How’s the IT Channel Weathering the Recession

It is no surprise that the weight of the recession caused headaches and elevated stress across the IT channel during the last 12 to 18 months. A recent survey of solution providers conducted with our partner ChannelForce reveals just how broad a blow the economic downturn struck. More than three-quarters of survey respondents reported that the recession impacted their businesses either significantly or moderately. Just 22 percent said they experienced no impact at all.

But what’s most interesting is how the channel has responded. Their various actions and tactics exhibited a combination of pluck and old-fashioned common sense. While many, as expected, pulled back spending on events, training, capital expenditures and other line items in their businesses, these same solution providers continued to invest in areas that would position them to lead and drive revenue again when the economy turned around. Many got creative, rethinking how they conduct and participate in industry events, trying out new sales approaches and expanding their marketing efforts into other arenas such as social networking. Still others seized on the downturn to transition their business model to services or experimenting with such alternatives as subscription pricing and leasing options.

A couple of key findings leap out from the survey results.  Pounding the pavement to drum up sales remained critical during the slowdown. Nearly three quarters (72 percent) of respondents did not pull back on the number of sales visits they made during the recession, and in many of the qualitative interviews, respondents said that catering aggressively to existing customers helped offset the slowdown in net-new business. Targeted, one-to-one sales efforts trumped broad, umbrella sale campaigns, which two-thirds (65 percent) of respondents said they curtailed.

Not surprisingly, capital expenditures took a hit. More than half of respondents (56 percent) said they delayed or canceled cap-ex purchases (this would include machinery and other equipment), in all likelihood to retain critical cash flow. The reduction in cap-ex spending did not extend to technology spending, however, with just 38 percent of respondents delaying or canceling their planned upgrades. And while cap-ex spending will inevitably return, organizations are increasingly looking to turn one-time purchases into operational expenses that spread the total cost over time through subscription pricing and leasing.

The majority of solution providers (77 percent) avoided staff reductions. While companies in large part held onto existing employees, hiring new employees was a slightly different story, with the respondents nearly split evenly on whether they delayed hiring during the recession.

A particular bright spot in the study found that the majority of solution providers, while trimming costs and cautious about expenses, continued to make investments in their company. Only one-third of respondents reported delaying or canceling investments during the recession. In a down economy, continued investment is critical to future success. Companies that tread water waiting for the recovery to happen will find themselves well behind those competitors that, despite tough economy, kept putting dollars into exploring new technology offerings and vertical markets and did not stop marketing aggressively.

What’s clear from this survey data is that the channel’s resilience is intact, but also that it is not guaranteed. Standing still or retreating to a bunker wasn’t going to work for most companies during the downturn. Being smart with finances, but continuing to invest and create, will work.