2003 Survivors

The year 2003 has been a year of crisis and of change amongst the Top 75 channel Solution Providers in Canada. Evans Research Corp. (ERC) estimates that total revenues of these firms will be $5.256 billion in 2003. This is 9.2 per cent less than the $5.793 billion that these same firms achieved in 2002.

The

composition of the Top 75 changed dramatically this year. Eighteen of the firms in this year’s ranking did not appear in last year’s rankings. This is a remarkable feat. In the past, the number of new firms in the rankings has normally been in the range of 8 to 12.

A multitude of factors combined to create extremely unfavourable market conditions for the Top 75 including:

  • Reduced capital spending on IT Infrastructure by corporations and government.
  • Increasing market share in the server market for the manufacturers that use the direct model.
  • Encroachment in the solution provider market by outsourcers and consulting firms.
  • Weak economic conditions

Fortunately the outlook for 2004 is significantly better. ERC believes that the following factors will lead to strong increase in revenues for the Top 75 next year.

  • The installed base of equipment has become very old. This should be enough to prevent another year of reduced capital spending and will likely ensure a healthy increase in IT investment.
  • The share for the direct model is approaching its natural limit.
  • The other market players who have encroached on the share of the Solution Provider channel are not well positioned to support and service their customers in the small and medium business segments. These other market players will need to sub-contract a growing range of services to the Solution Provider channel in order to ensure a positive experience for their clients.
  • The overall Canadian economy should achieve greater growth in 2004 than it did in 2003.

Moreover ERC believes that over the longer term following factors will contribute to the growth and success of the Solution provider channel:

  • While server manufacturers now compete heavily with the Solution Providers for equipment sales, the network, printer and storage manufacturers remain highly loyal.
  • End-users are continuing to convert to Windows and Linux, two environments that Solution Providers are highly skilled in. The software environments that belong to the server manufacturers are continuing to decline.
  • Margins on servers and desktops have been virtually non-existent for the last five years. Revenues that have been lost in 2003 to the direct manufacturers will have little or no impact on the profitability of the Solution Provider channel going forward.
  • Solution Providers continue to develop their skills in the application software and utilities that are used by their customers. Thus they will be able to increase their service revenues.

Although 2003 has unquestionably been tough, the outlook for the medium and long term is much better. The firms that have proven their resilience by surviving this difficult year are now positioned for another prolonged period of growth.</

Would you recommend this article?

Share

Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.


Jim Love, Chief Content Officer, IT World Canada

Featured Download

Featured Story

How the CTO can Maintain Cloud Momentum Across the Enterprise

Embracing cloud is easy for some individuals. But embedding widespread cloud adoption at the enterprise level is...

Related Tech News

Get ITBusiness Delivered

Our experienced team of journalists brings you engaging content targeted to IT professionals and line-of-business executives delivered directly to your inbox.

Featured Tech Jobs