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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 Channels – All the right moves?

Channel Momentum

As some IT companies continue to consolidate and others split up, Dell is promising its channel partners consistency, stability and increased profitability. And it is showing:

  • Dell Channel revenue now represents more than 40 percent of overall Dell commercial revenue and its channel business is growing faster than the overall market

  • Channel revenue growth is up double digits in 10 of Dell’s top 11 countries year-over-year

  • Dell solutions are now available through three of top Distributors - Ingram, TechData and Synnex - and where Dell is experiencing growth in excess of 50 percent


To keep the channel momentum intact, Dell is pledging US$125 million in enhanced incentives to help channel partners bid and close new customer acquisitions and also deploy towards retention deals with existing customers.

As always, not willing to take any hype on face value Techaisle took to the streets to really talk with Dell SMB channel partners and especially those who have partnered with both Dell and HP. Over the course of last three weeks, Techaisle conducted over 25 depth interviews with SMB channel partners. The discussions clearly revealed that the partners have started to look at Dell rather seriously. As one of them said, “Dell has changed its approach and outlook towards channel partners after it went private. They monitor and coordinate with their partners just like any other OEM. They have changed their ways in how they strategize and have created their training plans to cater to our needs and are succeeding by actively collaborating.”

Another partner, based in Texas and focused on SMBs was more direct, “Dell hasn’t been looking at channel partners as a key to gain market share unlike OEMs like HP. A few months back only about a 30 percent of sales were driven by the channel partners and the rest was a result of Dell’s direct sales efforts. The reason is that Dell itself had a large sales team managing sales accounts. However, after Dell went private they have mended their ways in how they look at us. They have kept the key sales accounts with themselves and the rest have been distributed amongst the channel partners for further management and revenue generation which is a good step as it inculcates trust and sense of real partnership.”

Impressive Numerics

At one of my sit-down meetings, Cheryl Cook, VP, Global Channels and Alliances shared some impressive statistics:

  • Dell has 167,000 channel partners out of which 4,255 are Preferred and Premium partners.

  • Nearly 700 channel partners chose to become premier or preferred partners of Dell in 2014, a testament to channel commitment

  • Training uptake, (a top requirement of channel partners as per Techaisle SMB Channel study), was up by 54 percent in 1H’14. But more importantly, training on software solutions increased by 102 percent.

  • Over 82,000 deal registrations were processed, up 8 percent YoY and software (security, device management, data protection, systems management) deal registration was up by 32 percent

  • Rebates processed was also up by 23 percent during the same time frame

  • 4400 new customers were acquired through channels, transacted 10,000 new orders out of which 1200 were for storage and 1600 for software


Although she deftly skipped my question on how many named accounts have been formally handed over to channel partners she reiterated that Dell is continuing to maintain its compensation accelerator program which is yielding good results. Recently, a little over 200,000 greenfield accounts have been posted on the Partner Portal.

Investment in Training, Support, Lead generation, Consultative partnerships

Most channel partners that Techaisle spoke with agreed that Dell has been concentrating on technical training sessions and regularly assessing partners’ performance with a clear objective of empowering them with required product knowledge to be able to pitch to the right set of SMB customers in the best possible way. Unlike the immediate past, account managers from Dell have suddenly become approachable. Some partners went to the extent of telling Techaisle “we specifically like the pre-sales and sales trainings that Dell has designed for Channel Partners. At times I feel that their efforts in the field of training annoy us as there are multiple and repetitive requests for attending or undergoing the same set of trainings that we have already gone through. They do not yet have a system to remove these redundancies”.

Channels are also having good experiences working with Dell’s consultative approach. “Lately, we were dealing with a few SMB customers and they wanted the account managers and few other technical experts to be available on call. We worked together with Dell and closed 3 deals where the consultative partnership worked in our favor”, said an SMB channel partner based in California.

Dell is also investing in supporting the channels when they bid for complex engagements. Their pre-sales support has improved as compared to before as channels now have access to their technical resources who work along with partners’ technical teams in understanding customer requirements, existing customer infrastructure to suggest suitable solutions.

