Hanli Wood, channel sales manager: sub-Saharan Africa at Riverbed Technology, offers her predictions for where the channel will move in 2017.
Digital transformation redefines the channel’s role
The traditional sales model used to comprise three distinct steps: the OEM develops a new software or hardware solution, the VAR sells it to the end-user who pays for it entirely up-front, and the VAR continues to generate revenue by selling upgrades and new license fees to the customer. That business model will disappear within the next three-to-five years.
Organisations across all industries are experiencing the digital transformation triggered by a number of factors: such as cloud computing, mobile technologies, the Internet of Things (IOT), and big data analytics. More companies are embracing the cloud for software- and hardware-as-a-service options instead of installing those solutions in their data centres.
Meanwhile, OEMs recognize that they can offer their products as services that a customer can purchase from them directly. They no longer need an intermediary to deliver, stage and install new equipment or software.
Channel partners are not being cut out entirely (yet), but this signals the end of collecting fees for traditional intermediary functions such as license renewals, providing upgrades, etc. As a result, we’re already seeing many of our partners roll out new services that position them as expert service providers who can assist their customers with the migration to the cloud.
For example, they’re enabling customers to “pay by the drink” – monthly subscription fees instead of paying an up-front price. This also enables the customer to upgrade and downgrade as their business needs change, instead of having to wait for their solutions providers to offer upgrades from the OEMs. This move to As-a-Service shifts the risk from the customer to the OEM who then “shares the risk” with partners (that will likely now build out the solution). In the coming year both partner and vendors will need to manage this “shared risk” to make monthly subscription fees financially viable.
We also expect that there will be a continuation – even an acceleration – of consolidation within the channel industry as smaller VARs and systems integrators recognize the market demand for their traditional value-add is diminishing. Merging with larger companies will enable the new entity to offer a wider breadth of products and services that businesses require to compete today and tomorrow.
Adapt or risk falling behind
The evolution of the channel’s roles and relationships with OEMs and customers is one the industry should embrace, not fear. This creates even more opportunities for them to introduce new, or build up existing, integration services, support services and/or managed services.
The one thing that won’t change is the typical customer’s lack of IT resources and expert personnel. The VAR will remain an invaluable business advisor on how to leverage those solutions to drive their businesses better and disrupt their competitors.
By adopting to work closer with vendors/OEMs to be As-a-Service providers, VARs can create a “win-win” scenario built around shared risk and the use of the vendor’s IP-technology.
The rise of cloud computing has also given rise to the of DevOps – an operating philosophy with origins in the agile development community. There is no consensus on one definition of DevOps, but the core principle is to break down the silos that traditionally separate the application development and operations teams. The objective is to shorten the time it takes a company to develop, launch and update new applications or services. In particular when developing systems of engagement, rather than systems of record, customers are often relying on DevOps to rapidly launch new capabilities to enhance the customer experience.
The wide availability of cloud-based application development tools enable someone with little or no coding experience to define, customize and create new apps without having to write any code. Individual lines of business that have an idea for an app that can improve their teams’ productivity levels or benefit customers no longer have to submit requests to IT, then wait for months for the traditional methods to deliver.
Yet, many smaller companies do not have the resources or bandwidth to take advantage of these low-code tools. This represents another new business opportunity for a VAR: identify a customer’s business needs, and develop new applications for one or more departments to help the customer better meet those needs.
Certainly, this is not to say that all VARs should jump into the DevOps movement, but more that they cannot afford to sit still. DevOps is a movement that may or may not be lucrative to many but one that needs careful evaluation as it is a cornerstone to many customers’ strategies for digital transformation.