Techaisle Blog

Techaisle’s SMB Channel Partner study shows that while cloud drives recurring revenue, profitable cloud channel members report that they drive more than 40 percent of revenue from non-recurring sources (such as services and attached product sales). Channel partners that are overly-reliant on recurring revenue are not achieving success in their cloud businesses; the companies in the Unsuccessful group report that more than 80 percent of revenue is derived from recurring sources.

 It is important to drive revenue from multiple business lines. While more than 50 percent of revenue for successful SMB Cloud channel partners is derived from recurring sources, unsuccessful channel partners obtain over 80 percent of revenue from recurring sources. Recurring revenue is important because one can predict earnings thereby reducing risk; however, selling licenses alone does not create a high value or high margin business. Cloud profitability requires that SMB cloud resellers combine sales of cloud services with sales of one-off consulting and products.

The market currently is comprised of two revenue sources: a large but declining on-premise business, and a small but rapidly-growing cloud business. Successful channel partners will be those that participate in both revenue pools thereby finding real advantages over single-market competitors. For example, think about a situation in which an SMB is looking for a new email system. Those that propose only physical hardware and on-premise software will be very expensive. Those that propose only cloud-based services will be much less expensive, but will not enjoy a substantial amount of revenue (a Microsoft partner would get 18 percent for the core Office 365 email connection in year one, and roughly 6 percent in second/subsequent years). A partner blending both on-premise and cloud might get both the recurring Exchange revenue plus additional product/service revenue – laptops, MDM, security software, migration and deployment services, etc. They would also achieve better margins for the on-premise products than the on-premise-only provider, since it would be more difficult to do apples-to-apples price comparisons for solutions that blend cloud and on-premise equipment.

To set the context for a BYOD discussion Techaisle’s survey on end-point technology status of SMBs provide an intriguing set of statistics through which we can assess recent endpoint trends. BYOD is clearly a major force in the US SMB market. BYOD purchases accounted for 13% of all new laptops, 17% of all new tablets, and 22% of all new smartphones purchased by US SMBs in 2013. This creates challenges for both IT management, which needs to establish methods of managing these devices, and for suppliers, who need to work with SMBIT to secure their position in the main endpoint categories, and also appeal to business managers and individual buyers to ensure that they are not left out of a major portion of the market. Techaisle’s SMB End-point survey data shows that approaches to BYOD –brand selection, reimbursement, application download and support – vary with employee size, with small SMBs leaving most of the decision, cost and support to individual users, and larger SMBs tending to involve business and/or IT management in these activities.

The survey data also shows that overall frequency of device purchases, which speaks to the erosion of the notebook market as emphasis shifts to alternative screens; in 2013, a higher percentage of US SMB employees were using tablets and smartphones than notebooks purchased within the year.

Suppliers need to recognize the distinctions that are apparent across employee size categories, and structure their offerings accordingly. IT vendors courting the very small business (1-19 employee) segment should recognize that employees are most likely paying for and supporting these devise themselves; as a result, IT vendors will need to offer financing and vendor/carrier-supplied, business-grade support options. In larger SMBs, specifically, mid-market businesses, funding and support is more likely to come from business and IT management; in these segments, OEMs are advised to establish programs that make it easy to onboard, secure and support new devices and users. In both cases, there are gaps in policies; suppliers who help businesses to establish and implement effective BYOD practices may be able to position their products favorably as a result.

SMB employees driving much of the activity is also creating sales and marketing challenge for suppliers: opportunities to sell brands and configurations that are outside corporate specifications, and challenges in aligning channel strategies to a market that includes both IT and individual employees (business management) as important buying groups.

Within the SMB context, BYOD itself comes in several ‘flavors.’ Techaisle survey data shows that on hand an SMB employee both selects and pays for a new device, delighting the CFO, but causing problems for IT. On the other, the SMB employee pays for the device, but selects it based on guidelines or an approved list – an approach (referred to in some cases as CYOD) that appeals to both the CFO and IT, but might not be completely satisfactory for the employee. BYOD can take any one of these paths and add some level of reimbursement for the purchase from the company and/or technical support for the devices, which has both upside (because the employee selects technology that he/she is comfortable with) and downside (the cost burden rests, at least to some extent, with the company rather than the employee) for the SMB business owner. And regardless of the approach chosen, some SMBs are instituting formal contracts that provide them with authorization to secure and (if necessary) ‘wipe’ employee-owned devices.

Who selects the BYOD brand?

The most critical BYOD question for IT manufacturers revolves around brand selection: is it done by the employee or the employer? Survey data shows that the answer depends largely on the size of the SMB business.