In addition to training and support Dell is making a series of investments to help channel partners by:

  • Making available 5X demo gear to facilitate proof-of-concept

  • Increasing number of Solution centers for partners to showcase Dell end-to-end solutions to their customers (granted not many SMB channel partners will take advantage)

  • Improving areas of financing such as extending credit and payment terms thereby assisting channel partners in better managing their cash flows. The terms announced are 75 days interest-free financing on all Dell purchases for an introductory period of 180 days


Are conflicts a thing of the past? Channels are cautiously optimistic

Dell seems to be diligently working towards building trust within its channel partners. Dell and its partners have had a love-hate relationship due to conflicts with Dell’s strong direct sales force across all divisions. In fact, with the progress made, channels are wishing that Dell limits its investment in its internal sales teams as it would in all probability bring back the channels to “square one”.

The channel partner community reminded us of unpleasant past experiences of “Dell snatching customers from their partners and dealing with them directly”. But they quickly added, “We haven’t come across such a scenario (lately) and would never want to face a situation like that”.

Another partner said, “Dell has always been known for their direct business and has ramped up their efforts in the indirect sales through channels around a year ago. Earlier, we never knew if a deal which is routed through us will be closed keeping us in loop (with our margins intact) or Dell may go ahead and deal with the customer directly. Now, this has completely changed and Dell itself directs the customers to go through us”.

An HP and Dell partner was eager to get his point across regarding lead generation saying that Dell is managing a nice balance while sharing potential customer details with only one partner. HP is not following this approach triggering conflicts.

End-to-End Solutions message is resonating

Dell is steadfastly focused on its end-to-end solutions strategy and channels are paying attention. “Dell offers support in implementing end-to-end solutions. They work with us in consultation to determine the best product and solutions based on SMB customer requirements. Account Manager from Dell works with us closely when we deal with such deployments. We get all the technical help required, if skills are not available with us. Dell offers us access to experts (both on calls and physically, when required) from functional areas when we deal with SMBs for deployment of end-to-end solutions”.

Channels are finding that not only end-to-end solution deals give them extra margins but also makes it easier to deal with Dell, namely, channels get a better attention from Dell. Techaisle feels that if selective attention becomes the norm then many Dell SMB channel partners may flounder.

A mid-west Dell SMB channel partner was very vocal when we spoke with him. “Dell is important while we engage in end-to-end deals with our customers. Dell’s role starts from pre-sales to the deployment of such engagements. They offer the required marketing set-up for the products and solutions. If we have to take care of these things on our own, I think our margins will squeeze and it will be difficult to sustain our business”.

Having a full portfolio of offerings also allows “non-end-to-end solution channel partners” to sell adjacent technologies. For example, “we have clubbed and sold Dell hardware with Cisco, NetApp and IBM storage management and security solutions”.

Then there are other channel partners who try and build solutions with a product from Dell as the center-point. “Based on customer requirements we will see if there is a Dell product suited to meet the needs. If yes, we pitch for it and if there isn’t a product suited, we may bundle it up with other solutions and design an end-to-end solution for our customer. If the customer wants to go with a specific product and Dell doesn’t have promising product in the area; in these cases we will bundle it up with other product and present it as an end-to-end solution to our customers”.

Lingering Channel Challenges

To my question on what should channel partners be expecting next from Dell, Cheryl Cook quickly points out her focus on strategic pillars of mobility, security and Big Data with big push on converged infrastructure and innovative storage solutions.  She counters me with a question on VMware EVO:RAIL and its “fantastic” suitability for the SMB market segment.

Channels are listening and echoing that the fastest selling Dell solutions are Rack and Blade servers. But they feel that Dell has not yet been able to position its Force10 and SonicWall offerings effectively and channels are losing to Cisco or HP.

As conflict is disappearing, trust is settling in, channels have a new gripe. When a customer floats an RFP to a number of partners, Dell seizes the responsibility to directly speak with the customer, decides which partner is in the best position to offer most favorable terms and informs other partners to step aside and not waste their time on a deal which may not land with them at all. This annoys the channel partners as they would like a fair opportunity to win the deal and gain a customer by cutting down on own their margins.

