Techaisle Analyst Insights

Having the right information in the right context in the right format at the right time is critical to making business decisions these days, and increasingly that means access through mobile devices – whether it is the roughly 30% of consumers who own tablets or those tens of millions who get information from a Smartphone. A recent Techaisle survey of over 600 channel partners uncovered several important similarities and differences between how SMB channels are approaching three of the most important trends in the market: Cloud-Computing, Mobility Solutions and Remote Managed Services. In this post we will offer a snapshot of some characteristics of Mobility in the SMB Channel.

From a demand perspective, 60% of partners reported having SMB customers request Mobility Services, with almost 80% of ISV customers topping the list. Not surprisingly, email – the killer app, is the most used and offered service with about 50%, followed by Payment Processing with over a quarter. As we have found in other surveys, the front-office, revenue-related applications of CRM, especially among ISVs, and SFA, especially among SPs and Social Media Marketing, especially among SPs, were all being adopted by almost a quarter of respondents. We expect a rapid uptake in 2013 in the area of Mobile Analytics, which is being embedded into many front office SaaS applications in the form of dashboards and self-configured KPI management with proactive communications, or from the several cloud-based pure-play BI vendors in the market. As mentioned following the recent Citrix announcements, we also believe the market is ripe for adoption of Cloud-based Productivity Suites, which will also drive adoption of mobility among SMBs.

In many areas of Cloud Computing and especially Remote Managed Services, the big inflection point in both adoption and average spending does not happen until the 100-249 employee segment, but not so with Mobility; approximately 60% of the demand comes from the 1-9 and 10-49 employee segments, with the increase in email (across the board) and Social Media Marketing and Mobile Advertising (ISVs, SPs) driving the trend.

There are differences in the approaches, needs and challenges between SMB channel types when offering Mobility Solutions to customers, typically falling into Cost and Complexity, Management and Employee, Network and Device and Security categories. In this example, we see some key differences between the VAR/SI and SP partners related to the provision of Mobility solutions. Poor Network Service is the biggest challenge for VAR/SI partners, followed by Insufficient Network Speeds, Lack of Integration/Compatibility, and Immature Platform Choices. Both were challenged equally by Slow Performance of Mobile Apps and Device Management issues. SPs biggest challenges relative to VAR/Sis included Lack of Applications Availability, followed by Poor Mobile Web browsers, and Network and Device Issues.

As the market matures, these challenges should dissipate with increased mobile responsiveness built into websites and applications, more affordable device and data plan pricing and wider adoption of smart mobile devices. For now, the perennial SMB issue of cost and complexity of new technology balanced against perceived and demonstrated return on investment remains the most important barrier for channels to overcome.

According to our latest forecast, which takes into account the first three quarters of 2012 research, the SMB Managed Services market will grow from $27B to $44B between 2012 and 2016, compounding at over 12%.  Remote management monitoring services will cross US$15B during the same time period. Key points of the update include:



The most attractive segments are shown in the chart and sorted based on opportunity (2016 value>$1B), and growth (arrows are relative), so the largest and fastest growing segments are shown. Rank based on revenue opportunity is listed in the left hand column.

13 of the 19 sub-segments are expected to reach over 1B$ in opportunity by 2016, with over half growing at double-digit rates,

The Remote Services segments are generally growing faster than onsite, with notable exceptions in India where the labor market and domestic bandwidth contribute to a viable onsite market, and China, where second and third tier markets are expected to adopt remote services more slowly than the combined remote/onsite increase.

While at 12%, the market is not growing quite as fast as in Cloud Computing, the robust increases will be a very good opportunity for SPs and MSPs in the market. The difference in fulfillment and delivery between cloud computing and managed services is thinning rapidly. Channel partners and managed services providers are quickly cross-migrating their skill sets to serve both technology areas. The path being chosen by Channels to move from one offering to the next is strongly dependent upon their current offering.  Those that are in the mobility space are moving to cloud, while those in the cloud are moving to managed services. The point being that understanding the channel dynamics and current offerings can provide  clues in the direction they will move. Similarly, within managed services, the channels are moving from one offering to another; vendors wanting to partner with Channels must identify the ideal cluster of services to take advantage of Channels outreach and capabilities.

