Peter O'Neill here with some observations about cloud computing and channel partners. While cloud computing has been a boon for the tech industry in general, for channel partners the story is different. Channel partners have to deal with shrinking product margins, skills shortages, and new competitor types (including tech vendors themselves!).
And the funny thing is: many vendors still haven’t internalized what predicament their partners are in. How else can you explain Microsoft executives berating their partners that “only 2% of you are in the cloud business” at their recent Worldwide Partner Conference – and then adding insult to injury by suggesting calmly that the partners could host future customer visits in Microsoft Stores, where they can see those MS cloud products (I count the Surface tablet in that list) they cannot even sell!
Forrester Principal Analyst Tim Harmon and myself are discussing these issues almost every day with technology vendors; in fact with B2B vendors in general, because cloud computing is affecting every sector now (including insurance, health care, etc.). Channel partners are changing their business model stripes — in myriad directions, and oftentimes as ungrounded "experiments."
In our new Forrester report, “The Shape-Shifting Tech Industry Channel Ecosystem”, we write about how the successful channel partners of the future will be those that operate under a hybrid business model umbrella, combining on-premises and cloud delivery, and IT and business value.
Recently Dan Bieler and I attended a Colt Technology Services analyst day in London. It was great to see a technology services provider who is trying to embrace both disruptive ICT trends and challenges facing enterprise IT. Here is a high level summary of our views from the event:
Dan: Colt views its network assets not as its key differentiators - but its IT services. Although IT services today account for only a small fraction of Colt revenues, Colt views its network infrastructure assets as a means to an end to support IT services. Whilst we agree that network infrastructure runs the risk of commoditisation, Colt’s network helps to differentiate Colt’s offering from both IT service providers without network infrastructure and carriers with a less impressive network footprint. Quality network infrastructure is the basis for developing reliable, secure, and compliant ICT solutions. Maybe Colt ought to view itself more as a communications integrator than an IT Services provider.
John: Colt provides a strong European IaaS offering. One of the presentations focused on Colt’s European datacenter footprint. At Forrester we get many inquiries on hosting and IaaS-specific options for Europe as many clients have to address regulatory and business requirements for data to reside in specific countries. Colt has a substantial number of data centers in European countries including the UK, France, Germany, Spain, Italy and Switzerland.
Channel partners are bullish about their growth prospects. In fact, in a recently conducted Forrester survey in North America (NA) and Europe, 59% of channel partners expect to grow by more than 10% in each of the next two years. However, partners will need help and handholding as they aim for greater sophistication and higher growth targets, especially around cloud based services. Forrester research indicates that three-quarters of channel partners in NA and Europe now sell cloud-based solutions (up dramatically from two years ago). These solutions now make up 26% of their overall revenue, a percentage they expect to increase in coming years.
In my recent report, Seeding the Cloud Channel, I highlight three key areas where the partners will need support from both their tech vendors and their distributors:
Diagnostic tools and services to assess current maturity and set a transformation road map. Partners will first have to collaborate with their principal vendors to gauge the fitness of their organizations for an annuity-based business model — and whether they can sustain that model in long run. Vendors need to create assessment tools to evaluate their partners' business model transformation potential. For example, Cisco Systems built its OnPlus ROI Tool expressly for partners to model the myriad business model options and scenario decisions they face. This will not only help partners identify their pertinent strengths and weaknesses, but will also help them plan their future growth strategy.
This week, Colt launched its Ceano cloud services for SMBs with a particular focus on the reseller channel that actually services these businesses. As this announcement combines the business strategy of a telco provider with an innovative channel strategy, Forrester analysts Dan Bieler and Peter O’Neill have again combined (as in their previous blog on Cisco) to discuss their impressions:
Dan. Ceano is impressive in that it constitutes a true end-to-end platform, ranging from the network solutions provider to the channel partners and service enhancers, to the CIO of corporate clients, and all the way to employees – i.e., the actual users of Colts’ services. The main area of improvement of Ceano versus the previous customer engagement relates to the presentation of Colt’s portfolio.
Peter. Well, I had already called out their impressive channel strategy a few months ago, and this announcement continues that story. Leveraging the technologies from the ThinkGrid acquisition, Colt partners are now easily able to orchestrate, provision, and manage the Colt cloud services for their clients – and the system supports the partner’s own business processes from quotation to billing.
Last week, Forrester hosted a channel roundtable in Singapore on theevaluation of channel models in Asia Pacific.The goal was to create a common platform for tech vendor senior channel executives and Forrester analysts to discuss key changes faced by the channel leaders and how best to adapt to them. The briefing was attended by 26 senior channel executives representing 21 tech vendors.
