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Hardware channel faces shrinking margins

Stiff competition, cheaper hardware and cloud solutions are placing pressure on the channel, says XDSL.

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 10 May 2013
The stiff competition in the hardware sector has resulted in shrinking margins for the channel, says XDSL's Danie Fourie.
The stiff competition in the hardware sector has resulted in shrinking margins for the channel, says XDSL's Danie Fourie.

The channel is increasingly being pressured by shrinking margins, especially in hardware sales, and is continually looking for additional revenue streams such as services.

This is the view of Danie Fourie, director at Internet service provider, XDSL, who says this has resulted in many voice over Internet protocol (VOIP) resellers offering onsite services and maintenance contracts.

However, he points out that this is a 'hard sell' for resellers, as the reality is that ADSL is the most suitably priced connectivity option for VOIP but is not the ideal communication platform for VOIP as it is a 'best-effort' service and is not guaranteed.

"This has resulted in many VOIP users experiencing latency and jitters, hindering the uptake of this technology in the local market, and in turn, hindering opportunities for the channel," says Fourie.

First, Fourie believes the stiff competition in the hardware sector has resulted in shrinking margins for the channel.

"Secondly, the price of hardware is a lot cheaper; therefore, by default, the margins are a lot less. Thirdly, there are ample solutions that make use of cloud offerings, and as such, hardware pricing needs to compete with these cloud solutions."

Fourie also points out that a Diginet line is the ideal connectivity platform for VOIP, but due to its previously prohibitive price tag, this was often not considered. This was due to the fact that the savings delivered through VOIP could not justify the investment of a Diginet line, ultimately costing the end-user customer more, he explains.

He notes that ADSL is not viable for VOIP, as ADSL is defined by Telkom as a best-effort service. "This means the throughput on the line is best-effort - best-effort up-time and best-effort throughput. ADSL has no throughput guarantee due to shared-access; therefore, a 4MB line does not mean you will receive speeds of 4MB per second.

"It is better to use a Diginet line as it offers a guaranteed service due to it not being a shared service, as is the case with ADSL. Diginet is synchronous, as upload and download allows for full capacity use."

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