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Techaisle Blog

Insightful research, flexible data, and deep analysis by a global SMB IT Market Research and Industry Analyst organization dedicated to tracking the Future of SMBs and Channels.

Dell’s SMB Strategy in India: Winning, For How Long?

Complex PC Reseller Landscape

There are 30,288 channel partners in India, out of which 24,850 are PC resellers. As per Techaisle research, volume resellers account for 12 percent of all resellers but they constitute 47 percent of PC shipments. 50.2 percent of the PCs sold by these volume resellers go to the SMB segment. On the other hand, micro-resellers account for 16 percent of reseller PC shipments but constitute 50 percent of reseller universe. Their main customers are the consumers, nevertheless 28 percent of their shipments also go to the SMBs. India is a country where dealers are evolving from a mono-brand approach to a competing multi-vendor offerings, where low margin in hardware sales is driving dealers towards value-added services and a creation of a more skilled dealer channel. India is also a country where mall-like culture is sprouting to embrace the consumer segment and small businesses and selling is focused on price conscious provisioning of PC devices. Techaisle Channel Research also shows that there are many stages in the value chain before a PC reaches the end customer affecting the price structure. With additional presence of 6,340 system builders, India channel landscape is not only complex but constantly evolving.

Winning Streak

In the last 2 years, Dell has established itself as a leader in the Consumer PC market and is now trying to extend the same winning streak to the SMB market. But was it a stroke of luck, its own strategy that worked or the fault of others? Stroke of luck does not play into a market which is still considered nascent and growing. Dell has been winning due to equal measure of its own efforts and missteps of others. This winning position is for Dell to lose and others, namely HP to regain.

Let us break it down. Dell started its winning streak with the consumer segment. Initially rejected by Redington and Ingram, Dell motivated and signed up with Supertron to make them their National Distributor. Supertron with no presence beyond the Eastern Region quickly became a useful crutch for Dell to expand and establish itself in the India market. With the success of Supertron, Dell also picked up Global as a Distributor. With an explosive growth in consumer notebooks, Dell began establishing regional distributors for reach and market penetration. Their goal - to sell 5 notebooks for every 0.75 desktops.

During the growth phase of Dell in India, HP began to falter for a variety of reasons. Redington, a trusted partner for HP, which had initially rejected Dell’s offer now chose to drop HP and partner with Dell; albeit for some products only.

Targeting SMBs

To address the SMB market in India, Dell developed a “Direct-to-Dealers” strategy. It is a two pronged strategy where Dell deals directly with end-tier of channel partners for Tier 2 and 3 cities bypassing the distributors. However, for the Tier 1 cities, Dell follows the traditional route of selling through distributors. Dell itself does not stock and sell with channel partners but sells on a back-to-back basis. Targeting low-end products for SMBs, Dell is also using the retail channel to sell Vostros, a PC specially created for SMBs. This is key since traditionally vendors have shied away from selling commercial SKUs through predominantly consumer channels. Needless to say, Dell has recognized that the small businesses, especially less than 20 employee size companies use retail channel for their PC purchases. For its lower mid-market customers, Dell is encouraging its channel partners to sell on a solution based approach.

New strategies always tend to bring teething problems. With limited experience in dealing directly with the VAR/Dealer channels, signs of frustration are becoming visible, not yet within Dell but among the channels. Account managers are pushing channels to “pick-up vendor mandatory stocks” even if the inventory is not sold out. At the same time, channels mention that Dell does not provide any price protection nor does it yet understand the buying cycles in India which is different than many of the mature markets.  In lieu of price protection, Dell has designed a rebate program for its channel partners and empowers them with white papers and training programs to help them achieve better profitability.

Even if channels show some negative sentiments, there may be positives to Dell’s PartnerDirect program, such as provisioning of single point of contact for SMBs to reach channel partners.

Targeting the SMB Market of Tomorrow

Dell is trying to not only target today’s SMB but also keep in sight the Future SMB. Besides a distribution channel strategy, Dell is trying to focus on Cloud and Mobility for the SMB market. This itself is a great strategy but is yet lacking on execution. Vendors such as HP may have a much better chance of executing on the Cloud and Mobility front. Both these solution areas require extensive and experienced channel partners. Dell is in the early stages of partner development and majority of them are focused on basic building block products such as PCs and Servers. HP on the other hand has the capability to analyze its partner network and segregate them by expertise levels, creating partnerships among them to design a coherent and executable Cloud and Mobility strategy. On the flipside, since Dell’s channel ecosystem is relatively new, it has a rare opportunity to build a long-term program based on learnings from its own missteps and partner feedback.

Although Cloud Computing in India is on the rise, there is more hype than substance, and there are more free services being used than paid. With a limited bandwidth and internet speeds, it may not be long before cloud services get delivered over wireless. Because of a heavy adoption of Smart phones and other mobile devices, the march towards mobility in India cannot be stopped. However, SMBs mostly want integrated solutions to limit complexity and therefore seek channel partners that are capable of delivering cloud and mobility solutions integrated. Unfortunately, very few channel partners currently do so – especially for Dell. Those that do are financially out of reach of a typical SMB customer. And this is making SMBs unsure of overall benefits of Cloud and Mobility and desire to spend. Dell has to identify channel partners that could be ramped up and focused on delivering Cloud based solutions that have higher relevancy to SMBs.

