Credit Crunch Hits The Channel

Distributors, for their part, say that credit is readily available to qualified solution providers and, in fact, they are proactively increasing credit lines for solution providers that need more credit to finance business. And distributors note that they are seeing an uptick in demand for leasing to help solution provider customers that may have difficulty obtaining financing for IT projects. Still, solution providers are taking a cautious approach until the economic situation stabilizes.

"Any solution provider that isn't taking a harder look at dispersing his credit liability is fooling himself," said Dave Gilden, COO of Acuity Solutions Inc., a Tampa, Fla., solution provider.

Gilden said Acuity just completed its best month ever. "But two fairly good-size customers put the kibosh on projects scheduled for next month," he said. "What I'm seeing is not a knee-jerk reaction but rather a proactive move on the part of customers who are waiting to see how things shake out."

Even those solution providers that have largely escaped the initial impact of the economic tsunami are bracing for the next wave.

"It hasn't really hit us yet, but there is going to be a trickle down and anybody [in the channel] that thinks it won't impact them better think again," said Mont Phelps, president and CEO of NWN Corp., a Waltham, Mass., solution provider. "This is an unprecedented event. When you see huge financial institutions like Washington Mutual go out, this thing is bigger than we ever imagined. If it's that big of a splash in the credit markets, the ripples of that have to impact everybody."

While Phelps has seen no change in lending practices from his financial institutions, his greatest fear is that one of his customers' credit will dry up and the client won't be able to pay NWN. "We [solution providers] are all exposed to that problem," he said.

Phelps thinks, however, that the credit debacle could be a boom for solution providers active in managed services. "Anything that you can do faster, better and cheaper than the customer, that's going to give them financial relief," he said.

He also noted that technologies such as videoconferencing should do well. "We are seeing decent-size companies doing Tandberg [videoconferencing] installations," he said. "By avoiding one or two [in-person] meetings, a company can pay for the system."

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