U.S. economic uncertainty clouds the 2008 business climate for solution providers even as most VARs anticipate healthy growth in the coming year.
That's one major finding from 2008 VARBusiness State of the Market research report gleaned from interviewing 733 North American solution providers in October. While 27 percent of the VARs surveyed expect their business to grow by 15 percent or more in the next 12 months and an additional 43 percent forecast growth of between 5 percent and 14 percent, concerns about the economy hover over the market.
Mark Singh, president of ValCom Computer Center, a solution provider in Midland, Tex. voiced the economic dichotomy many VARs face as 2008 approaches. "I'm concerned about the economy to a small extent. The housing market is hurting a little bit here," he said. "But we're right in the midst of the oil patch. What are crude prices today, $95 or $95 a barrel? So much of the economy here has to do with the oil business, where as in the rest of the country VARs might be more concerned."
Singh said too, that about 50 percent of his business comes from the public sector, which is less impacted by economic ups and downs than the commercial sector.
The top concern voiced by almost 43 percent of the VARs surveyed was fear that businesses would pull back on spending in the face of the uncertain economic environment. That was followed closely by nearly 42 percent of the VARs who feared the declining value of the U.S. dollar against other major currencies could impact business.
On Nov. 1, for example, the U.S. dollar was valued at just 95 cents against the Canadian Loonie, marking the first time in more than 30 years that the value of the Canadian dollar exceeds that of the American dollar.
The Federal Reserve on Nov. 1 also pumped $41 billion into the U.S. financial system, the largest cash infusion since September 2001, to help companies get through a credit crunch. That move followed by a day the Fed's decision to cut the federal funds rate by a quarter of a point.
Those moves could address some of VARs' concerns. Thirty-six percent said credit issues could impact business in 2008 and nearly 13 percent said the Fed was not doing enough to rectify the situation. Investors, however, responded to those moves by sending a sell wave through Wall Street with the Dow Jones Industrial average dropping by more than 362 points Thursday.
In the midst of this overall economic uncertainty, 40 percent of the VARs who participated in the VARBusiness survey said they fear a recession is on the way.