Who pays the BYOD bill?

One of the contentious issues in BYOD is the matter of responsibility for funding the device purchase. Many employees view BYOD as an attempt by their SMB employers to shift costs from the business to its staff. Many SMBs, on the other hand, see BYOD as a means of ensuring that employees have access to the technology that they like best. Some employers view paying for the devices as a means of building goodwill with staff (and/or as a means of building a basis for exerting management control over the devices), while others believe that simply allowing the devices to be connected to corporate assets represents contribution enough.

Who is responsible for BYOD support?

In our survey, we asked respondents to identify the ways in which their organizations support BYOD devices. The findings provide a fascinating insight into the ways in which BYOD devices are integrated into the corporate endpoint portfolio from no support at all to commitment to full integration of BYOD devices.

What is the policy with respect to app downloads on BYOD devices?

One of the key employee benefits associated with BYOD devices is that employees have a platform on which to run personal applications. What, though, is the implication for business applications? Are employees free to select any app that they choose, or should the business play a role in directing or determining the selection of business apps? Results from the survey suggest that the degree of formalization associated with app selection and installation varies from no formal policy to a very structured approach.

Is there a contract in place to govern BYOD use?

The final BYOD issue investigated by our survey related to the creation of contracts between employers and employees. Techaisle considers these contracts to be important to the success of BYOD strategies, as they provide explicit employee agreement to IT activities necessary to safeguarding corporate apps and data and we expect that this will become standard HR practice in BYOD-friendly SMBs over time.

About the Report

Coverage:

• Current and Planned purchase Intentions of client devices


• Tablet OS & Application software adoption – Behind the Screen


• BYOD: Employers vs. Employees, or Micros vs. Larger SMBs?


• Across the OS generations: XP, Windows 8 refresh intentions


• The Android Opportunity: Google in the PC Market


• Converged Mobility PCs: 2-in-1 PCs


• PC Purchase Channel and Sources of Information

More details about the report can be found here.

Related Research Articles

Seven Key Trends and their Meaning: SMB Endpoint Device Market in 2014

SMB Purchase Intentions for Android PCs

Key Attributes of Successful SMB Mobility Solutions

IT markets tend to be complex and fast-moving – but even by IT industry standards, the endpoint device market in 2014 is extremely complex, and subject to significant and abrupt changes. Consider the following trends – some of which have played out over several years, and some of which are scant months old – and how they might affect buyers and suppliers of client technology this year:

#1: Migration to multiple screens: It is clear that today’s SMB endpoint device user is looking to perform specific tasks with the best possible device

• Impact/implications: The ‘Swiss Army Knife’ appeal of the notebook – which doubled as both a mobility device and as a content creation platform – is waning. Tablets, not notebooks, are seen as the key productivity tool; and there is evidence to suggest that the desktop may have resurgence as a content creation option.

#2: Migration away from the traditional Wintel platform: For decades, “endpoint device” has been synonymous with “PC,” and “PC” has implied a device based on Microsoft Windows and Intel microprocessors. Through the course of this decade, that definition has been eroding. With the iPhone and iPad, Apple established iOS as a key smartphone and tablet technology. Google’s Android, with the support of powerful OEMs, has built a leadership position in the smartphone market, and has a great deal of market strength in the tablet market; Techaisle SMB End-Point survey results indicate that it is gaining momentum in the PC market as well. Meanwhile, low-power ARM chips have spread beyond portable devices into the PC, and even the data center.

• Impact/implications: The proliferation of operating systems and underlying architectures creates opportunity for a wide range of suppliers – and confusion for a large number of SMB and mid-market IT managers who need to integrate, support and secure these devices. Suppliers should both exploit niche opportunities and look for strategies and tools that help IT managers to wrap niche products into existing, evolving client device portfolios.

#3: Incursion of new form factors:The acceptance of multiple screens, coupled with the availability of new platform technologies, has created a market where “endpoint devices” span a wide range of device categories: desktop PCs, notebook PCs, tablets and smartphones, as well as thin clients, All-in-Ones, and other device types.

• Impact/implications: These form factors are differentiated by more than size and input technology; they move through different SMB channels at different price points; they appeal to different kinds of SMB buyers, who use different means to learn about and source them. The complexity associated with the proliferation of form factors will challenge marketing organizations that are accustomed to using a limited number of marketing vehicles and channel options to reach a relatively-predictable buying audience.

#4: Opportunities to redefine product categories: Buyer openness to new screen types has emboldened suppliers to redefine categories, or to create entirely new device classes. Some of these attempts (like the Ultrabook) have had limited success, but others, such as the 2-in-1 tablet/PC, show promise.

