VDC Research’s Mobile and Wireless Practice recently fielded a survey among Enterprise Mobility channel organizations to gage their expectations for 2010 and measure their performance in 2010. The general consensus among respondents (over 100 organizations responded to the survey) was that the worst was behind us and that the outlook for 2010 was increasingly optimistic. More specifically, after experiencing a contraction in excess of 15% in the first half of 2009 and between 5-10% during the second half of 2009, channel organizations expect their revenues to grow by an average of 7.2% during the first half of 2010 (over H1 2009). While organizations will likely not return to pre-recession levels until late 2010 or early 2011, the change in outlook is motivating organizations to increase their investment in their organization’s infrastructure and market development programs.
Now for the not so good news. While VDC contends that this is not altogether surprising and may be a one-time occurrence in response to the challenging business environment it is nonetheless concerning. Channel organizations reported an across the board decline in hardware resale margins of over 50% and in some cases over 70% during the second half of 2009. What makes this perhaps more shocking is that during the most severe market conditions – the first half of 2009 – channel margins appeared to hold somewhat steady with historical trends. Whereas during the second half of 2009 – as the market began to show signs of life – channel organization’s bottom line performance cratered.
So what does this mean? While two quarters of data does not make a trend, this writing has been on the wall for a while now. While our research indicates that channel organizations agree that they need to focus on new sources of revenue streams – read services and software – more will be required for channel organizations to truly succeed and separate themselves in this already crowded market. Enterprise mobility channel organizations do not have a great track record when it comes to expanding their footprint or scaling their businesses. However, that is exactly what will be required going into 2010. Not to be overly dramatic, but the shelf-life of ‘business as usual’ has expired. There is not enough green-field business and too much competition for this model to sustain itself. Channel organizations will need to be more agile at identifying and prioritizing emerging applications that map well to their profile. Furthermore this means a much more application oriented business model that leverages next generation services such as ‘pay as you go’ managed services and hosted applications. Status quo is not an option.
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