ICT resellers, particularly those operating in the mid-market, must become more agile in how they sell solutions and package them if they are to survive as their clients adopt cloud and as-a-service models to address more of their technology needs.
That’s according to Gary Pickford, CEO of Tarsus Distribution, who says that the way ICT industry sells technology is not changing as quickly as the way that enterprises consume technology. “Many resellers are still stuck in an antiquated business model designed for an era of on-premises computing,” he adds.
“They have yet to shift their ways of incentivising and remunerating salespeople from the old models based on vendor rebates, long sales cycles and box dropping. Many of them understand they need to shift towards a new business model, but lack the skills or the will to make the transition. But the smart and agile players are already adjusting to the new patterns of demand.”
Consolidation and competition
Pickford says that mid-tier resellers are finding the environment challenging on several fronts. Firstly, they are facing growing competition in businesses such as business applications, servers and storage as new competitors enter the market. Telecoms operators, software vendors and large systems integrators are all muscling into the mid-market by offering infrastructure-as-a-service or software-as-a-service solutions.
“The competition today could be anyone who offers a solution for the client’s business need,” says Pickford. “A customer looking for a mobile-enabled customer relationship management solution could choose between an internet service provider, followed by a software vendor, and then a traditional reseller, all offering a cloud application.”
Adding to the pressure is the ongoing commoditisation of ICT solutions through the cloud and converged infrastructure solutions, which reduce the level of implementation, integration and support customers need as they rollout new services and applications. This poses a challenge for resellers accustomed to earning high margins from services.
These trends are seeing a rapid consolidation of the market, across resellers, vendors and distributors as industry players adapt to a changing market. But as daunting as the growing competition seems, the shift in the industry also spells opportunity for resellers who pivot successfully from dropping boxes towards providing solutions, says Pickford.
Mid-market is where the channel adds value
These opportunities are not necessarily in the large enterprise space — where companies have specialist teams to manage in-house and cloud deployments and have less of a need for a reseller’s help — but in the mid-market, says Pickford. “There are around 40,000 mid-market companies in South Africa, and it is here where the channel can still add enormous value,” he says.
“These companies understand that there is a need for a hybrid cloud and on-premises computing model, but they’re not sure how to get there. Rather than seeking technical skills, what they want is expertise around how they can use technology to drive innovation, reduce costs and leapfrog competition. And they’re willing to talk about sharing risks with their providers as they move to new models of technology consumption.”
Medium-sized resellers are particularly well placed to help mid-sized companies because they can easily bring together a team to talk about the customer’s business requirements in a holistic manner — unlike large consulting and integration companies that have skills scattered across different siloes, says Pickford.
Speaking the same language
For example, a smaller reseller will be able to easily bring together its infrastructure, cloud and applications experts to have a conversation with the client, whereas a larger integrator will have these skills fragmented across different divisions, each pursuing its own financial targets. “Mid-market resellers are more agile and able to adapt, which means they can thrive in this changing market,” says Pickford.
“Mid-sized resellers speak the same language as mid-sized enterprises. They are in a good position as mid-market companies embark on their digitisation journey. But they need to shift from thinking that their value lies in their technical skills alone. Their role is to match the ideal solution to the ideal customer — understanding the business need and how to fulfil it.”