Brexit and the channel

It’s now two years since the UK voted narrowly to leave the EU but negotiations have still barely started in earnest on the Brexit process and there’s continuing deadlock over a number of issues. How has the IT industry been affected by the uncertainty of the last two years and what lies ahead in the next 12 months? Below are the thoughts of MCSA Managing Director, Paul Timms.

How has the IT industry been affected by the uncertainty of the last two years?

Despite the statements from a few multi-national organisations of late, I can say the impact on the IT industry here in the UK from Brexit has been minimal, so far.  From MCSA’s perspective, our customers tend to be mid-market and British owned and we support a large variety of verticals, which has maybe protected us. Most businesses dislike uncertainty, however with or without Brexit customers will continue to seek great value IT partnerships, the measures taken during the last 10 years, coming out of the financial crisis, have meant that the procurement discipline now in place has had a more fundamental effect – Brexit has just meant that those controls remain firmly in place.

What do vendors and channel businesses think the future holds in store over the next 12 months?

I can see some effect in the channel – particularly around new vendors like Huawei, who have grown enormously in the Enterprise space in the last 5 years by providing a great product for low cost.  However, in contrast to that growth, the customers/channel seem to be going for less disruption and sticking with the more familiar vendors – HPE, Microsoft and Vmware are still strong and I think that familiarity is a comfort when so much else is unknown.

In the next 12 months I think customers and partners alike will look for stability and familiarity until the post-Brexit dust settles.  Once we have a view of what the post 29 March 2019 world will look like, then we will see the disruptors start up again and I hope for a lot of British technology providers to really get involved. There are a lot of big US software firms that are currently seen as a familiar and safe pair of hands but there is no reason that in the new world of Software-as-a Service and creative hybrid platforms, for the UK market to not really shake things up.

What measures are IT businesses taking to mitigate the potential effect of Brexit?

Having a diverse customer base makes sense and we have all seen a rush of VARs try to become Service Providers – some more successfully than others.  It will be important to have cash reserves and clear focus – big investment in new things will be for the big and cash rich.  As a result, Microsoft, Amazon, Google will do well as there will not be big competition to their cloud offerings, and it may take some time before customers come back to a hybrid or physical element of their IT.

Looking at customers who have a strong balance sheet helps too – nobody wants to be left holding a £m order for a business that is on the ropes – so expect some “cash with order” scenarios in certain sectors where the pressure – Brexit or not – seems to be really telling at the moment.

We have seen sales of our Managed Service and finance leases increase by 100’s of percent over the last few years and I think that is down to customers wanting to keep their cash flow healthy.