Review : CRN Top 100 VARs 2017

19 December 2017

Anyone who works in the channel see Channel Reseller News (CRN) as a useful source of information, particularly regarding shifts in trends and performance of some of the key IT and Telecoms suppliers within the UK market. A few weeks ago they released their CRN Top Value Added Resellers (VAR)s 2017 ratings, and it made for very interesting reading. To save you reading all 40 pages I thought I’d list some of the interesting points I gleaned from the report.

Mixed results for the collective channel

Across the top 100 VARs, revenues appeared to have grown by 15%. Whether that’s as a result of acquisition, as a result of stealing market share from the non-Top 100 or as a result of a market size increase is difficult to fathom, but it appears to be good news for the big boys.

What isn’t such a good news story is that overall average operating margins have dropped from 4.4% to 3.4%, which underpins the competitive nature of such a fragmented channel. The shear volume of providers, along with a more aggressive stance from Vendors on margin sharing / direct client engagement, is driving profits down across the sector.

Mergers and Acquisitions are rife, and some are struggling / have gone

A number of major players in last years list are no longer with us, with 4 of the names having been acquired or in the case of Misco, gone bust. I think this is an indication of things to come, with many smaller resellers looking for an exit in the short term and many larger player looking to grow by acquisition to support a volume sales model in a commoditising space.

It only takes £31m of revenue to get in the Top 100

The 100th place entry is Excitech, with revenues of £31.3m. This is not as big as I thought it would be. With allegedly 16,000 technology companies in the UK, it doesn’t feel like a big number to get to the “Top 100”. We work with a lot of firms in this general ballpark of revenues. It feels like this is an indication of a highly fragmented market, with loads of providers around a similar level all competing for a similar client size and space.

The 80/20 rule doesn’t quite apply, but its not too far off

The top 20 VARs on the list are driving 62% of the revenue on the list. The total revenues for the top 100 is £13.6bn, and numbers 1-20 are driving £8.6bn, of which Computacenter is £1.4bn (about 10% of the total). These guys are enormous, and driving this volume of technology products and services whilst maintaining customer service is impressive (assuming customer service is maintained).

Trends and Predictions #1 – Specialists are winning over broad line

There is some interesting commentary around how finding a niche smaller provider has become a lot more socially acceptable than just sticking to the bigger brands, citing the complexity of technology becoming too much for a single vendor to deliver it all. Supplier rationalisation into a single provider seems to be not as trendy as it once was.

Trends and Predictions #2 – AI and IoT are a thing, and so is 3D Printing (?!)

In a survey of end users, CRN have found that over a third of respondents have budgeted for AI and IoT (which is more than expected as its still fairly early doors for some), and 20% of respondents have budgeted for 3D Printing / Augmented Reality, which is weird as the practical applications of these have yet to really emerge.

Trends and Predictions #3 – Clients are buying more direct than from the channel

Not an enormous surprise is that clients are engaging directly with vendors more than they were, to the detriment of the channel. I can’t help but think this is a result of the push towards AWS (who’s channel programmes are fairly immature) and Microsoft (who are offering many offerings direct / online), but this will probably reverse as clients realise that Vendors have finite resource to support them and the channel re-establish its value.

In short, an excellent piece of analysis by CRN which shows that the channel is still a buoyant, but maybe more turbulent than it was, place to be and that the UK IT and Telecoms space continues to have its nuances which need navigation!

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