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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.

Indian IT Hardware Retail – Shifting Landscape

India is witnessing unprecedented growth driven by favorable demographics, a young working population, rising income levels, urbanization and growing brand orientation. India’s retail industry has emerged as one of the fastest growing industry and is projected to grow almost to US$1 trillion by 2020 from the present market size of US$600 billion in 2015 driven by income growth, urbanization and attitudinal shifts.

However, it must be said that Indian retail is still dominated by unorganized sector. Organized retail penetration is just 8%. The biggest challenge facing the Indian retail sector is the lack of efficient supply chain. Within retail, India's IT hardware market includes many product segments such as desktops, laptops, phablets, tablets, printers, and other peripherals.

Techaisle team has been tracking the channel market and specifically sales out of various IT products in India for a decade. At last count, Techaisle India channel census data shows that there are over 30,000 channel partners in India. Supporting this vast channel network are eight national distributors and 159 regional distributors. Techaisle research shows us that there are typically four types of retailers.

With a country so large with varying maturity of IT adoption and number of distributors and retailers/resellers it is but natural to see a very complex PC distribution flow. Techaisle team tracks the percent units that flow through various intermediate channels from the OEM to the end-customer.

techaisle-complex-pc-distribution-flow

It is common knowledge that India’s e-commerce market India is still in nascent phase, yet it is growing rapidly but IT hardware sales through e-commerce websites or through the company's own website are still in the single digit-range as percentage of total sales because most of laptops, desktops, and tablets sales are still sold through bricks and mortar shops. In order to expand in India, large technology companies have been increasing their focus on smaller towns and non-tier 1 cities. For example, by end of 2015, Dell plans to more than double the number of its stores (named Dell Exclusive) in India to 825. In 2014, Dell had already doubled its number of stores to 400 from 2013.

Organized retail started more than a decade ago and significant growth has been achieved. However, most of the retailers have struggled to achieve a desired level of profitability. Leading retailers are now putting profitability at the top of their agenda. Croma was the first multi-brand store to sell consumer electronics among other retail products. Today, major retail players include Reliance Retail (Reliance Digital – 151 stores), Pantaloon Retail Ltd (eZone – 92 stores and Electronic Bazaars), Videocon (Next Retail Ltd – 144 stores), Tata Sons (Croma – 101 stores), Sumaria Appliances and Vijay Sales (54 stores).

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Table of Contents

  • Indian IT retail landscape
  • Major IT retail hubs in India
  • Distributor and Retailer count
  • Increasing focus on OEM branded stores
  • Leveraging distribution and sales networks through strategic partnerships
  • Types of Retailers
  • Complex PC Distribution Flow
  • Pain points of smaller retailers
  • Explosion in E-commerce and M-commerce retail channel
  • Overcoming inefficient supply chain management
  • Overcoming logistics and warehousing challenges of Indian e-commerce
  • Organized retail sector competing with online retail
  • Brick-and-mortar retailers warming to E-commerce

techaisle-india-it-hardware-retail-pov

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WW SMB Cloud Channel partners – builders more successful than resellers

Data gathered through the Techaisle SMB Channel surveys in US, Europe and Asia/Pacific shows that half of channel firms that have launched cloud businesses are primarily focused on “cloud builder” activity, which in many cases is an extension of existing resale business, and which is leading the channel partners down the path of specializing in virtualization and converged infrastructure. This naturally bodes well for channel partners of Dell, VMware and even Cisco although it must be said that VMware SMB channel strategy is yet to take center stage and Cisco is most famously focused on midmarket customers.

The three approaches to establishing a channel cloud business covered in Techaisle study include:

  1. “Cloud builders” who are typically engaged in creating private clouds for customers,
  2. “Cloud resellers” who resell third party cloud capabilities (often, SaaS applications), and who may also integrate multiple third party offerings, and
  3. “Cloud providers” who have built their own infrastructure and are selling access/capacity to SMB customers

Cloud builder, cloud reseller and cloud provider approaches to building cloud practices within SMB channel businesses all address common SMB customer needs, but have unique challenges. Survey data also reveals that cloud optimism and success is highest among cloud builders.

“Cloud resellers” is the second largest cloud business approach. About one-third of US & Europe SMB channel partners with cloud businesses are primarily focused on reselling cloud capabilities but the proportion of “cloud resellers” increases to 39 percent in Asia/Pacific. However, many cloud resellers are still not very successful (see figure below) in their cloud endeavors, again proving the fact that simply reselling cloud solutions is not a viable long-term business.

The third approach, “cloud provider”, chosen by less than 1/5th of SMB cloud channel partners, offers a high degree of control but requires reserves of investment capital and operational expertise that are beyond many channel firms.

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SMB Channel Partners – Top 10 Business Issues, IT Offerings

Top 10 SMB Channel Partner Business Issues

Figure below from Techaisle’s SMB Channel Partner Trends coverage lists top 10 business issues being addressed by SMB channel partners in the next one year - a question that parallels the one that Techaisle uses to develop perspective on SMB buy-side business issues.

techaisle-2015-smb-channel-partner-business-issues-infographic-resized-small

There are many ways that SMB channel partners can attack these business issues; in some areas, cloud is part of the problem, while in others, it helps form some of the solution. For example, cloud creates a requirement for new products and processes, which opens opportunity for firms that are effective in rolling out new offerings, but cloud itself is a major source of channel business uncertainty.

