Networking Sales Strong Despite Stagnant Overall IT Spending

"Hardware is relatively stagnant. The market is saturated. We don't see that changing. Components within that [market] will change, but the big picture is we are not in an era where corporate IT or medium or small business [IT spending] will go up 10 to 15 percent," said Stephen Baker, vice president of industry analysis for consumer technology at NPD Group, during an executive workshop session at XChange Solution Provider 2013 in Orlando, Fla.

While overall IT spending isn't growing much, up 0.9 percent from 2010 to 2011 and 1.1 percent from 2011 to 2012 according to NPD, IT spending through the SMB VAR channel is healthier than through retailers and large direct marketers, Baker said.

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In addition, VAR sales tend to be driven by more higher-end products that are part of a larger solution rather than transaction-oriented products like PCs, which remain the biggest category for direct marketers, according to NPD.

Nearly 30 percent of DMR sales came from PCs in 2012, while VARs accounted for about the same percentage in communications products, according to NPD.

"You see more advanced products selling through solution provider channels, who are much stronger with communications and storage hardware vs. the CDWs of the world, who are still very focused on the PC," Baker said.

Within the data center and communication devices space, solid-state drives experienced the most growth in 2012, about 58 percent compared to 2011. Large format commercial displays (50 percent), network attached storage (25 percent) and disk enclosures (19 percent) also saw strong growth in the channel.

Meanwhile, larger companies are more optimistic about IT spending growth than smaller companies, according to NPD.

In October 2012, about 79 percent of companies with less than 50 employees expected to spend more on IT in the next three months, but that figure fell to about 71 percent by January 2013, according to NPD.

Meanwhile, 76 percent of larger companies, those with 50 to 999 employees, said they intended to spend more in the next 12 months, as of October 2012. By January, that figure had increased to 80 percent, Baker said.

PUBLISHED MARCH 12, 2013