All of the channel leaders agreed with a Forrester report which indicated that channel models are under great pressure due to the growth of mobility and the devices that power it, as-a-service computing models, and the decreasing influence of IT departments on overall tech spending. As they cope with these changes, the key challenges they identified during the interactive roundtable were:
Identifying and engaging with those channel partners that can adjust to market shifts. This emerged as a major challenge, not only for some of the new cloud-based service providers but also for traditional tech vendors venturing into new solution areas. A shortage of skilled channel professionals within Asia Pacific exacerbates this challenge. Several also identified the challenge of high turnover within their channel base and the frustration of investing in the skills of a partner executive and having him shift to a competitor’s channel.
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Forrester hosts its Sales Enablement Forumin Scottsdale, Arizona, on March 4 and 5, 2013. Attendees will engage as a community with a shared focus on driving revenue, hear success stories in process from their peers and leading B2B practitioners, become immersed in the latest thinking and data from Forrester including face time with analysts, all in the comfort of the Camelback Inn Resort & Spa. Over the next three weeks, Marketing Mondays will spotlight the themes of the forum through a series of Q&A sessions with attending analysts. First up, I will answer frequently-asked-questions as a general introduction to the forum, and then Tim Harmon and Jonathan Silber will delve into the forum’s don’t-miss value for clients who market and sell through the channel.
In their Asia Pacific Tech Market Outlook For 2012 report, Andrew Bartels and Frederic Giron show that government and business IT spending in the emerging markets of Asia (including China, India, and the ASEAN countries) will reach US$180 billion in 2012, growing by roughly 13% over 2011. While emerging Asia’s IT spending is surging this year, economic obligations in the developed markets of North America, Europe, and Japan will ensure continued austerity — and limited IT spending growth. In other words, emerging Asia is clearly a lucrative region of opportunities for US, European, Japanese, and South Korean vendors looking for new sources of growth to offset lower business prospects in their home markets.
Asia is a region of highly disparate countries, with regulatory complexity, cultural differences, and a limited pool of skilled resources. These barriers to entry and expansion will compel vendors to look beyond organic growth, which is simply too time-intensive. Instead, mergers and acquisitions (M&A) of local/regional incumbents with local know-how, skills, and client relationships will increasingly be a strategic imperative for vendors targeting emerging Asia. I’ve highlighted some examples from the Indian market below, but I foresee similar trends in the overall ICT sector throughout emerging Asia:
This year (next month) Forrester’s Technology Sales Enablement Forum will sport a new channels track. With a theme of “Bridging the Strategy-to-Execution Gap,” we will drill into the issues vexing channel professionals on why “perfect” strategies, involving partner recruitment, partner enablement, and partner loyalty, often fall flat with channel partners.
I’m particularly excited by being joined on stage, not just by my colleagues Dane Anderson and Michael Speyer, but by [yes, real live] channel execs Jon Roskill of Microsoft and Wendy Bahr of Cisco. Jon and Wendy are going to share their insights and their most effective techniques around channel enablement – i.e., how their companies’ channel teams empower their channel partners to effect maximum productivity. Attendees will have plenty of opportunity to grill Jon and Wendy with their particular issues.
Moreover, Dane, Michael, and I are going to bring “the voice of the channel partner” directly into our explorations of partner management execution. I’m sure you’re going to take away some valuable, actionable ideas for boosting your own channel strategy-to-execution map. Check it out:
Forrester’s Technology Sales Enablement Forum 2012
What is it that you think makes one tech company stand out from another? “My product is better than your product”? Not anymore. “My salespeople are better than your salespeople”? Possibly. “My channel is better than your channel”. You’re getting warmer. How about, “My marketing machine is better than your marketing machine”?
For example, 41% of customers identify “the vendor’s (not including its salespeople’s) ability to understand our business problem”, compared with only 21% who identified “the vendor’s salesperson’s ability to understand our business problem” as the most important vendor action factor when selecting a tech vendor. Marketing is clearly the difference-maker.
But cloud computing changes everything. The implications of cloud computing go far beyond its technology delivery/consumption model. It seems I get questions from tech marketers about all things cloud these days. A few examples:
“How can I use the cloud more effectively to market our solutions?” (Answer: It’s not what you read in USA Today about Facebook and Twitter. According to the results of our 2011 B2B Social Technographics® survey, discussion forums and professional social networking sites (read: not consumer social sites) outpace Facebook and Twitter ten-fold as information sources for informing businesses’ technology purchase decisions.)