Digital Transformation and the future of Reseller channel

The past 15 years have been tough for traditional resellers. Digital transformation will benefit the reseller channel. Today, the IT industry is abuzz with discussion of digital transformation. Unlike smartphones and cloud, however, DX may actually provide upside for traditional channel members. In this document, Techaisle, in its latest white paper argues in favor of the proposition “DX will deliver new opportunity for traditional VAR businesses”. VARs are best positioned to scale “the twin ladders” to deliver digital transformation technology building blocks and the Interwork platform helps the channel position digital transformation initiatives in successfully navigating through and across digital transformation delivery stages.

In many cases, channel organizations that describe digital transformation to prospective clients are really talking about digitization, or some combination of digitization and digitalization. This is particularly true of MSPs or cloud (SaaS, IaaS) suppliers who are positioning their infrastructure management offerings – which are, for the most part, vehicles for augmentation – as a means of achieving DX. However, in its transformational end stages, DX is defined not by supplier delivery but by customer processes and objectives.

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Smartphones devastated the PC refresh business, while generally lower prices for front-office equipment hollowed out the value of maintenance/management contracts. Around the time of the ‘great recession,’ channel valuations fell precipitously – by 20x or more – disrupting transition plans for an entire generation of channel leaders, as diminished consideration for resale business and product-linked services like deployment, plus a general oversupply of prospective sellers vs. prospective buyers, carved away enterprise value. Next came the explosion of cloud, which reduced market potential for on-premise back-end technologies and shifted contracts from high-value, one-time transactions to monthly recurring revenue (MRR) agreements, increasing stress on revenue and operating margins. A cloud-driven reanimation of vendor/reseller conflict was exacerbated by the rise of new competitive business models – managed service providers (MSPs) and born-in-the-cloud service brokers (CSBs). Pundits from all quarters issued gloomy forecasts, stating that a large proportion of existing channel businesses would simply be consolidated away, with survivors forced to reinvent virtually every aspect of their operations.

Techaisle research shows that the combination of product transactions, ongoing management services revenue and tangible contribution to customer business success makes digital transformation a compelling opportunity for channel businesses. Those that are able to develop the required skills and processes will have an opportunity to reverse the channel’s declines in impact and business value, and establish their firms as viable long-term partners worthy of commitment from customers, suppliers and strategic investors.

Digital transformation provides enormous opportunities for the channel, particularly the reseller community that has been negatively impacted by other recent IT industry trends.

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