Techaisle offers forecasts for all the above sub-segments by Region, Country, SMB company size and Channel flow share, customized to your needs. Please contact us if you would like more information on how this information can be combined with your internal market model to offer a clearer view of  opportunity and resource allocation to best increase market share share during 2013 and beyond.

Target Market Attack Strategy

Dusting off my notebooks (the notepad variety) I came upon some carefully documented notes of my conversations with Dell’s Channel team, in particular with Greg Davis, Vice President and General Manager of Global Commercial Channels.  Just reviewing the notes of the previous two years it hit me squarely in my face that Dell’s channels team has been on a restless pursuit of:

• Simplicity,

• Training & enablement,

• Winning datacenter together with the channel, and

• Partner profitability

Fall of 2011

Although Dell’s Partner Direct program was formally launched in 2007 with aggressive channel recruitment and courting happening in 2008, we will pick up on our conversations with Dell’s Greg Davis and Paul Shaffer, Executive Director Global Channel Marketing & Demand Generation from the fall of 2011. Partner enablement, training, certification and integration of acquisitions had percolated to the top of the team's agenda. For an IT company which is notorious in selling direct, drastic measures were needed to become “one” with the channel. Dell delivered 75,000 training modules to its partners, 30 percent of Dell’s commercial business had started to come from channels and 58,000 registration deals were closed. With the acquisition of Force10 Networks Dell announced enhanced network certification programs and 130 premier partners got their certifications. Emphasizing that the training modules were working, Greg Davis had mentioned that top 10 partners who invested most in training had seen 110 percent growth in revenue. Fall 2011 was also the time when partners started seeing the first glimpse of gentle motivations from Dell to push deeper into healthcare segment and drive revenue from datacenter solutions. Inroads were being made into smaller partners for SMBs as much as national and larger partners.

Cloud Channel

During the same time period while Dell was building out its confidence and trust with the channels, enterprises and SMBs were moving to cloud, thus dis-intermediating the channel. Especially the VAR channels (which typically form the largest percent of channel partners of an IT Vendor) had been finding their traditional business models threatened by products and services that could be sold direct by a vendor over the Internet. To continue to adapt to the changing times and never taking its eye off the channel partners’ livelihood Dell launched cloud channel programs in the spring of 2012:

• Cloud Builder,

• Cloud Provider, &

• Cloud Service Enabler

A technical services team was also put into place to help partners sell data center solutions namely, server and storage. Dell now had roughly 250 premium partners and had delivered 135,000 training modules in the year.

Work was far from complete. More acquisitions were taking place; these acquisitions had to be integrated and above all emerging market countries had to be targeted. Both Greg Davis and Amit Midha, President, Asia Pacific and Japan, Chairman, Global Emerging Markets underscored the fact that they were working to ensure a consistent channel engagement across every market covering:

• Deal registration

• Compensation neutrality

• Conflict escalation process, and

• Executive priority

Asia/Pacific

The channel commitment work in Asia/Pacific countries in our opinion is far from complete. There are still some major strides to be made, specifically in the Asia/Pacific region. By its own acknowledgement, Asia/Pacific is the fastest growing regions for Dell which requires a constant confidence and trust building process with the channels. In many of Techaisle’s analyst interactions with channel partners in 2012 in Asia/Pacific, it was found that channels had warmed up to Dell but some questioned Dell’s sincerity whenever bigger contracts were involved.

In both summer and fall of 2012 we asked Greg Davis and Amit Midha where they thought they were with consistency and confidence. Not only were they bullish but also recognized that they have some hills to climb. They were also candid that services remain a big component of any channel’s revenue mix and while typical services such as warranty, break-fix, and insurance were straightforward re-sale of Dell Services, partnering in consulting was a bit more challenging.