• Impact/implications: There is arguably more opportunity to define net-new endpoint offerings today than there has been for decades. There is an additional requirement on suppliers to segment accurately, to be in tune with the needs and preferences of target segments, and to move quickly to address new demand drives – but there is also new opportunity to translate this acumen and agility into substantial marketing-driven success.

#5: Solution opportunities: As endpoints become more capable, buyers – especially the emerging class of SMB business decision makers (BDMs) who wield increasing power in IT decisions – will move past the device itself, to a need for solutions (such as mobility) that capitalize on the capabilities of the new units.

• Impact/implications: To date, endpoint device suppliers have focused on building and selling screens, not the solutions that connect the screens. Marketers who understand how to connect their products to business-relevant solutions have an opportunity to differentiate those products, attracting new SMB customers and partners.

#6: Changes in buying points: The impact of SMB BDMs was mentioned above, but this point really should be considered as a trend unto itself. The IT industry has been told for years that BDMs (and especially, CMOs) would displace CIOs as the key IT decision makers. This certainly has not come to pass, and it is not clear that this shift will ever result in CIOs being displaced from their technology strategy roles. However, it is very clear that BDMs possess a great deal of power in many environments, and that their preferences and requirements are an important factor in shaping overall IT priorities.

• Impact/implications: If BDMs gain power by joining rather than supplanting the IT decision maker (ITDM) “at the table”, the net effect is that the decision making unit within SMB customer accounts is getting bigger and more diverse. This may offer new opportunities for one-off point technology sales, but is likely to increase decision time and complexity in many organizations – particularly, within larger businesses.

#7: Product and information distribution logic: In a market dominated by the ITDM, vendors could rely on IT-focused information sources to reach prospective buyers, and IT channels to manage relationships with these buyers. Like the ITDMs themselves, these requirements persist in the current market – but are joined by a new set of inputs. SMB Business buyers do not look for the same types of information that ITDMs require, and they are looking for different kinds of information to help shape requirements and preferences. Meanwhile, the traditional channel plays an essential role in distributing traditional endpoint device types (desktop and notebook PCs), but other channels (carrier, retail) are key conduits for other product types. Effectively managing the mix of information and buyers, and products and channels, is becoming a key factor in vendor success.

• Impact/implications: Increased complexity in information sources poses a challenge for marketers, who must find multiple ways of reaching customers. The imperative for success in this activity is increased by the common belief that buyers are using online resources to get much deeper into the purchase cycle before they contact a vendor; this increases the importance of effective content marketing, as direct sales alone will have difficulty in shaping needs and associated preferences. At the same time, the channel’s support needs are changing, and the vendor’s need to expand its channel by engaging with new kinds of partner businesses is becoming clear. Vendors need to both help traditional partners to succeed in their business transformations, and to establish relationships that reach new buyers within customer organizations.

Any one of these trends would be noteworthy against the backdrop of the SMB endpoint device opportunity, which accounts for a clear majority of all IT hardware spending, and affects literally every user of technology. Taken as a whole, these seven factors indicate potential for substantial market upheaval, creating risk and opportunity for current market leaders and new market entrants alike.

Any one of these trends would be noteworthy against the backdrop of the SMB endpoint device opportunity, which accounts for a clear majority of all IT hardware spending, and affects literally every user of technology. Taken as a whole, these seven factors indicate potential for substantial market upheaval, creating risk and opportunity for current market leaders and new market entrants alike.

To help illustrate potential opportunities and pitfalls in the 2014 endpoint device market, Techaisle has produced the The SMB Endpoint Device Adoption Trends report. This report is based on survey of SMBs, and includes both BDMs and ITDMs across each SMB size category.

About the Report

Coverage:

• Current and Planned purchase Intentions of client devices

 

• Tablet OS & Application software adoption – Behind the Screen

 

• BYOD: Employers vs. Employees, or Micros vs. Larger SMBs?

 

• Across the OS generations: XP, Windows 8 refresh intentions

 

• The Android Opportunity: Google in the PC Market

 

• Converged Mobility PCs: 2-in-1 PCs

 

• PC Purchase Channel and Sources of Information

More details about the report can be found here.

