One of the greatest challenges in creating a profitable, scaleable and sustainable business in the channel is in accurately identifying which vertical sectors hold the most potential. I think it is fair to say that the public sector is often ignored by many channel players, with its associated sales cycle complexities and ever-changing stipulations, but I believe that there are several topical reasons to reconsider this market.
Firstly, it is undeniable that there is an urgent need for investment by public sector bodies and this alone is enough to make many resellers take a second glance. As an example, we know that the IT market in government is set to boom - in fact a new report published by the National Audit Office (NAO) shows that public sector ICT procurement is set to increase from £2.7bn in 2005-2006, to £4.1bn by 2010-2011.
Interestingly, the NAO's report also focuses on a crucial technology investment issue that I have alluded to in many of my columns. It states that on average, public bodies replace their IT equipment every five years. Let's be honest, there is nothing surprising about this - even the private sector is way behind replacing technology as frequently as it should. The report suggests that PCs, for instance, should be replaced around every three years, as this would result in reduced operating costs - echoing our own research which indicated replacement cycles are set to contract with increasing pace over the next couple of years.
In parallel, we know that the public sector hardly has cash floating around to spend on expensive upgrades every few years. This is leading to a real headache for public sector managers: investment in IT is urgently necessary, but they cannot afford the up-front costs. So isn't this an ideal opportunity for resellers to approach them with an effective, transparent way of gaining access to the latest technology whilst conserving their cash? If the channel makes an approach with the right technology solution combined with a suitably tailored leasing-based package, sales to the public sector could become a great deal smoother - and even become an attractive viable way of generating profitable business.
What's more, our own new research reiterates this current opportunity for resellers to tap into the public sector market. In response to the significant financial squeeze that I mentioned above, we have found that Heads of Finance are expecting increased take-up of point-of-sale finance solutions. To explain this in greater depth, the research showed that one third of UK public sector bodies believe vendor finance will increase over the next three years - in comparison to one fifth for the previous three years.
This certainly indicates that the public sector is already moving towards more advanced ways of making their technology investments, and that they are likely to be very open to a finance-lead sales approach. Increasingly, they are beginning to mirror the private sector which has for years acquired depreciating assets by financing them - in other words, the sector is finally beginning to see the real benefits of asset finance over asset ownership. Another key element to the public sector sell is the ability to finance the whole solution or project costs - which might include hardware, software, service and even insurance. Increasingly the norm in the private sector, this approach responds to the modern IT directors' desire for clear ROI models and particularly suits the 'efficiency' agenda of the public sector.
Naturally, I am not suggesting that the public sector offers 'easy' sales but our research does indicate a growing appetite to deal with vendors who can offer them a way of acquiring their ICT assets in a cash-flow friendly manner. We are working with many resellers to help them make the most of the wide range of financing solutions available to improve their sales pitch - and never has there been a better time than now to tap into this market opportunity.
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