straddles several market segments.