Modest growth expected in the channel

Posted on February 01, 2006

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By Ann Silverthorn

A survey of 50 value-added resellers (VARs), conducted by the Robert W. Baird investment research firm, indicates that Q4 2005 reflected “reasonably healthy” VAR revenues. The survey also suggests sound prospects for modest growth in 2006.

Baird analysts report that in the fourth quarter of last year about half of the resellers were “on plan,” 34% “above plan,” and 18% “below plan” in terms of revenues. Looking ahead to 2006, 86% of the resellers expect their growth to exceed 5% (with 34% predicting growth of more than 15%), and only 14% of the VARs expect flat results this year.

As for vendors’ prospects in the channel, Network Appliance, IBM, and EMC are expected to be the top beneficiaries of increased spending by VARs in 2006. In terms of mindshare, NetApp scored the highest, followed by IBM and EMC.

Regarding the OEM deal between IBM and Network Appliance, the Baird report suggests that resellers generally have a positive view of the relationship. Nearly 60% of the survey respondents believe that incremental sales will result from the relationship, and none of the respondents expect market-share losses because of the deal.

In addition, resellers’ views of the Sun/StorageTek merger seem to be improving, with no respondents considering the move as a “major negative,” compared to 8% that gave that response in Q3 2005.

Resellers surveyed consider IBM and Hitachi Data Systems to be the leaders in “channel friendliness.” EMC remained in the middle of the pack after suffering a drop in Q3 2005. All of the vendor scores were down slightly. Baird analysts speculate this might be the result of a general industry shift of vendors’ strategies away from the channel.


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