Techaisle Analyst Insights

The channel industry examined by Techaisle’s 2018 SMB & midmarket channel research survey (separate studies conducted in the US and Worldwide) is very different from the community that existed a decade ago. Once a staid domain in which technologists provided IT infrastructure support to local customers, the channel is being reshaped by five key issues: cloud, and its wrenching effect on all aspects of the channel business structure; managed services efficiencies, especially vs. the pending opportunity associated with digital transformation; increasingly-complex data center technologies; integration demands that are expanding in multiple directions; and the need to sell on and deliver to business rather than technical outcomes. Let us discuss four key questions arising out of the research that is of interest to IT vendors and distributors.

Question 1. What are the top channel trends?

The channel is being reshaped by five key issues:

1. cloud, and its wrenching effect on all aspects of the channel business structure;
2. managed services efficiencies, especially vs. the pending opportunity associated with digital transformation;
3. increasingly-complex data center technologies;
4. orchestration & integration demands that are expanding in multiple directions; and
5. the need to sell on and deliver to business rather than technical outcomes

A lot has been written about cloud so let us discuss the other four areas and the remaining three questions.

It is evident from even a casual tour of a modern SMB office that IT has become integral to business activities. Email and communications systems that meld conventional, web-based and mobile phones; and social collaboration tools on the web and within offices provide the basis for connections between companies and customers, across processes and with suppliers, and between staff members. Productivity applications like spreadsheets, graphic presentation packages and word processors enable users to complete tasks, while enterprise applications capture and report on financial data and organize processes.

Given the nearly-ubiquitous nature of IT, it is fair to wonder: are we “there” yet? Have all of the technologies that one needs been deployed? Results from a recent Techaisle survey of 1455 North American SMB IT managers (ITDMs) and business decision makers (BDMs) conducted by Techaisle indicate that there is still a voracious appetite for new IT-based business solutions. Asked to evaluate the business importance of current IT developments, 77 percent of SMB survey respondents reported that new IT systems would have a very high to high impact to their organizations. Only 6 percent believe that new IT products and services will have little impact on their businesses. Clearly, SMB BDMs and ITDMs agree that new technology will play an important role in making their businesses more profitable, and their employees more productive.

How can cloud suppliers identify the partners most likely to be successful or very successful in selling cloud? Techaisle’s 7th year of channel tracking survey data indicates that a powerful indicator is found in the growth paths identified by channel firms.

Characteristics of very successful cloud channel partners (“what to look for”)

• Very successful cloud channel firms view advanced solutions as major opportunities and are focused on growing business in BI/analytics and IoT
• Very successful cloud firms recognize that hybrid IT is the key and are anticipating increased revenue from data and/or application integration than their less successful peers
• Nearly 90% of very successful cloud channel firms (as compared with just 23% of unsuccessful firms) offer IaaS to SMB customers
• Over 90% of very successful cloud partners offer SaaS today. Less than one-third of unsuccessful cloud partners offer SaaS, and 20% neither offer it nor are planning to do so
• Successful cloud partners view partner-to-partner (P2P) relationships as a strategic imperative, whereas unsuccessful partners connect with other channel firms on an opportunistic basis
• There is a clear, multi-year trend of very successful cloud channel partners differentiating themselves by selling self-branded (and supported) cloud offerings
• There is strong evidence in data to support the notion that very successful cloud partners are focused on assembling multi-sourced solutions to meet customer needs, 57% of very success cloud partners as compared to 31% of unsuccessful and 34% of successful partners
• Three-quarters of very successful and nearly 70% of successful cloud partners offer UCaaS, vs. just 20% of unsuccessful firms
• Successful channel firms are actively participating in cloud and IT orchestration and are investing in technology advisory & architects
• Digitalization & digital transformation are new focus areas of very successful channel partners

What to look out for – characteristics of unsuccessful cloud partners

“IT and cloud orchestration” reflects the reality of a multi-platform world in the era of digital transformation. Techaisle research shows that within the SMB & midmarket segment, orchestrated connected cloud and technology will be the focus of substantial new investment over the next few years. Connected cloud itself forms the basis for an Interwork platform for successful digital transformation and is crucial for competitiveness and growth.

• Upper midmarket firms use an average of 2.5 of the four leading public cloud providers (AWS, Microsoft, Google, IBM) – a true multi-cloud environment
• For 25% of small businesses and 51% of midmarket firms, workloads and data migrate across cloud and/or on-premise platforms
• 89% of midmarket firms state that orchestration tools are critical to their ability to deploy workloads on hybrid platforms
• 46% of SMBs do not know which cloud services to use and in what order
• 47% of SMB/midmarket-focused channel partners are offering orchestration but only 24% are delivering, but 55% are expecting substantial revenue increases in the next 1 year
• Use of orchestration is poised for growth as 40% of midmarket firms and 15% of small businesses are implementing cloud connectivity

Using a large number of on-premise technology as well as cloud platforms is escalating complexity beyond reasonable manual management limits. In response to this conundrum, many SMBs & midmarket firms are turning to orchestration as a strategy for optimizing use of multiple platforms and multiple technologies (topic of another blog another time). But help and guidance are missing. Even Techaisle’s latest channel partner study shows that although 47% offer orchestration but only 24% are delivering, and that also partially. Their vendor partners are not helping because of intense focus on enterprise segment.

In the quest for digitalization and digital transformation there has been ad hoc adoption of technology – both cloud & on-premise - as responses to paint points within SMBs.