While the year has gone down in history for being packed full of doom and gloom, analyst outfit Canalys thinks that it has been pretty good for the Channel.
The technology sector has had a stronger year than many would have expected at the start of the pandemic. Over the past three quarters, the tech industry as a whole has increased by five per cent. Distribution across Europe, the Middle East and Africa (EMEA) has increased by four per cent, as have resellers.
Canalys CEO Steve Brazier (pictured) addressing the assembled throngs at the outfit’s Channel Forums event, said that while GDP across EMEA was expected to fall by nine percent this year, the tech world had defied gravity and come out fighting, helping customers solve real problems caused by COVID-19.
“Technology has won, the channel has won, distributors have won – it’s turned into a very good year and we couldn’t have predicted that. The channel in Europe will see the most profitable year ever.”
He said that several factors, including higher revenues, created all that but there has also been a focus on spending and costs.
“You are spending a bit less. You are travelling less and probably spending less on consultants. During the first and second quarters, when we were all worried about the future, you cut costs and you have been able to maintain many of those cost cuttings. As a result, your operating margin has gone up and your SG&A [selling, general and administrative expenses] has gone down”, said Brazier.
“It is both the success of the industry and the cost-cutting measures we were able to make that means this will be the most profitable year ever for the channel, and a very healthy channel we are too”, he added.
Brazier said the channel could have done even better had there not been supply issues around some components and products. The shortage of air freight meant delays crept in and the demand was so strong that there was not the capacity in certain segments, like panels and processors.
“The one who has supply wins because the customer will buy whatever you have got”, he said.
The big resellers have done better than smaller resellers, and volume has performed well compared with advanced solutions. Government spending has been higher this year, which has been hoovered up by some of the larger players already on the approved lists.
Resellers serving the small and medium-sized enterprise (SME) market saw most of their smaller company customer base shutter operations and reduce spending, which hit them harder. As a result, corporate resellers improved their revenues by six per cent across EMEA while smaller partners only managed a 1% improvement.
Brazier added that this was set to be the most profitable year for the players in the PC industry, with Lenovo, HP and Dell in very strong positions. Home working has driven volume sales of products and that has translated into it being a positive year for the hardware players.
“We are confident that demand will remain strong for at least the next 12 months in the PC market,” he said. “The PC market has had a sea change and it is fundamentally bigger now than it was a year ago.”
