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UK tech channel in RUDE health as bankruptcies dip in Q1

Put away the stretchers... fewer dead and dying for 4th quarter in a row

It's time to crack open the bubbly: corporate fatalities in the UK channel have fallen for the fourth consecutive quarter, official stats from credit rating firm Graydon UK reveal.

Some 61 companies bit the dust in the first three months of the year versus 64 for the same period of 2013, indicating that the UK IT industry has well and truly stabilised.

"It is pretty quiet out there on the insolvency front," said Alan Norton, head of intelligence at the credit reference agency, "and I expect that trend to continue".

The UK channel was the largest across Europe in Q4, data from Context shows, with distributors' sales shooting up 8.8 per cent to £2.86bn.

Upward momentum in the biz space looks to have has spilled into '14 according to firms including Computacenter and SCC, and it was also a busy year in the public sector, according to multiple sources.

"The IT industry is one of the growth areas that is helping economic recovery," said Norton, "consumers are slowly getting their appetite back, budgets are being released in the corporate sector. This is not rapid exponential growth but there is a steady stream of business to be had".

Forrester forecasts sales growth in tech of three per cent for 2014 and five per cent for next year and other beanies also agree the demand has returned.

According to a Canalys-run survey via its Candifero platform, three quarters are channel companies are forecasting top and bottom line growth for the year.

Alastair Edwards, Canalys principal analyst concurred businesses are investing in mobility, XP end-of-life upgrades and are gradually shifting tech to hybrid clouds.

He said channel partners need to help with this migration but many are not yet up to this challenge. Edwards added that IT decision are becoming more "software oriented".

"Developing API skills to create unique software and services [is a must]"," he told us. "There is a growing recognition in the channel that this needs to happen but whether they can do it quickly enough remains to be seen.

"All vendors are pushing this message of transformation but that is slightly difficult for the partner community because all those message are slightly different. This will be an important period of time as partners choose where to place their bets," he added.

A report by financial analyst Raymond James stated that while OEMs are facing "more uncertainty about their future growth trajectories", the global partner community is on its uppers.

"The market seems to be increasingly recognising the resilience of the channel's value proposition and its relevance in a physical, virtual and even in a cloud environment".

It reckons that many of the large listed resellers had "exceeded" revenues and profits performance "over the past two quarters, while OEMs have reported either disappointing results or guided future expectations below consensus".

It added that cloud is growing but "disruption" to distributors and resellers is "less likely" than investors initially estimated.

"Customers typically rely more heavily on channel partners during periods of rising complexity, while the fragmentation and hard-to-reach nature of the middle market makes it inherently difficult for vendors to penetrate on their own."

History shows that as economies comes out of recession, the level of insolvencies rise, but with interest rates at an all-time low this most recent dramatic downturn is unlike all that came before it. ®

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