Improving productivity as well as improving quality of products and services are the top 2 business issues - they are ranked way higher than business growth and customer acquisition. It makes for a compelling attention that channel partners have realized the shift in technology and its acquisition and SMB channels are struggling to address these issues. Improved productivity is also often seen within the channel as a core attribution of managed services delivery – but growth in managed services portfolios will very likely encompass cloud-based systems. Cloud allows for new offerings to be brought to market quickly. And given the growth of cloud within the SMB market it could be fairly stated that cloud is central to both increasing business growth and keeping pace with competition. The impact of cloud on business activities expands beyond the SMB buy-side community into the channel itself. Cloud’s virtues are therefore apparent in several of the business issues that are of most concern to SMB channel businesses.

It is interesting to point out that "improving sales and marketing" is also among the business issues being addressed by SMB channel partners, but it not within the top 10 business issues.

Top 10 Current & Planned IT Offerings

Figure below lists the top 10 current and planned technology offerings, which can be treated as the starting point and the “next steps” in SMB channel migration. The findings illustrate the breadth of business opportunities available to the SMB channel – and also, the essential pervasiveness of the cloud as well as managed services.

techaisle-smb-channel-partner-current-and-planned-offerings-vertical-resized-small

Cloud is at the core of many of the IT solution offerings enumerated in both the “current” and “planned” lists, for example, managed services and of mobility management. It is intrinsic to social media, VDI, desktop as a service and IoT. It is the best, most cost-effective and most scalable approach to supporting collaboration and BI/Big Data. And cloud enablement and management is the key objective of deployments of server virtualization and converged infrastructure, and the key requirement for on premise/off-premise data integration.

Today, many of these IT solution offerings and their associated channel capabilities are largely commingled but within the next three years the depth requirements associated with these will force them to concentrate on some areas and de-emphasize others. Techaisle believes that channel organizations serving the SMB market will become increasingly defined by pursuit of one or two of four primary product/delivery areas.

There will also come points in the SMB Channel Partner migration where the connection between the starting point (for example, mobility) and the next application (for example, Big Data) will become tenuous. These cases will call for partner-to-partner collaboration structured around meeting evolving SMB customer needs. There is already evidence that firms adept in partner-to-partner collaboration are better positioned to build successful businesses in areas such as cloud than those that cling to a "go it alone" approach in all situations (Source: Techaisle’s Winning Strategies of Successful SMB Cloud Channel Partners). Partners and vendors who are effective in inculcating these relationships within their ecosystems will both achieve above-market growth rates. In the meanwhile IT vendors and distributors should really pay attention to the top business issues being faced by SMB channel partners. 

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SMB MSP Channel fragmentation and role of IT vendor

The SMB IT channel has hit a point of fragmentation. Today, channel can be all things to all people but not in 2018 unless channel finds a way to generate more than 150% of revenue. Faced with an expanded SMB buyer community and requirements for specialized skills to support different solutions, the SMB channel is beginning to segment by focus area. Although the different specialties are starting from a common point today, Techaisle expects to see each develop unique characteristics over the next several years.

Highlights of Techaisle’s report on State of SMB Managed Services Channel include:

The business of the SMB channel: migrating to specializations

  • Overall, currently, the SMB channel has a reasonable balance between product and services revenue and engagements.
  • There is no ‘silver bullet’ leading to financial health in the SMB channel. Execution, not time allocation, is the key to sales success.
  • Sales cycles vary with several factors, including solution expertise. SMB-focused MSPs have relatively long sales cycles overall, but channel partners that are “very comfortable” with managed services have superior time-to-revenue results.
  • Four key specializations are emerging in the SMB channel and this fragmentation will accelerate in the 2015-2018 timeframe.

Managed services in the channel: pervasive as a delivery vehicle, becoming more of a specialty

  • MSPs are hardly the only source of managed services: more than 60% of VARs, SPs and SIs sell managed services today, and there has been an increase in managed services activity in all of these channels.
  • The variety and depth of managed services will make it difficult for non-specialists to keep pace with MSP specialists.
  • SMB preference for a single source of managed services will have an impact on managed services market and channel development.
  • SMBs have a definitive view of pricing and per user/ per device is not the way forward 

The role of the vendor in the managed services channel

  • Vendors must navigate a mix of generic channel requirements and requirements that are specific to managed services partners.
  • Generic requirements for end-to-end solutions are less important in managed services (where best-of-breed is paramount) than in other areas.
  • Vendors must understand and address the challenges faced by partners migrating to managed services specializations; this course will be complex and expensive.
  • Vendors will benefit from aligning with managed services partners’ value propositions, which are in turn well aligned with business outcomes (and business buyers).

Working with the SMB managed services customer: managed services addresses key buy-side imperatives

  • SMBs are more dependent on technology than ever before.
  • Since 2010, IT staffing has dropped in microbusinesses, and increased in small and midmarket firms. Accordingly, managed services acts as a substitute for IT staff in firms with 1-19 employees, and as a means of augmenting IT management in larger SMBs.
  • SMBs are struggling with IT complexity, and turning to managed services providers for support.

The survey data shows that channel partners struggle to transition from delivering some managed services to building viable businesses on a managed services model. To be successful, vendors will need to set objectives spanning a three-year period over which managed services specialization will emerge.

Many IT vendors will struggle with simply understanding this fundamental change in the market, and more will fail to understand the focus and investment required to grow with partners through this transitional period.

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