PRC’s 2004 Canadian IT Reseller Report  

PRC conducted research on the Canadian IT Reseller market in the spring of 2004 through a targeted email blast to the Canadian IT Reseller community.  Many of the respondents came from the small business segment, with 79% citing <50 employees and 77% with annual revenues of <$5 million Canadian.  Sixty percent of IT resellers categorize their businesses as Consulting & Systems Integrating, or as an IT Solutions Provider.  The independent software vendor (ISV) category is one where 9% of respondents place their business models.  Only 8% of respondents use the “reseller” category, which indicates a shift towards incorporating the services component into the business model.

Specialty markets, such as retail and professional firms, are key area for sales growth.  In targeting new firms, direct mail campaigns (21%) raise awareness of the reseller organization, and then outbound sales representatives (19%) establish direct contact with the perspective client.  To service existing customers, assigned sales representatives are critical, accounting for 19% of business practices.  In combination with the “hands-on” use of the sales representatives, indirect practices, such as direct mail campaigns (18%), web site activities (14%) and email marketing tools (13%) maintain communication with the established client base.

The partnership opportunities between resellers and vendors are vital components to success in the IT industry.  From driving new business to maintaining existing clients, resellers highlight key opportunities available through partnership initiatives.  Fifty-six percent of survey respondents indicated they have formed partnerships with other organizations.  Professional services firms are the most popular choice for resellers (23% of respondents) and increased sales opportunities is the most common reason for forming a partnership.  The most critical role a vendor can play in this relationship is bringing the marketing dollar to the table.  With tight marketing budgets, resellers increasingly rely upon the vendor’s marketing and development funds to help contribute to improved businesses opportunities.

Hardware sales represent a key component of the industry, with PCs and networking equipment accounting for the bulk of activity.  HP was ranked as a top vendor for PC and peripheral equipment.  Ingram Micro is ranked as the top IT distributor in Canada.

The professional services segment is a key area for growth.  Many respondents indicate strong interest in growing this business component.  Management consulting is critical to professional service activity.  Security, mobility and disaster recovery are pivotal to the growth in this segment.

Software continues to experience growth, as resellers focus on security and data management issues.  Microsoft, IBM and Symantec were ranked the top three software vendors.  Of all of the areas where software vendors can bring value to the reseller channel, technical support and training are critical.

The future for the IT industry is rosy, according to survey respondents, with a 52% predicted increase in hardware sales.  Outsourcing is forecasted to increase by 48%.  Following the challenging period experienced in the past three years, reseller organizations have emerged strongly and optimistic for activity growth.

Vendors play a critical role in marketing & communications

The partnership between vendors, resellers, distributors and third party organizations, is continually being refined as this industry matures.  In 2004, resellers identified vendors as playing a critical role in providing marketing materials, product positioning, and market research in that relationship.  The resellers play a critical role in service delivery, relationship management, opportunity ownership, and leads generation.  Distributors are pertinent to channel communication.  Third party organizations hold strengths in product training and certification.

Marketing materials ranked the most vital of all sales support activities

Recognizing the important role of the vendor in providing marketing materials, the same activity is highlighted as being the top sales support activity.  Also ranking in leading positions of importance are funding, product training, vendor website (providing information) and sales collaboration.  The next three activities all finished in the same position:  business development, leads management and sales tools.

Computers & networking devices are critical hardware products to resellers

Computers continued to rank as the number one hardware product offered to corporate clients by resellers.  Tying for the number one position were networking, or communication, hardware.  As known as “back-end” products, networking devices provide the infrastructure for the IT business solution.  Operating hand-in-hand with networking and personal computing devices is the server, which is identified as being the next most popular hardware product. 

Exhibit 1: Most Popular Hardware Products
Resellers Offer to Clients: 2003

Upgradeability features rank as the number one contributor to hardware product sales

The need to upgrade hardware ranks as the number one contributor to product sales, according to survey respondents.  Other critical factors are total solution sales, software advancements and hardware advancements. 

Subcontracting, or sharing service delivery revenues, is the most attractive vendor compensation tool to resellers

Sharing service delivery revenues is the most important vendor compensation for reseller/vendor partnerships.  The second most popular compensation is a remarketing discount, followed by a fee for service market and a fee for passing a lead, according to reseller respondents.

Exhibit 2: Vendor Compensation for Services Partnering

Security & information management software ranked as the most popular software offered by survey respondents

Vendors should provide technical support and training to help drive software sales through the reseller channel.  Partner conferences, providing sales and marketing support are also critical business practices to enhance software sales.

Exhibit 3: Leading Software Types
Offered by Resellers: 2003

*Multiple answers were encouraged