Dell may be winning at this stage but its competitors are hot on its heels.

Tavishi Agrawal, US
Gitika Bajaj, India

New Technologies - Cloud, Mobility, Managed Services Will Finally Change SMB Channel Landscape

Techaisle's recently completed channel surveys show that Cloud, Mobility, and Managed Services Solutions together are beginning to change the SMB channel landscape as these solutions are revolutionizing IT utilization by SMBs. However, only 14% of channels are currently offering all three services to SMBs. The new paradigm would be the “3-in-1” Channels offering Mobility, Cloud, and Managed Services as a single offering.

Our research shows that SMBs want mostly integrated solutions to limit complexity and therefore seek partners that are capable of such deliverables. However, very few partners currently do so as they are all camped in either one or two solution corners and few seem to embrace a holistic solution view – and this is making SMBs unsure of overall benefits and desire to spend.

We feel that it is important for broad product/solution vendors to rapidly evaluate all their partners, seek and cluster partners based on where they are with regards to capabilities of delivering complete solutions and introduce programs to support development.

Resellers should look at their core skills, financial support and asses if they are capable of developing a market accepted value proposition encompassing all three key areas or seek collaborative relationships with other partners in areas they are weak. Here, vendors can also help in partnerships.

So far, Managed Services has been the most important offering and implementing Mobility Solutions is a new line of business for SMB Channel Partners.

Survey data shows that VARs are quite proactive in initiating discussions with their SMB customers for Cloud Solutions. Nevertheless, 31% of the VARs mention that vendors are pushing them to offer more Cloud Computing Solutions.

Channel partners that are able to deliver a suite of services that cut across Mobility, Cloud and Managed services will find SMBs that are willing to listen to them. The march towards Mobility and Cloud cannot be stopped. The only course for channel partners and vendors is to find the optimal intersection of the three. These “3-in-1” partners will define the next channel landscape.

In-depth analysis is covered in Techaisle’s report titled “Channel View- Trends & Challenges in offering SMB Mobility, Cloud, & Managed Services Solutions.”

Tavishi Agrawal

New Emphasis Behind Cisco SMB Strategy

On 2nd of March, Cisco made three new product and service announcements for the small and mid-market business segments. With these announcements, Cisco is continuing to show its commitment and focus for empowering the SMB segment and enabling its partner community to efficiently and effectively serve such market.

These three new announcements are a new platform for SMB collaboration (UC300 & BE 3000); a program to empower partners with the resale of WebEX solutions; and improved sales support to the SMB partner community with the Partner Advisor. These offerings are immediately available in the US and UK, and will gradually roll out in other European countries as Cisco completes the localization activities.

SMB-tailored products

The Cisco UC300 series is a very important step towards empowering small businesses to have a voice of their own, literally. Priced at US$165 per user, UC300 series can support up to 24 users and provides one single platform for voicemail, wireless, auto attendant, remote access, and mobile links. We feel this is an important and affordable platform for many of the small businesses who are still sitting on the fence as far as having a well connected communication and collaboration system among its employees. It is also extremely suitable for those small businesses which have grown organically and have multiple communication devices and have either fully or partially deployed VoIP systems.

For higher end small business users and the lower end of the mid-market businesses, Cisco announced its Business Edition 3000 which can support up to 300 users and is priced at US$100 per user. The platform not only provides capabilities for a single number, soft phones, auto attendant, click to call, mobility link, but also is able to connect up to 10 different sites.

Technologies such as collaboration and web conferencing are increasingly becoming important to SMBs to satisfy their priority to make employees more productive. As SMBs tighten budgets for items such as travel, such collaboration and conferencing solutions take center stage. While some solutions have been around for a long time, we believe that broad adoption among SMBs is upon us as evidenced by the priority assigned to such technologies vs. the current level of penetration. And with the announcements of UC300 and BE 3000, Cisco is playing right within the sweet spot of empowering the SMBs.

Similarly, mobile devices and enabling technologies are perhaps the most exciting space today remaining somewhat resilient even in a severe downturn. SMBs have always had a strong desire for mobile products and things became more interesting since Apple released its iPhone. As smart phones expand their empowering abilities, SMBs have strongly taken to accessing email, conferencing, collaborating and using social networking when mobile. A unified, affordable and simple to deploy platform suddenly helps the small businesses.

Small businesses have actively begun to use social media to create awareness about their business. According to Techaisle’s most recent survey, 70% plan to use social media in the next 12 months which is a positive sign, however 45% are not sure how it could help their business. Nevertheless, it is comforting to know that platforms from Cisco can provide that consolidated enablement across all different devices and solutions that are being used by SMBs. Another recent survey on Cloud Computing shows that besides industry specific applications, communications/collaboration and general business productivity applications including CRM are fastest growing. The inflection point for cloud based services is evident when business hit 20 or more employees. This again points to the fact that Cisco seems to have done its homework and instead of following a technology paradigm, has introduced a real business solution paradigm.

