SME channel partners expect 12-13% growth in 2009: AMI

Channel partners serving enterprises, including SMEs (small and medium enterprises, or companies with up to 999 employees) and large enterprises (companies with more than 1,000 employees) are cautiously optimistic about their revenue growth during the current economic downturn.

Channel partners that serve SMEs expect to grow 12-13 per cent in 2009, while those who serve large enterprises expect a 17 per cent revenue growth this year, according to New York-based Access Markets International (AMI) Partners.

AMI-Partners specialises in information technolofy (IT), internet, communications actionable market intelligence, with a strong focus on global SMEs.

Channel partners in India are not just traditional box pushers as they also focus on providing holistic solutions to end-users, said Alankar Joshi, research analyst at AMI-Partners.

 

"Information technology (IT) services are a substantial contributor to revenue growth for channel partners. Selling just hardware has become comparatively less profitable business as heavy discounting has curbed reseller margins," Joshi said.

Profit margins from selling hardware products have dropped from 29 per cent last year to 20 per cent this year. On the other hand, margins on IT services have risen from 12 per cent to 14 per cent.

Even SME channel partners have gone into IT services and solutions as a lucrative business model for sustained growth, AMI research pointed out.

"Channel partners face immense pressure because of fierce competition and margin pressure by IT vendors," Joshi said, adding, "Most channel partners are also concerned about the availability of credit. Nearly 50 per cent of channel partners said insufficient cash flow is the biggest challenge they currently face."

The economic downturn has led companies to lower their IT budgets and review criticality and timelines of IT projects. Financial support for further procurements has also dried up. So, the hardware market is expected to be adversely affected and channel partners are now looking at diverse avenues to push their products.

The top two verticals for channel partners to get a major share of their revenue are manufacturing and education. These sectors registered considerable growth in the last couple of years. Apart from these, verticals like finance, insurance and real estate (FIRE) and retail have contributed substantial revenue share for channel partners. Some of the up-coming verticals channel partners are looking at for more revenues, are media and broadcasting, legal firms and entertainment sector. Healthcare and life sciences are also promising due to high computational needs.

There has also been a growing trend of subscription-based models, a good chunk of large enterprise-channel partners deal with Software as a Service (SaaS) line of offerings. Many large enterprises and now small and medium enterprises are also adopting subscription-based models to avoid operational hassles and gain cost advantages. With more time and awareness, these modules will have increased acceptance.

Though majority of channel partners still resell basic computing products such as desktops and portables, printers and peripherals, servers and basic security solutions, they feel that there is immediate need to go beyond these product lines due to current economic slowdown.

The present economic situation has led channel partners to diversify their product portfolio. Realising this need, around 40 per cent of large enterprise-channel partners are already venturing into server and storage virtualisation solutions and are open to more emerging products to capture additional business. Medium enterprise- channel partners have already forayed into second level of managed services, such as on-site IT services with some remote functionality. Some of the other solutions which are gaining popularity among Indian channel partners are unified communications and enterprise mobility.