No Regrets – but could have been bolder

Looking at the last one year since taking the helm, Cheryl Cook has no visible regrets. After much coaxing and cogitating she says, “Perhaps we could have been bolder in our move” referring to speed of Dell’s organizational moves and intuitive proactive thinking. The future is bright and she and her team are committed to helping all partners – “narrow or broadline”.
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SMB and Midmarket: Cloud Software acquisition and the importance of “deep carpet selling”

Linoleum vs. Deep Carpet Selling

There is an old story about a consultant who was advising a client about changes in his market, and what they would mean to sales strategy. The consultant went through a series of tables demonstrating that, due to increased interconnectivity with other corporate systems, products in the client’s segment were increasingly purchased by senior managers rather than shop floor managers. The consultant stressed the importance of developing new marketing material and directing the sales force to call on the senior managers instead of the shop floor, to which the client replied, “You are talking about deep carpet selling. We don’t do deep carpet selling. We do linoleum selling here.”

Most IT vendors engage in a variation of “linoleum selling”, focused on engaging IT professionals in discussions that focus on the technical attributes of their products. However, BDMs (Business Decision Makers) – who tend to inhabit the “carpeted” realms of their businesses – are more likely to be engaged by discussions about business benefits and objectives than by “feeds and speeds”. In categories where the BDM is central to the needs identification and budget process, sales reps will need to develop “deep carpet” language and skills.

The data from Techaisle’s SMB and Midmarket IT Decision Making Authority survey demonstrates that we have already reached that point in cloud applications and software in both the small and midmarket segments.

Need vs. Enhancements

Survey data shows that in both micro/very small businesses (1-19 employees) and the smaller midmarket businesses (100-499 employees), BDMs are the primary drivers for determining the need for new cloud business applications.

These findings are broadly consistent with the results from the survey question on determining the need for enhancements to existing cloud solutions. While in most cases, IT has more influence in determining the need for enhancements than it does in determining the need for new solutions, BDMs are still generally the most important voice in the discussion. ITDM’s (IT Decision Maker) influence is directly attributable to the extent that enhancements are driven by technological rather than functional requirements.

Conclusively, survey data shows that business requirements are the prime mover for identifying the need for both new solutions and significant enhancements/upgrades in micro and very small businesses, and that technology concerns play a meaningful role in instigating discussions about enhancements to existing solutions in businesses with 20-499 employees.

Interestingly, within the 500-999 segments, there is more BDM influence over identifying the need for meaningful enhancements than for new applications. Following the logic applied to the other segments, this suggests that enhancements within these near-enterprise accounts result primarily from process optimization requirements, rather than from a need to upgrade the underlying technology.

Cloud Software budget authority

“Determining the need for” a new business application or a “meaningful enhancement” to an existing application is not, of course, identical to signing off on the purchase of a new solution. When Techaisle extended its questioning to include “budgetary control and authority,” it resulted in two interesting findings:

    • The proportion of SMBs where budgetary control and purchasing authority for new applications rests entirely with BDMs increases in all employee size segments, relative to the statistics for determining need in these segments. This means that BDM control over the final purchase decision is even higher than the “determining the need for” statistics suggest.

 

    • The proportion of respondents reporting that responsibility resides entirely with either IT or business – but is not shared between them – increases in five out of seven employee size segments (missing only the 10-19 and 20-49 employees groups). This suggests that needs identification may be more collaborative than final purchase decisions.



Both findings point to the same conclusion: that BDMs are extremely important to suppliers of cloud software. Chart below provides a graphical representation of the determining need vs. final purchase decision authority balance by employee size.

techaisle-blog-smb-midmarket-decision-making

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34 percent SMBs want out-of-box Collaboration within SaaS/Cloud applications

Techaisle’s SMB & Midmarket Collaboration adoption research found that apart from traditional collaboration solutions of file sharing and communication, SMBs need SaaS business applications to have collaborative properties. 34 percent of SMBs and 44 percent of midmarket businesses say that SaaS applications should have built-in collaboration properties out-of-the-box. They say that the success of a cloud business application is its ability to provide /support collaboration, including email and/or hosted telephony.

