When it comes to motivating and explaining the cover story that characterises every issue of Channelwise, my esteemed editor is often inclined to ask some fairly “simple” questions.
To illustrate this point, he asks the following questions in connection with this issue’s “State of the Nation” cover story that takes place against a background of extreme uncertainty throughout the global economy brought on by the devastating effects of Covid-19, combined with the tumultuous political events experienced in South Africa this year:
- Will the channel recover from these setbacks?
- And if so, how long will the recovery take?
- What measures are distributors already taking, and how do they see the future unfolding?
The answers to these rather “simple” questions are incredibly easy to answer. They are:
- Of course it will!
- Recovery will be far quicker than expected, and
- All measures will be based on expert execution of the basics of business that have always applied to the IT channel since its inception.
As a country that has always relied heavily on the importation of technology needed to build and sustain IT infrastructure as a foundation for all human endeavour in today’s rapidly-increasing digital world, supply chain disruptions have always been considered a part of “business as usual”.
Stock shortages caused by a wide range of factors including basic issues such as lack of manufacturing capacity, offshore or component assembly operations in-country, or logistical nightmares caused by the destruction of infrastructure due to natural disasters or political upheaval, foreign currency limitations and many other factors, have always been a part of life in the IT channel in this country.
Look no further than the conditions that prevailed when the IT channel first came into its own in the dark days of Apartheid when vendors, distributors, resellers and end users battled enormous odds to survive in the face of mandatory trade sanctions and the challenges of doing business in what was commonly referred to as an “abnormal society”.
Ingenuity, determination and strict adherence to the basic principles of “what makes the world go round” in the IT channel helped establish and guarantee the survival of the IT distribution channel in those days and the one that we all continue to know and respect to this day.
These basics include the role of vendors to create awareness and demand for their products and solutions in the end user market; the role of distributors to carry and make available the right product at the right price and offer credit facilities to the business partner community throughout all industry sectors across the entire economy; and the role of IT resellers to meet the needs of end users through the delivery and provisioning of IT products, solutions and supporting services on an ongoing basis.
Regardless of how long the disruptive impact of the pandemic is going to go on for – both in South Africa and across the world – or whether or not the country’s president will ever succeed in getting to grips with “insurrectionist factions” in the domestic political landscape, or the equally devastating impact on the economy of expert “State Capture” practitioners in the ruling party, success in the IT channel will depend on this proven business model and how well it is executed in the face of PESTLE factors (Political, Economic, Social, Technological, Legislative and Environment).
Over the years there have been a number of “bell curve” landmarks that have been characterised by “life-threatening” economic conditions for both the South African economy as well as national economies of other countries around the world.
None of these instances proved fatal for the IT sector as a whole. While many thousands of IT companies may have folded or been forced out of business due to the economic environment of the time, it was nothing that can be explicitly attributed to the nature of IT as an industry sector, but rather poor management.
Looking back on some of the biggest threats ever faced by the IT channel, the most serious challenges have come from within the industry itself.
The most serious threat and the one that always causes the most consternation in the channel is what can commonly be referred to the “Greed Factor”.
The ”Greed Factor” refers to desperation measures often taken by specific players in the three-tier distribution model in an effort to grab more profit for themselves at the expense of the trading principles that govern the industry.
This includes vendors who decide to “go direct”, distributors who try to bypass their own business partners, and resellers who use grey market product or indulge in outright piracy.
The extremes of “boom-or-bust” economic cycles – regardless of the root cause (pandemic or political) – should not be regarded as a serious threat to the future of the IT channel. Reacting to these conditions in the wrong way, is the major risk.