How have the recent economic struggles affected Enta Group over the last year – have you had to readjust your business?
From Enta’s perspective, in the last number of weeks we’ve noticed a slight downturn in business. People have been more cautious in buying stock, because they realise there’s going to be a lot of deals out there – as does the general public.
So we’ve seen a downturn in that, but thankfully we’ve taken on a number of products over the last 12 to 18 months to complement our existing range, such as CCTV – which is still a massively growing market – server and storage solutions, and virtualisation products to complement what we’re currently doing in terms of peripherals and components and software.
If you take a look at the system build resellers, they have almost certainly seen a downturn in business.
Are you concerned about 2009?
Yeah. Obviously with what’s going on in the economic world at the moment, it’s really going to hit home at the end of January. I think people are going to try and have a good Christmas this year, and hopefully buy their families and friends IT products.
But due to the gloom, and although it hasn’t been highlighted that we’re in a great recession yet, it’s going to hit home in the New Year. You see thousands of jobs being laid off daily in the press, and obviously there’s going to be a time, probably in Q1, when we see a big downturn.
Resellers and distributors need to be looking at alternative products to uphold the margin and revenue for 2009. Just doing the ‘same old same old’ is not going to help your business.
What area do you think will be the most hard hit within the industry?
Enthusiast sectors will still be very strong, those end users have got money to spend. Some of the best gaming titles came out over the Christmas period and there’s more to come over the next few months. This means the gamers will still want the best graphics cards and memory, so I don’t think that sector will suffer too badly.
The system builder market will struggle, with more and more corporate organisations having their IT budgets cut. It also looks like the IT budgets for schools are going to be cut, so that’s going to affect those in that market. All the big firms, everyone in The Times Top 100, there’ll be very few that don’t cut their IT budgets next year. That will obviously effect the reseller, the distributor and the manufacturer.
Some have asserted that the IT market is more resilient to the recession, because it provides things that are no longer considered disposable luxuries. Do you think there’s any truth in that?
I do. People aren’t suddenly going to give up their internet connection. What they will do is perhaps delay upgrading their PC or notebook. But obviously backup, data security, server hosting, all that type of thing, is still vital to the day-to-day running of a business. Those vitals are still going to be required during 2009.
Enta Group is almost uniquely placed in offering a holistic service, with EntaNet and EntaTech. What advantage is this to retailers and do you think such a service will become more popular going forward?
What a lot of resellers have woken up to is that they just can’t rest on their laurels and sell IT kit all day. They’ve realised there’s huge opportunity to sell bandwidth and a lot of successful resellers have been born out of doing that.
With new virtualisation products coming out in terms of servers, new laws on data back up, the obvious importance of security, and many other aspects, the IT industry is still very rosy. Others, such as the peripherals market, will struggle heavily in some cases during 2009.
Enta Group as an organisation is able now to offer all types of solutions to our customer base, and that does make us quite unique in the market place. We don’t just sell hardware or software – we sell bandwidth, server hosting, lease lines, VoIP hardware and the service itself. Holding those indispensable lines is a strength of ours.
What’s the difference in revenue between EntaTech and EntaNet?
EntaNet equates to around 25 to 30 per cent of our revenue. A year ago it was 15 per cent, so EntaNet as an organisation has grown quite rapidly. In fact I think they were the 61st fastest growing IT company in Britain according to The Sunday Times Tech Track 100 and Top 50 with Deloitte.
The growth of EntaNet is going to be more rapid in terms of revenue that EntaTech, which is an established business of 18 years now. EntaNet has been trading for over ten years, but has only seen rapid growth in the last three. That’s down to the broadband revolution. It’s still going to grow in 2009, but the broadband revolution is now peaking.
Are there any gaps in your portfolio that you’d be looking to move into?
There are a number of gaps, but it’s all about whether we can make money out of it or survive doing it. Laptops and PCs are always a bone of contention being a component distributor.
We all know in terms of units that notebooks grow each month and desktops fall. But a distributor or reseller won’t make a lot of money selling a branded notebook. If you focus on selling notebooks, you’re not going to survive.
How do you think independent retailers and resellers are going to fare in 2009?
The outlook is gloomy. All the signs are that certain parts of the IT sector are going to be under a lot of stress in 2009, but yet again its about diversifying in particular core channels that are important to the end user or the corporate client.