Beijing, October 14, 2010 – The channel partners in China mainly focus on the huge and fragmented public sector IT market, finds Springboard Research, a leading innovator in the IT Market Research industry. The Springboard report, “China IT Channel Landscape 2010” revealed that 63% of channel partners focus on the public sector, far exceeding the 24% concentrating on manufacturing, and the 8% targeting the banking, finance, security and insurance (BFSI) industry.
In terms of channel revenue, the public sector leads with a share of 26%, followed by 21% for manufacturing, and 20% for communications.
The report notes that the Great North China region based channel partners take a lion’s share of the channels market, as measured by number of channels and total revenue. Whereas, China’s less developed four sub-regions (South Western, North Eastern, Central and North Western) together account for 24% of total channels and only 10% of the total revenue.
Chinese Channels are Over-Reliant on the Low-Margin Hardware Business
As high as 93% of channels count hardware as their largest revenue source, in contrast to 6% for software and 1% for services. Moreover, the hardware business accounts for 72% of total channel revenue as compared with 15% and 13% for software and services respectively.
“The profit margins for hardware are rapidly shrinking and thus Channel partners should steer away from the fierce competition in this space, and focus more on software development and service delivery capabilities,” advised Jingwei Liu, Associate Research Manager, Greater China at Springboard Research.
SIs, Distributors and ISVs Drive Channel Sales
According to Springboard estimations, System Integrators (SIs) account for 33% of channel sales, followed by 28% contributed by distributors and 26% by Independent Software Vendors (ISVs), consequently marginalizing the role of resellers at only 10% revenue share.
The report finds that the vendors in China are working to reduce channel layers with an aim to expand coverage and improve margins. “As PCs and low-end servers and storage become increasingly commoditized, the market has become highly price-sensitive and therefore, vendors often choose to scrape the national distributor layer and work directly with client-facing regional distributors and resellers”, explained Bryan Wang, Associate VP, Greater China at Springboard Research. “With a flat and simplified channel structure, the vendors can also reduce the distribution costs and be agile and flexible in response to market dynamics”, added Mr. Wang.
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About this ReportThe Springboard document “China IT Channel Landscape 2010” provides a comprehensive background of the channel dynamics and competitive landscape in China to enable vendors to address market opportunities more successfully. This research leverages Springboard’s proprietary channel database, which consists of information from 20K partners in China, a variety of public sources, including vendor websites and news reports and targeted interviews with select channel partners.
About Springboard Research With visionaries others pursue, methods others neglect and ideas others don’t consider, Springboard Research not only seeks to lead an industry – we seek to transform it. Leveraging our pioneering research model and industry thought leaders, Springboard provides greater insight, analysis, and innovation specific to global emerging markets. Working with leading technology vendors, IT professionals, and local channels, Springboard helps our clients lead, rather than follow, market trends.
Springboard has a global presence with research centers in Australia, China, India, Japan, Malaysia, Pakistan, Singapore, the UAE, and the US. We have been acknowledged as an emerging leader and for the last three years been named a “Rising Star” in the global IT market research industry by Outsell, the leading research and advisory firm for the information industry. For more information and access to Springboard’s research, please visit www.springboardresearch.com
Media ContactsJoyce Liu, Marketing ExecutiveSpringboard Research86-10 5900-3299 [email protected]
Bryan Wang, Associate VP, Greater ChinaSpringboard Research86-10 5900-2972 [email protected]