​How IT firms can protect themselves against insolvency

A key element of surviving in an increasingly competitive IT channel is adaptability

Picture: Pete, Flickr

Picture: Pete, Flickr

Given that there has been a spate of insolvencies within the IT channel in recent months, it seems an appropriate time to explore the steps IT resellers and distributors can take to help insulate themselves against the threat of financial collapse. There are a number of processes companies can implement before they get into difficulties that greatly reduce the likelihood of ending up in that dire situation.

A key element of surviving in an increasingly competitive IT channel is adaptability. There have been a number of major shifts in the channel in the past decade and, with the rate of technological innovation set to increase further, adaptability and flexibility will be critical assets for channel players to survive and thrive.

It is important for channel organisations to examine the market in a more scientific manner. They should identify areas that are currently under-serviced, or where there is an opportunity to provide a certain product or service at a more competitive rate than is currently available elsewhere. To grow their businesses and increase the value of their existing client base, channel organisations should offer value adds to services that they are already providing.

When undergoing larger scale business transformation, IT resellers and distributors face a number of challenges, and it is critically important that those challenges are met head on and addressed early in order for the business to not only survive the transformation, but thrive.

Cash flow and other financing challenges can occur when a business is looking to transform itself, so any changes should be fully costed to ensure that the necessary collateral is in place, including contingency funds. This is essential to ensure that the business transformation doesn’t put the entire operation at risk.

The challenge of course is that companies must also ensure that they don’t neglect their existing business while pursuing new opportunities. If customers feel the levels of care and support they have become accustomed to have declined in any way, businesses could lose the existing income they were counting on to support the new opportunity during its infancy.

Having a business transformation roadmap can help organisations avoid such a scenario. By creating a transformation roadmap, everyone in the organisation can be across where the company is heading, what the rate of change will be, and what the ultimate objectives are. This can go a long way to alleviate confusion and uncertainty, as well as identify whether aspects of the diversification plans have the potential to hurt existing parts of the business. This lets decision-makers identify issues early and address them before problems escalate to the point that they become beyond repair.

Given the rapidly transforming landscape within the IT sector, it is also important for companies to stay up to speed and ensure that their staff do not fall behind when it comes to product and services training.

Having a skills gap can be the death of a business, so companies must ensure that their staff are kept up to date with emerging technologies, as well as better sales and business skills. This can also have the added bonus of equipping staff to identify new opportunities to grow the business that are not currently being exploited, which could pay a handsome dividend. While this may at first appear to be an additional cost for a business going through transformation, this may be greatly alleviated through effective use of vendor market development funds (MDF) .

By identifying market trends early, IT resellers and distributors can attain market share before their competitors. By diversifying in a measured and considered fashion, businesses are less exposed to the financial difficulties that occur when one part of the business is not performing well. Having multiple other revenue streams on the go, as opposed to being over-reliant on a limited number of product or service offerings, is essential to protect the entire business from risk if one offering falls over.

Moheb Moses is co-founder, Channel Dynamics, and director, ANZ Community Channel, CompTIA

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Moheb Moses

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