These are unusual times, for the global economy and the IT channel. Geopolitical events threaten to cast a shadow over the industry even as new opportunities present themselves in the form of digital transformation and the arrival of 5G networks. As always, CONTEXT is your trusted partner for channel companies.
Our latest highlights report provides in-depth, sober analysis based on an unparalleled collection of data points across hundreds of thousands of vendors, distributors and resellers around the world. Recent trends reveal continued growth in the IT sector, although uncertainty remains thanks to events outside of the industry.
Brexit concerns persist
First, the good news: the IT sector outperformed GDP by an average of 4.2% in Europe. That’s a sign of the channel’s continued strength, despite a more general slowdown in the year-on-year rate of growth of the CONTEXT panel from Q4 2018 to Q1 2019.
GDP growth for the eurozone increased slightly from 1.1% to 1.2%, driven mainly by France and Germany, while the UK economy expanded from 1.3% to 1.8%.
The latter could be seen in part as a result of stockpiling due to no-deal Brexit fears. With the UK now given a 31 October deadline to leave the EU, there still remains significant uncertainty here. Despite record low unemployment and decent retail sales growth in the country, panel growth has slowed dramatically in Q1 2019 from the previous quarter, from 12.1% to 2.3%.
However, there are opportunities for growth. Large organisations know that digital transformation is no longer a nice-to-have – it’s increasingly a pre-requisite for growth. That in turn is creating significant demand for the IT industry which in Q1 has seen:
Further out, there is the prospect of growth driven by 5G, the much-anticipated new network standard. Q1 saw a slew of announcements in this area at Mobile World Congress, further increasing anticipation. June was a particularly hot month as in the UK, EE launched 5G services in six cities, while Vodafone has done so in Italy and Spain, and South Korea announced that it has already reached one million 5G subscribers.
One ongoing hurdle for such deployments, of course, is the continuing stand-off between the US and China, and particularly regarding Washington’s treatment of Huawei – the firm that supplies the majority of equipment for these roll-outs.
We are monitoring the key issues closely for our channel clients which could negatively impact growth. These include Brexit; weakness in consumer product demand; the impact of Easter and May breaks; falling exports in Singapore; uncertainty in the Argentinian economy; and fears of a correction in the Australian property market.
On the positive side, digital transformation, government-led investment in countries like the UAE and a GDPR-related boost in the security sector have given the industry a shot in the arm. As a result, we’re standing by our start-of-year prediction that overall channel growth will reach 3-6% in 2019.
© CONTEXT 2020