While technology channel sales increased slightly in the first quarter of 2020, economic indicators warn of tough times ahead.
Overall volume in the Canadian distribution market increased by about three per cent over the previous year, said Michael O’Neil, channel consultant with The NPD Group, at the first of a new webinar series on B2B Tech Channel Sales. “It was not terrible by any means for the Canadian channel,” said O’Neil. However, a decline in job postings in Canada of 43 per cent suggests the situation is deteriorating rapidly, he added.
O’Neil cautioned that volatility due to the COVID-19 pandemic makes it impossible to develop accurate forecasts. “I get that everybody would like some certainty. But I think it’s pretty clear that in the current crisis, forecasters are completely at sea.”
Data based on first quarter sales shows clear winners and losers in technology products and services, he said. As well, past data shows that the technology channel is resourceful and resilient, said O’Neil. “We’ve lived through good times and bad before, we’ll do so again.”
What was hot, and not, in Q1 2020
The first quarter sales data provides a “lesson in why it’s important for channel members to keep their portfolios aligned with demand, especially in times of great change,” he said.
The data shows “notable growth” in sales of front-end technology such as PCs, headsets, monitors and end-user level security software. That’s not surprising given that a survey by the Canadian Internet Registry Authority found that seven times more Canadians are working from home now than before the lockdown. The PC market, in particular, grew by 30 per cent over the same quarter last year.
“If we are moving towards a distributed workforce, sales should focus on productivity tools, including and especially, powerful PCs,” O’Neil said. Security sales grew in identity and access management, security information and event management, and gateway and firewall solutions. “Security, of course, is on everyone’s mind, especially as workers start connecting from new places.”
The first quarter also saw double-digit growth in cloud infrastructure, PaaS and database and application development software, although O’Neil saw this as a broader technology trend.
The sales data shows a clear downward trend in projectors and telecom equipment. The latter category had been growing during the same period in the last two years, but dropped by six per cent this year.
“It looks like an abrupt shift in spending priorities, one which I think might continue at least as long as the lockdown does, and potentially further if predictions about the companies moving away from corporate real estate come to pass,” said O’Neil.
Where do we go from here?
Given the steep decline in job postings, O’Neil anticipates that the technology sales environment will worsen in the near term, while the longer term is still too variable to predict. “The key will be to take the actions that are appropriate to each opportunity to optimize portfolios to make the most of what is likely to be a constrained market,” he said.
O’Neil suggested that channel providers with a focus on stable, helpful, and empathetic support for customers will stand a good chance of making it through the near-term turbulence and the longer-term recovery to “whatever the new norm is. We’ll come out of this on the other side, but there are real questions as to how long that will take, and how deep things will get before they start to come back.”