Techaisle survey data shows that there is a strong connection between SaaS applications and collaboration. In some ways, these connections are intuitive: SaaS is a resource that can be accessed simultaneously by multiple individuals located anyplace where there is a network connection and cloud is inherently supportive of collaboration, and many applications are either explicitly focused on collaborative activities (ranging from SharePoint to CRM) or embed these capabilities (as with productivity applications like Office 365 or Google Apps).

Techaisle’s SMB research found quantitative support for these perceptions. When SMB respondents were asked, “what are the key attributes of a successful cloud solution?” As would be expected, security, scalability, and data management (including disaster recovery) were prominent in these responses. However, the most common answer was “the ability to support mobility,” which speaks to the requirement to enable mobile collaboration. And the fifth-most common response was “the ability to provide or support collaboration.” As the figure below shows, this is an important issue across size categories: it was cited as an important cloud success attribute by nearly half of near-enterprise (500-999 employees) firms, and also by companies with just 10-19 employees.

techaisle-saas-collaboration-connection-blog-smb-attributes


Further analysis of current and planned SaaS workloads underscores the importance of collaborative capabilities within SaaS applications. Techaisle asked small business and midmarket respondents who are currently using or planning to use cloud to identify the top SaaS workloads in use today, and those that are in current adoption plans. The results, that collaboration plays a role in most SaaS applications:

Workloads explicitly focused on collaboration

    • Hosted VoIP (used today by 52 percent of midmarket businesses, with 35 percent planning adoption)

 

    • Content publishing (used today by 53 percent of midmarket businesses; 56 percent of SaaS using small businesses are planning deployment)

 

    • CRM (in use or planned by 93 percent of midmarket businesses and 71 percent of SaaS using small businesses)



Workloads where collaboration is a key differentiator, attribute or outcome

    • Office suites (both Google Apps and Office 365 emphasize intrinsic collaboration capabilities. Office suites are the most commonly used SaaS application type within small business, and the third most commonly used application type within midmarket business)

 

    • Project management (most commonly used SaaS application type within midmarket business, and the third most commonly used SaaS application type within small business)

 

    • Business Intelligence (53 percent of midmarket businesses and 44 percent of small business are planning adoption)



Workloads where better collaboration or reporting within/across departments/functions and/or with external stakeholders is a key outcome

    • Accounting/financial management and ERP (accounting/financial management is the second most widely used SaaS application type within small businesses)

 

    • HR management (deployed by more than half of midmarket business SaaS users)

 

    • Marketing automation (highest rate of planned adoption within midmarket business SaaS users)



These findings underscore trends that are apparent in the SMB SaaS and collaboration markets: that increasingly collaboration is important to SMBs (as a means of boosting productivity), and that cloud-based systems – including file sharing systems, and extending to SaaS applications as well – are expected to provide support for many forms of collaborative activities.

Deployment scope further impacts SMB buyer requirements

As Techaisle observes the evolution of collaborative solution capabilities within SaaS, it is important to also consider the scope across which these applications and solutions are expected to operate. Solutions that connect workers within a group or department benefit from a common understanding of context and source applications; those that connect users across groups/departments exist within a single company, and can focus on supporting IT-approved devices with reference to IT-defined security policies. Solutions that extend beyond the organization’s own staff may well offer more business impact than internal-only systems by speeding communications to customers, prospects and/or suppliers – but they come with increased issues in terms of support for seamless connectivity across multiple platforms, and potentially, may raise security concerts as well.

techaisle-saas-collaboration-connection-blog-smb-scope


In the research, Techaisle asked respondents to specify the scope of their collaboration solutions. The results help clarify the strong demand for collaboration within microbusinesses, and provide insight into why businesses view collaboration as an essential solution investment area. More than 40 percent of microbusinesses, and 39 percent of all SMBs, extend their collaboration infrastructure to support for customers. Midmarket businesses are more likely to focus on internal collaboration, but they join smaller peers in having a roughly 20 percent incidence of supporting supply chain relationships (suppliers/vendors) through their collaboration systems.