More focus on supporting Partners with dedicated personnel

Cisco announced also the introduction of Partner Advisor. With this enabling element of its partner programs, Cisco is catching up with the more traditional instrument of back-office support that is customary for the small/mid-sized reseller. Cisco Partner Advisor, which is to be deployed globally during this year, includes a one stop source for sales support and information such as product selection, promotion, pricing, financing and ordering.

The Cisco Partner Advisor is to be delivered both through the use of a dedicated myCisco online portal and, more importantly, with dedicated live agents’ organization – recognizing that distribution is a people business and resellers requires personal touch. The physical locations of the agents’ organization and their ability to solve issues for resellers will be the test ground for success of this investment Cisco is making. Dedicated to support the smaller resellers, not all Cisco’s partners will be allowed access to the Partner Advisor services.

Andrew Sage, Vice-President of Worldwide Small Business Sales, Cisco said at the announcement, “Our partners are the center of our business at Cisco, and we will do whatever we can to help them succeed. Our new Cisco Partner Advisor initiative uses both people and technology to help our small and mid-market business partners to begin or continue working with Cisco to get the immediate sales and programs help they need.”

Partner-Led WebEx: Cisco shows how the channel can drive Cloud Services

Cisco is bullish here, and rightly so. A chance to talk to customers, different ways to sell collaboration features, application sharing and complementing the new product launch, Cisco announced that Partners will be able to bundle or resell in their offerings Cisco WebEx Online Services.

Whilst this will be offered to users at published prices, this enabling & recurring revenue stream has all the writings of a strong lock leverage which competitors will find difficult to neutralize in the quest for new partners. Additionally, this appears to be a great integration example for Cloud based services offered by the reselling channel for others to follow.

Ian Pennell, Senior Vice-President, Small Business Technology Group and Co-Chair, Small Business Council, Cisco also showed his commitment for small businesses and the partner community that serves that segment by saying, “Cisco continues to be 100 percent committed to giving our partners and the customers they serve the easy-to-use technology innovation they need to succeed. Our partners and customers have told us they want simple unified communications solutions to help them stay ahead of their competition. Cisco is ready to meet that need.”

Paolo Puppoli
Tavishi Agrawal

Buyers Speak: Prices, Not Programs Drive Convergence

With the ever growing uptake of smart and mobile computing devices, many IT and Telecom vendors have been quick to forecast major channel restructurings to take place. For example, for many vendors, Netbook PCs have opened entirely new avenues to consumers, increased the number of resellers in their rosters and even called for an entire reorganization of their affiliation programs.

Techaisle’s recently published survey of 2900 Small Businesses across four countries [US, UK, Brazil and Germany], however, shows that on average, less than 1 in 5 Small Business buyers are sourcing their telecom and IT equipment from the same supplier. The data has not changed significantly over the last few years, particularly if we consider the advent of IP-PBX switching and integration in data networks.

Price seems the determining factor – whilst about 1/3 of multi-sourcing SBs are not looking to consolidate purchasing practices, the research shows that the bulk majority is regularly looking at ways to unify sourcing.

The market is there but reaching it is proving to be difficult.

The same research shows that channel suppliers’ inability to price competitively individual products from both IT & Telecom worlds is the largest barrier for limiting convergence possibilities – and making SBs source each set of products from their most relevant price specialized channels. If we continue as is, we have a near perfect parallel world.

Sourcing Considerations

Business Buy Solutions… But also products! Get it right and a third of the market may be yours. That is the size of the buyers business which is being sought after at multi-degrees and multi-levels between shareholders, vendors and the very channel players supposed to converge.

It is not an issue about wanting to converge but the ever present need to grow that makes vendors seek to drive the IT-Telecom markets convergence and to do that, they must address this particular channel weakness – and this is not an easy task.  Invest, and others will benefit. Do nothing and nothing will happen.

Besides retail, each channel player [in their remit] is arguably looking at efficiencies, focus, expertise, and… price on a daily basis but one reseller focused on IP Telephony [and with many years of expertise in the solution] will undoubtedly struggle to reach sufficiently relevant economies of scale to price compete with a specialist counterpart in the IT world. And any investment to balance this equation will likely increase their cost structure to threaten the overall business. They will not be the first to change.

Retailers, on the other spectrum of the market, have been selling Smartphones, SIM handsets, PCs and Netbooks for many years now, but that is hardly convergence.

So it is up to the vendors to make it happen. I once read that the answer may lie in the development of program alliances - a scenario where vendor A and vendor B  define how their products fit into a solution for SBs and enable selected partners with the right approach, solutions and products [a program] to serve the market niche by niche and in a probable unified manner. Competitive dynamics may make it more like fantasy than a real proposition, but it is a nice vision of the future.

More probable drivers for channel convergence, however, are to be found in new integrated technologies or solutions [like cloud offerings billed to create a new breed of channel players] but for now there is just talk.

Paolo Puppoli

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