Its been a funny old year so far, hasnt it? Reminds me of a theme park ridequite exhilarating, but not altogether pleasant. With economists and business commentators variously predicting soft landings, bumpy crashes, global depression and bath-shaped recoveries, whats really happening within our industry, and what sort of shape will we all be in when we shut up shop on Christmas Eve?
First the good news: despite widespread doubts about the economy, IT spending in the UK is set to grow over the next two years, with SMEs leading the way. Users are typically demanding a business case that demonstrates a return on investment in six months, which is a challenge for mainstream IT players but perfectly achievable in the mobile data/auto ID sector.
This promising outlook is supported by the number of enquiries were fieldingif only half of these develop into serious prospects, our pipeline is going to be looking pretty lardy. Many of our resellers are reporting that theyve rarely been busier, burning the midnight oil on proposals, some of them of eye-watering proportions.
So, why the long faces? The main problem is that the orders are failing to materialise. The deals arent necessarily disappearing; theyre being put back, sometimes repeatedly, for reasons often difficult to pin down.
the only way to be sure of plump margins is to add value, which is still possible despite the decline in demand for bespoke development.
For those with quarterly targets to achieve, this slowdown in activity is causing some concern. Worried vendors have observed that the torpor that had been evident in the UK in recent months is now being felt in continental Europe. However, Im not sure that there are grounds for gloominess. Theres a huge difference between a decline in sales and a failure to meet ambitious growth targets, and providing you havent ramped up your overheads in anticipation of that growth, your business should remain sound.
Of course, a side effect of business doldrums is downward pressure on gross margins, and weve certainly seen a bit of that in recent weeks. Theres plenty of evidence that dropping ones drawers to encourage a deal can be futile and counter-productive, as price alone is rarely the sticking point and the order wont arrive any sooner as a result. So, the only way to be sure of plump margins is to add value, which is still possible despite the decline in demand for bespoke development.
It may prove to be a tough year, but theres business out there to be grabbed and delivered
For many resellers and their customers, creditor rather the lack of itis what frustrates them. As I type, a very nice order has landed on my desk. I would prefer it to have arrived five weeks ago, when originally due, but its taken this long for our customer to obtain payment in advance from his customer, enabling our customer to pay us with the order. Better late than never, and Im full of gratitude, but its a fine example of how things slip.
In April we saw a reduction in the number of distributors operating within our community. With fewer options (read lines of credit), cash flow is going to be even more significant for resellers. It may prove to be a tough year, but theres business out there to be grabbed and delivered, hopefully without too many delays and with a sensible profit for all.
Earlier this year, a number of trade magazines carried the story of a leading-edge system going into the warehouses of one of the UKs major wholesale distributors. Its a great coup for the supplier, who has been understandably garrulous on the matter, notwithstanding the fact that the solution has been parked in my warehouse gathering dust for the last two months. Now, I really dont know whether theres a reluctance on the part of the supplier to install this kit, worth a significant amount of anyones money, or a reluctance on the part of the end-user to accept it, but I would hazard a guess that cash flow has something to do with its current inertia. Fortunately for me, the longer it stays put, the more cash flows into our coffers, because the only part we played in this particular transaction was to provide warehousing services. Kerching!
Ralph Donohue is managing director of Paradigm Distribution. Paradigm Distribution offers trade customers the world's best available products for auto ID and data capture applications. More than simply delivering the best products at prices designed to maximise profits for channel partners, the company has earned a reputation for providing unparalleled pre- and post sales support, including access to technical experts to ensure that partners' businesses win orders and fulfil them successfully.