Looking at the above chart, one sees that there is the potential for missed connections within the emerging panoply of collaboration-enabling systems. Social media, mobility, BI and cloud all have important collaboration extensions. But how can businesses ensure that these technologies will connect internally once they are in place? Techaisle believes that collaboration is evolving in response to this market condition. IT vendors have traditionally tried to position collaboration solutions as a platform on which businesses can create new capabilities and integrated processes. However, data shows that businesses are instead acquiring collaborative capacities as part of other applications: social media, mobility, cloud and BI all provide discrete and important – but potentially disconnected – collaboration capabilities. Moving forward, Techaisle expects that collaborative technology solutions will increasingly be positioned as a framework that integrates and extends the value of these discrete system capabilities, rather than as a “first step” platform.

Related Blogs:

SMB and Midmarket File Sharing & Collaboration Adoption to Grow by 52 percent

SMB Content Management & Collaboration Solutions Adoption: Seven Key Trends

Report details:

360 on SMB & Midmarket File Sharing & Collaboration Solutions Adoption Trends

 

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SMB and Midmarket File Sharing & Collaboration Adoption to Grow by 52 percent

Techaisle’s study on SMB Collaboration Solutions Adoption Trends shows that for 59 percent of US small businesses and 93 percent of US midmarket businesses, collaboration is among the Top 5 IT priorities for investments. In Asia/Pacific, 63 percent of SMBs are turning towards it as a business growth driver and in Western Europe, 68 percent of SMBs are finding that collaboration drives better teamwork and customer responsiveness.

Overall 38 percent of US SMBs are currently using one or more collaboration solutions and another 20 percent are planning to use one within the next year, a growth of 52 percent. Overwhelmingly, SMB customers view online file sharing as the most important aspect of a collaboration solution as 64 percent of SMBs using collaboration are currently using online file sharing (24 percent of all US SMBs) and another 32 percent are planning to use it within the next one year.

The survey data also shows that the next stage in the SMB collaboration adoption is their need for online interaction, that is, simultaneously share and edits files from PCs and mobile devices, mobile video collaboration, integration with social networks, and richer media escalations, such as using chat, text, voice, video at the same time.

As per the study, key business drivers for SMB collaboration adoption are also changing. While currently there is a strong desire to build robust content repositories, the next wave of SMB collaboration adopters are emphasizing speed of innovation, demands for improved productivity, and imperatives for faster time to market.

In terms of brand solution adoption, the SMB market is quite fragmented with Google, Microsoft, and Cisco leading, but there are many other smaller collaboration solution brands that are being used extensively by SMBs. Further analysis of data also underscores the importance and use of collaborative capabilities within SaaS applications such as CRM, ERP, accounting, project management, HR management, business intelligence and content publishing.

With respect to file sharing, Dropbox has had a very strong impact on the SMB collaboration solutions market. By enabling mobile users to share files freely, they at once underscored the central importance of mobility, enabled individual users to be drivers of corporate collaboration activity, and proved the centricity of file-first rather than person-first collaboration models.

Box (another important vendor in the space), on the other hand has gone on record saying that SMBs are not its target market segment. There is a market opportunity for traditional backup and file-sharing IT companies such as Hightail, Carbonite, Egnyte as well as those delivering mobile workspaces such as Citrix and managed services platform providers such as Continuum and security IT vendors such as Trend Micro. However, the reach for each of these will be limited to the reach of their respective SMB focused channel partners.

Techaisle believes that there are additional file-centric developments that will further shape the nature of SMB file sharing solutions in the years to come. Today, most files are intrinsically connected to the applications that created them. If cloud and mobility are the key determinants of IT delivery, then there would be a need for the decoupling of data from applications. Application-independent data wrapped in rich metadata would allow new cloud-based applications (potentially based on BI platforms) to combine existing data to meet new business requirements. In addition, freed of originating applications, it is also likely that data could be optimally formatted for a wide range of displays: large screen PCs, smaller screen smartphones and tablets, and new display types ranging from signage to digital paper to wearable heads-up displays.

For more details on the report, click SMB and Midmarket Collaboration Adoption Trends

 

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