How the Channel Is Preparing for Brexit

New research shows that almost a third of UK IT SMEs haven’t yet considered the impact of Brexit on their businesses.

That’s according to figures supplied by Aldermore bank. While the EU and UK haggle over a post-Brexit trade deal, IT firms have been preoccupied managing with COVID-19. This is despite 38% of these firms’ monthly income coming from customers in the EU.

Channel Preparations

So how is the UK IT channel preparing for Brexit?

A Tech Data spokesperson says that the distributor is preparing for the possibility of a no-deal Brexit, among other scenarios.

“Our aim is to support our partners in every way we can through this period,” they said. “We are in regular contact with our reseller customers and vendor partners to keep them updated on any changes. [We want to] ensure that partners feel fully supported by Tech Data as we transition.”

Tech Data’s preparations have focused on four key areas:

“Brexit will inevitably lead to some delays to the supply chain in the initial stages,” said the spokesperson. “We are doing our best to anticipate the challenges and create contingency plans around stock and order cutoff times, for example.”

The trading arrangements between the UK and the Republic of Ireland currently remain unclear. As such, Tech Data says it anticipates additional paperwork and customs clearance activities. It has put in place a specific contingency plan with its Irish partners to cover for January, initially.

Meanwhile, a spokesperson for the UK’s fourth largest channel player, SCC, believes the ongoing uncertainty “is no good for anybody.” The channel giant is working closely with key partners and proactively monitoring the situation.

“Whatever the outcome from political discussions, SCC is in the fortunate position that its services are primarily delivered by UK-based operations. In most instances little or no services [are] transacted with customers across country or territory borders,” said the spokesperson. “That will remain the case post-Brexit, even where SCC utilises its own support operations based outside of the UK.”

SCC also says the firm is addressing the most urgent issues directly with customers. These include product supply and service delivery, and data protection. It has also carried out an impact assessment and developed flexible response plans with distributors and vendors.

Communication Is Vital

However, for many partners, there will be anxiety about what the future holds. Much of that comes down to a lack of information, according to the Aldermore figures. Thirty percent of small IT firms say there’s a lack of information available on what to do. This, they say, is why they haven’t made any plans.

This is where good communication will be vital, says Graham Charlton, CFO at the UK’s second biggest channel firm, Softcat.

Softcat’s Graham Charlton

“Resellers, vendors and distributors all have a role to play in adapting to the new trading relationship with the EU. We’ve been working throughout the past 18 months to define our respective roles and bring our complementary skills to bear. We’ll need to remain close throughout the early stages of 2021 to react to tactical challenges quickly. The quality of the collaboration between the channel and vendors has never been more important.”

Between 5% and 10% of Softcat’s income is from overseas trade, much of which comes from the EU. Charlton says adapting to how that will work once a customs border is in place has enabled Softcat to consider how it could broaden our international trade further as well. This is something it has been “looking to do in any case for a few years now.”

“The export and logistics capability we have built to trade into the EU post-Brexit can also be used to …

… support our UK customers in their other overseas operations. We’ve also taken the opportunity to improve our foreign currency processes to cope with exchange fluctuations — also, to prepare for the ramifications of changes to data protection requirements.”

Charlton says Brexit will bring a period of challenge and change. However, that tends to be a good thing for organisations with a clear strategy and good momentum.

“One thing is certain: No matter what our future trading relationship(s), the UK economy needs modern IT infrastructure now more than ever. Supplying that is what the channel is all about. So, come what may, the future of our industry in the UK is incredibly bright.”

Data’s Freedom of Movement

Jon Williams, CTO at Calligo, says vendors and the channel must support businesses in tackling Brexit’s impact on data’s freedom of movement.

Calligo’s Jon Williams

“At this late stage, the UK is extremely unlikely to be awarded Adequacy. This is the EU’s formal recognition that the UK’s data protection regime is suitable for GDPR-applicable data. This means that any business that routinely transfers personal data between the EU and UK needs to put in place legal, practical and technical measures to allow this movement to continue.

“Most businesses are underprepared. Just as in March and April of 2020, the channel will need to rally in early 2021 to help them re-plan how their data is permitted to move. [Also,] where it and its backups may be hosted, how disaster recovery protocols will need to adapt, and its overall legal protection. Most businesses are naïve and complacent in this area, and as clarity finally emerges, they will understandably look to the channel for rapid responses and support. They cannot afford to be let down.”

Logistical Nightmare

Justin Harling, CEO of CAE Technology Services envisages “logistical nightmares for a few weeks at least.”

CAE’s Justin Harling

“The whole supply chain has taken sensible measures, but we are not dealing with a sensible situation. Just-in-time models that have worked well for years are going to severely tested by an unprecedented situation not of our making. Project and risk management are going to be critical here with customer expectation management already a big priority.”

Harling also notes that as demand continues to rise for specialist IT skills, any restriction in will lead to shortages. However, this should represent an opportunity to commit to developing talent from early stages and to consider initiatives like apprenticeships.

CAE’s most strategic response has been to incorporate a fully trading entity in the Netherlands. Completed at the beginning of the year, it allows CAE to quote, ship and invoice from Europe as part of the wider group.

“Now orders are being placed for delivery after Brexit the new entity is coming into its own. It represents a major step, alongside India and the US, to trade as a fully international business. However, the admin involved shouldn’t be underestimated. This is not a superficial exercise and requires commitment across the business to make it work.”

“Long term the UK represents a unique market, worthy of investment and recognition for the exceptional skills the channel possesses. It is down to us to cut through the political noise and make the most of whatever opportunity comes out of the eventual scenario.”