Related Research Articles

Techaisle survey data shows BYOD is a major force in the US SMB Market

SMB Purchase Intentions for Android PCs

Key Attributes of Successful SMB Mobility Solutions

29 percent of SMBs say that PC OEMs should offer Android OS PCs; 5 percent intent to purchase

Techaisle’s recent survey of SMBs in North America (UK, Australia data coming in March; China, India in April) suggests that the PC may be returning to its roots as a window to broader resources, less important as a content creation machine than as a portal to cloud-based systems. In the survey on SMB end-point device adoption trends, respondents were asked to use a scale to indicate the kinds of PCs that they would like to see from their PC suppliers: a “1” response indicated that they required only Windows-based PCs, a “10” indicated that they required only Android-based PCs, and responses towards the middle of the scale indicated a preference for choice between the two platforms.



The data shown in the graphic indicates that Windows is clearly still the #1 choice for PC buyers – but it also shows that many small and mid-market businesses are interested in having an Android alternative. 29 percent of SMB respondents said that PC vendors should offer Android OS based PCs.  In fact, in a follow-up question, 5 percent of small businesses and 18 percent of mid-market businesses stated that they would “most definitely” be interested in acquiring Android-based PCs. Almost twice as many BDMs (Business Decision Makers) as ITDMs (IT Decision Makers) are in the “most definitely” group.

What’s behind this? It’s very likely that Android-based PCs may not have the same level of capability as Windows-based PCs – but we can assume that buyers at SMBs understand this, particularly the traveling business decision makers. It appears that they are indicating that the needs associated with ‘personal productivity’ in a cloud-based world are changing, that in many cases, the PC is primarily a window into resources located elsewhere, and secondarily, a content-creation device.

The PC in 2014: more like the windshield than the engine

The PC has been a ‘content creation’ device in world dominated by consumption-oriented smartphones and tablets. Is its position eroding?

In the very early days (the 1980s), PCs in business led a dual existence. Especially in technology-poor small businesses, PCs provided access to tools like spreadsheets that allowed for automation of previously-manual, hard-to-manage tasks, while in larger enterprises, they were often used as terminal emulators – essentially, windows to larger systems offering the added bonus of local processing power.

Through time, the PC became the key personal productivity tool for staff in all industries, working for organizations of all sizes. In recent years, though, the PC’s pre-eminence has been assailed by the growing use of smartphones and tablets that offer limited local processing power, but access to the vast resources of the Internet. In many environments – and in the usage patterns of many ‘multi-screen’ workers who can choose between a PC, a smartphone and a tablet for a specific task – the PC has become niched as a ‘content creation’ device, useful for building presentations or spreadsheets or complex documents, but awkward for on-demand display of these kinds of content.

Good news for the monkeys. Whither the gorilla?

An increasing market for Android-based PCs would be hugely advantageous for companies that produce tools for Android users, and especially, for providers of open-source Office suites such as FreeOffice, OpenOffice and Kingsoft. However, it is Techaisle’s belief that the availability of a fully-functional version of Microsoft Office on Android will be essential for broad Android PC success, as many businesses require these applications for local PC activities.

How should Microsoft react to these market trends? On the one hand, delivering a complete version of Office for the Android platform would open up an enormous market opportunity, giving Microsoft the potential to continue positioning Office as the lynch-pin connecting PCs and content creation. On the other hand, Android’s gains in the PC market will come directly at the expense of Windows 8, diminishing Microsoft’s control of the platform, and accelerating Windows sales declines in an already-soft PC market.

There are likely widely-divergent views on this issue in Redmond. It is worth noting, though, that even a firm as omnipresent as Microsoft takes on risk if it attempts to thwart buyer demand for new technology. The “third hand” in the dichotomy above – that Microsoft continues not to offer full Office functionality for Android, that FreeOffice, OpenOffice, Kingsoft or something similar become embraced as ‘good enough,’ and that large swaths of the market decide they can live without Windows and Office – is clearly a nightmare scenario. We expect that as user demand mounts, Microsoft will feel increasingly-compelled to participate aggressively within the Android PC market segment, even as it touts the advantages of Windows within its native PC constituency, and as an alternative to Android (and iOS) in the smartphone and tablet environments.

More detailed data on end-point device preferences is available in Techaisle’s upcoming report titled “SMB End-Point Device Adoption Trends: Tablets, PCs, Smartphone” which covers:

• Current and Planned purchase Intentions of client devices

 

• Tablet OS & Application adoption – Behind the Screen

 

• BYOD: Employers vs. Employees

 

• Across the OS generations: XP, Windows 8 refresh intentions

 

• New OS PCs: Chromebook, Android

 

• Converged Mobility PCs: 2-in-1 PCs

 

• Purchase Channel and Sources of Information

More details about the report can be found here

Related Research Articles

Techaisle survey data shows BYOD is a major force in the US SMB Market

Seven Key Trends and their Meaning: SMB Endpoint Device Market in 2014

Key Attributes of Successful SMB Mobility Solutions