The South African channel is looking good

Von Nicolas Callegari

The channel is well on its way to full recovery, and the general feeling from all the people to whom I have spoken is very positive.

The highs

Rectron (Pty.) Ltd.CEO, Mark Lu, says that this year brought with it a number of highs, most of which were on the technology side, but which resulted in significant growth in the business generated from the channel.

"Intel and Microsoft, for example," Lu says, "have seen significant growth throughout the EMEA region, labelling it as the fastest growing market in the world."

This growth, he says, has been fuelled by good economic conditions and the move to a more retail-focused channel, and should continue as many of the post-Y2K equipment lifecycles come to refresh time. "This momentum should continue throughout next year," he adds.

2004 was definitely a good year for technology. With 64-bit computing taking huge strides forward in both the server and desktop spaces (with the likes of Intel Corp."s" EM64T and Advanced Micro Devices Inc."s Opteron and Athlon 64 processors), high-performance computing now looks to be more affordable for the SME and larger enterprise markets alike.

Also, there was exponential growth in flash memory, which has resulted in a dramatic drop in the price of removable media, USB storage and MP3 players, and an increase in the size of entry-level storage. OSS and Linux have also risen as a viable alternative in the operating system and application arenas, bringing a whole new potential revenue stream to the channel.

Axiz Pty. Ltd."s Anthony Fitzhenry says that the beginning of the year saw quite a boom in sales and, with the rand"s strength this year, businesses and consumers were able to get (and can still expect) a lot more bang for their buck.

However, Tarsus MD, Guy Whitcroft, adds that the issue of the volatility of the exchange rate continues to be a bone of contention for some. "Taking the good with the bad, we have seen the exchange rate lower the prices of most IT goods, but at the same time we are all finding we have to sell 60 percent more to reach the same Rand revenue as a year or so ago. Would that other imported goods saw prices drop in the same way as the IT industry!" he says.

"There is this exciting buzz in the channel that is contributing to significant growth from a sales and maturity point-of-view," says Mike Botes, channel manager at Pinnacle Micro. In the services channel, IS director, Ermano Quartero, says that having reached the next level of maturity, SMEs are benefiting from a channel that is able to deliver high quality services, to the extent that they can offer SLAs for network outsourcing, which were previously only available to the larger enterprises.

The lows

While the channel is slowly maturing to the level where solutions and business value close the deal, there is still a high level of horse-trading going on, according to LightEdge Technologies MD, Grant Poulton, who says that resellers will put one distributor up against another in a price war.

Fitzhenry says that there still remains a huge gap in the industry for the channel to create power applications for existing technology and drive commercial sales. "The technology gap is broadening," he says, "but this is creating opportunities for the channel to develop better applications for the existing technology."

While SA is on track, with policies like the ICT Charter and BEE, the industry does feel that there has been a mad rush to start up black-empowered companies and resellers to win government work.

It is felt that this is not really advisable because (a) there is only so much business to go around, (b) it is not sustainable to only aim at one small segment of what is a much larger market and (c) broader business targets will yield a higher chance of actually doing business.

Greg Darke, Kathea Communications Pty. Ltd. MD, adds that the slow time to market of the SNO is hindering the move to a more competitive market, especially with all the opportunities for the channel to get involved.

"It is important to remember that the SNO should have had a three-year lead time on the liberalization of the market, and the fact that it is not yet licensed will put all stakeholders at a serious disadvantage come 1 February next year. The timing of the Convergence Bill, which looks likely to come into existence around March 2006, is also an issue, as it will not give the SNO enough time to acquire reasonable market share and consolidate its position in the market," he says.

Trends for 2004 - 2005

The gaming market is definitely driving the local market, which has resulted in a higher demand for high performance equipment and brought the price of this equipment down, in conjunction with the strong rand/dollar exchange rate. The announcement that VoIP will be deregulated as of February 2005 has certainly shaken the market up - especially the technology sector - as companies begin to realize the immense benefits that deregulation could bring.

"If managed correctly," says Darke, "VoIP will spur business growth and international competitiveness for SA. VoIP is definitely set to change the way the SME market approaches business communication as, not only will it provide greater efficiencies and increased productivity, it will allow businesses far more flexibility and reduced operational costs." While recent figures report that the growth of mobile is down from 30 percent in 2003 to 13 percent in 2004, mobility will still be in huge demand, according to Dave Drummond, SA country manager for Acer Inc., who says that the demand for notebooks will continue its upward trend in 2005.

"Sales in LCD panels will also increase next year, driven by increased affordability, owing to ongoing rand strength. Sales in this sector currently constitute 10-15 percent of the market; I expect this figure to double in 2005 and again in 2006," he says.


In general, the channel is positive about 2004 and is eagerly anticipating 2005. There has been a substantial amount of growth across the industry and, with the channel reaching the level of maturity it has, we may soon see the holy grail of business value becoming more of a reality, provided the channel takes up the opportunities being presented to it.