Once the economy recovers, the IT industry will return to the cyclical nature it experienced before the over-investment cycle of the past two years, says Datatec CE Jens Montanana.
The industry is experiencing a downsizing of 30% and more, in terms of people, capital expenditure and spending on services, a trend which began with equipment manufacturers but is now evident across the sector.
Speaking at an analysts` road show intended to clear a perceived misunderstanding in SA about the nature of Datatec`s US subsidiary, Westcon, Montanana said Datatec was focused on global networking areas it believed would be growth sectors.
These included convergent networking and voice over Internet protocol, migration to broadband, security, and the small to medium enterprise market, which he said is set to outperform other areas.
Westcon president and CEO Alan Marc Smith said that as a value-added distributor, Westcon was not a revenue-focused company, but focused on gross margins and EBITDA (earnings before interest, tax, depreciation and amortisation) percentages.
"We will maintain a value proposition and focus, and the revenue will come back to us," he said.
Among other trends in IT, he expected Westcon to benefit from the convergence of voice and data.
"This is the next wave," he added. "Five years from now voice will be nothing more than a data package moving across the network.
"An incoming call will integrate with customer relationship management, bringing up a screen on who is calling even before you take the call, with a huge efficiency in business."
The company cannot disclose detailed financial information as it has filed its listing application with the US`s Securities and Exchange Commission, but Smith said it was experiencing a tough time, along with the rest of the market.
"We can expect reduced revenue, but not as low as the industry as a whole," he said. "Our margins have been relatively stable, because the market is still needing value-add, and so is not buying just on price."
He said, however, that the company would see an increase in cash from operations.
Asked how he expected Westcon to manage the downturn, he replied that the company would look for logistical efficiencies, such as using one warehouse to carry all three product lines (Cisco, Avaya and Nortel), whereas before each product-focused division had its own warehouse.
The e-commerce side of the business would also expand, meaning that no commission would have to be paid to sales reps.
The company is also planning further staff cuts. Westcon, which peaked at 1 100 staff, will cut the current headcount of 1 039 to 975 by the end of next month. Since 50% of the staff were in sales, half the cuts would occur there, Smith added.
The company would survive the downturn also because it had proved its ability to deliver increasingly complex technology on a commercial scale, he said.
Share
