I have lived through five recessions, although the first one in the mid-seventies was told to me by my father.
The others were quite noticable and each one impacted me differently. There is no question the recessions of 1991, 2001 and 2003 severely dented the IT industry in a big way.
The first one cut about 100 PC vendors down to a managable 10 or so. The second, in 2001, was in the wake of the 911 tragedy and the over-hyped and underwhelming Y2K fiasco. In 2003, the dot-com bubble burst. The last three major recessions hit IT hard. As this recession gets started is it possible that the IT channel may, for once, be left alone?
The recession is coming at a fortunate time for many in the industry if you can believe that. Most channel players have closed the books on 2008 with fiscal year ends in either August, September or October. Many channel partners I have spoken to recently have had a tremendous year. They also put into place aggressive plans for 2009.
Even with this financial crisis these channel partners are not wavering from their plans.
I recently attended the annual VTN Invitational, and many Canadian and American resellers are in this boat. They’ve all concluded a great year and expect to maintain their course of action going into 2009.
If there is any flaw with these entrepreneurs it may be over-confidence. Managed Services is also playing a pivotal role here. Back in 2003 managed services was just a concept. Today it’s a reality. CDN’s Channel Elite Awards offered its first ever award in this category and the submissions received were all of quality and plentiful. With more managed services it means that solution providers don’t have to rely as much on hardware and software margins. Also, many of these smart partners have three-to-five year signed agreements from customers in place right now. These contracts generate reoccurring revenue streams. Basically, managed services has made solution provider businesses sustainable.
So what about growth? That will be tricky. From my sources at HP and Cisco a slowdown is already occurring. But it’s just a slowdown at this point. No outright cancellation of projects. Mostly these projects are delayed or slightly scaled down.
From my sources at Microsoft and its partner community it’s business as usual, with no major cancellations, delays or scale backs. Symantec sources tell me the same thing. Customers will still need security and backup.Past recessions have taught the channel to be cashflow rich, carry very little to no debt and look for profitable opportunities.
Many solution providers who participated in this year’s Channel Elite Awards fit this profile. Many of them will be looking to acquire other IT resellers who do not have a strong balance sheet.
The first quarter will tell the story of this recession for the channel, but as it looks now, it may be one of the least impactful economic downturns for the IT industry.