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Part 4/4: Convergence

Major trends for the IT & Telecom Channel - Part 4
For many years there have been two areas of the channel where convergence between technologies has had an important impact: Print and Telecoms.

Even if these solutions are quite far apart from each other they do have some points in common.

Here are those that are interesting:
  • Both businesses have a part of the channel that has developed its business in a recurrent activity and a part of the channel that is more transactional oriented.
  • Both businesses need to develop the services part of their revenue.
  • Both businesses face difficulties putting the convergence into place.
  • Both businesses are going to face a price war and try to reduce partner margins.
  • Both businesses have numerous channel managers who are closer to retirement than to funding a family.
  • Both parties have historical contracts with their partners that can’t be easily changed and that slow down adaptation.
But the convergence will happen in slow motion, if no disruptive technology or model is created, or quicker if the contrary. Many partners have changed hands in the past years and many are going to change. It’s a hard time but these partners have an immense and valuable asset in this world of dematerialization… they will be the only ones to meet the client - an extremely good reason to keep them alive in your channel.

Part 3/4: The Cloud & C° impact

Major trends for the IT & Telecom Channel - Part 3
Many historic resellers are very reluctant to push Cloud offers, partly because reselling in subscription mode is not part of their culture, sometimes because of the age of the captain or lack of required staff, sometimes just because they don’t want their global revenue to fall or just because their client does not have the bandwidth required for a good level of services.

One thing that’s sure is that the expected boom of Cloud into the traditional channel will not last longer. Does this mean that the Cloud does not need distribution or that there is not yet a distribution for the Cloud? Certainly not, the distribution exists and the need for it too. It is just not with the same type of partners. The partners that are successful in Cloud distribution (I mean everything that is PaaS, SaaS, IaaS, BPass etc..) are not like a shop where you can take a box, or when they are, it’s just that the partner has already worked so much upstream that he can afford to show something that looks like it could be bought in a shop.

New staff, new sale methods, new ways to finance its development, an ongoing agility, are the requirements to be good in the resale of managed services, and Cloud offers are numerous and key to being successful. Few historical partners were ready for this. Many are trying to be, some will succeed, a lot will fail, but new players are entering the game, actors that don’t  come from the traditional industry or actors that have until now been in another activity.

ISVs are not only good potential end-user clients but are now considered as a sales channel of their own. Web agencies, content providers even chartered accountants may sell Cloud / SaaS solutions. Among the traditional IT activities, quite obviously hosting companies and those active in facilities management are the ones that are the most ready to jump onboard, but other types of activities should not be forgotten such as maintenance companies.

Read Part 4: Convergence

Part 2/4: Hardware concentration

Major trends for the IT & Telecom Channel - Part 2
The continuous fall in pricing, due to the commoditization of a large range of products and the development of emerging countries, which are certainly more numerous but also more demanding in terms of price, has increased the number of mergers in the IT manufacturer group and reduced the number of large dinosaurs left.  Others prefer to throw in the towel before losing their soul. The only pending question in the market is who is going to gobble up HP‘s remaining PC and printer activities … Dell, Lenovo or Samsung?

PC concentration is coming to an end, storage concentration is mature, and probably the next area where concentration is going to happen is printers. These manufacturers have been protected by the nice margins made by consumables, and critical size was reached with the convergence of office equipment and IT solutions. Now though business may not continue as usual for these companies in the context of a steady decline in prices. It’s going to be a fierce war and some targets look quite isolated and in the hands of investment funds….

This concentration of material also has its impact on the channel. Many partners have ensured they are not too dependent on a single brand and have reduced the impact of the fluctuation in the sale of equipment on their business. A growing share of resellers considers that resale is more a service than an activity. It means that they care less where the client buys its hardware as long as the client stays in their portfolio for the services activities.

Read Part 3: The Cloud & C° impact


Major trends for the IT & Telecom Channel
If you take a good look at the channel you may very quickly develop a squint as the sector is carried by opposing currents.

In hardware resale, the drop in margin and the development of virtualization of IT infrastructures is pushing the various players to either leave resale activities to focus on services, or to merge to gain critical size.

Still, the development of virtualization is creating a lot of new opportunities and businesses that require agility and speed. Usually the small and extremely focused entities have a better chance of being successful, or of being rapidly absorbed by a bigger fish.

So today is not a period where companies are quietly developing their business, it’s a period of strategists betting on the right horse and never forgetting the culture and history of their own enterprise.

The consequence for those who want to have their product sold by intermediaries is a world where just understanding the business of those you are speaking with is a challenge in itself.  Further difficulties come from the fact that business is done on quite a small scale and is often not strategic. The Pareto law is now closer to 90 / 10 than 80 / 20. Apart from certain exceptions, those who are still looking for golden nugget accounts hidden off the radar are just wasting a lot of time. In our business any concentration is always balanced by new companies positioning themselves on emerging technology or models. The challenge for the big players is now how to manage this change with teams that have shrunk a lot in the past 5 years.  How can distributors or VADs help in this, and are they even willing or able to do so? Distribution opportunities are numerous, but never in the history of the IT industry have the margins for those who do it been so low….Perhaps manufacturers think that the ultimate channel is Amazon.

Read part 2 : Hardware concentration
Below are the results of a Cloud Scoring performed on over 100.000 companies.

These results validate a model we set up to recruit the right Cloud partners before we qualified the whole database on “Cloud skills”, this method can also be applied to other subjects.
The scoring methodology is very interesting in a changing world because it helps to focus on the right partners before they are even active or detected as active in the targeted segment.
Comparaison of two datasets:

A - Companies in our database that have not yet qualified in «Cloud» Activities or that have not yet declared a “Cloud activity”
B - Companies in our database that have been qualified in «Cloud»  Activities
The scoring method compares each company to 20 different scoring segments giving each company a mark, the total of the mark is the scoring result.

Under “Found as active in the Cloud” are companies that we know have declared the skill “Cloud” in their skill set. 
Under “Var active vs. not yet qualified or not yet active” show that the compuBase scoring methodology extracts companies that are the most interested in “cloud recruitment” activities.

The interest of scoring is to speed up the recruitment process, it helps to focus on companies that have the profile to become Cloud partners.
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