Summer 2012

By the summer of 2012, efforts were paying off, 62,000 deal registrations per quarter were coming through partners with 72 percent approval rate, 35,000 training modules were being delivered per quarter, the number of premier and preferred partners had jumped to 2500, Asia/Pacific channel programs were being strengthened, SonicWALL was integrated and specific courses were introduced on how to talk to a CIO, value of integrated datacenter. Above all social media training programs were launched for the benefit of the channels.

In late summer, in a conversation with Greg Davis and Bob Skelley, Executive Director, Global Certified Partner Program & Channel, they reiterated their commitment to make Dell “easy to work with” and restated their deep & maniacal focus on training and competencies. This focus resulted in 34 percent of global commercial business funneling through Dell channels, up from 30 percent in the fall of 2011. Number of deal registrations had jumped to 71,000 and an enhanced deal registration tool on mobile platforms was rolled-out. 47,000 training courses had been delivered in the quarter and Dell now had 113,000 channel partners. Initial focus on healthcare segment had resulted in a surge in end-user customers. A 40 percent growth in certifications was also achieved when compared with previous quarter. With the integration of Wyse, a desktop virtualization certification program was introduced. Dell channels had truly arrived and there was never a question of ever turning back.

One year later, Fall 2012

One year later, by fall of 2012, Dell had 130,000 channel partners, 35 percent of commercial business revenue was funneling through channels, 142,000 training courses had been delivered in the year, number of deal registrations had shot up to 65,000 and there were now 3600 preferred and premier channel partners. In the words of Greg Davis, “Dell has the most confident and competent channel partners in the world”. One year later, I saw an urgency to deliver with a profound focus on datacenters, systems management and cloud services. Virtualization was also beginning to take center stage. Kathy Schneider, Executive Director, Global Channel Marketing & Programs, drove home the point that she and her team were focused on driving best practices across four strategic pillars:

1. Easy to do business with One Price and Sales Tools

1. Win in the Enterprise using a comprehensive sales tool aptly named as Enterprise Master

1. Training & enablement through expansion of training beyond Dell’s standard solutions to include social media

1. Partner profitability through a simple, effective and rewarding incentives program

It has been a long way from direct PC selling to indirect solution selling. Real progress has been made. Dell’s channel executives are an end-to-end solutions empowering team for the channels. Not all channels will thrive but those that are equally committed to learn, adapt and practice will certainly succeed.

Anurag Agrawal
With contribution from Gitika Bajaj in Asia/Pacific

 

All predictions below are compiled based on SMB and channel surveys conducted in 2012 covering Cloud, Mobility, Virtualization, Business Intelligence, Marketing Automation, Managed Services, Business Issues, IT Priorities, Channel Challenges across several countries.

SMB focused Predictions

• As SMBs continue to adopt cloud computing aggressively they will continue to move away from capital budgets; Revenue will become the focus rather than tight cost control. The buyer will move toward the department that is responsible for delivering business results and thereby revenue. The CMO becomes increasingly important as this unfolds.  Further, countries are coming out of economic slump which was a major factor in the initial move to the Cloud, as firms were scrambling to reduce capital outlays and reduce OPEX. But SMBs are now priming themselves for growth, and the Cloud is firmly established as an important tool to build the business.
• SMBs’ emphasis on front-office, revenue-generating applications will continue with CRM at the hub and with more marketing automation and business intelligence applications. The base of marketing automation vendors will continue to consolidate as start-ups fail and pure-plays are acquired and big players roll out integrated solutions. Cloud CRM spend will continue to grow at a healthy rate of 21 percent.
• Communications, Collaboration, Content and Context will be the primary computing scenarios of SMB IT departments, driven by Mobility, Cloud-based Applications and Process Optimization. Virtualization, Cloud, Mobility, Managed Services will together form the Four Pillars of IT that will support the transformation of SMB, enabling them to reach their full potential in the shortest period of time. The foundation for these four pillars will be the datacenter, both off-site and on-premise depending upon SMB segmentation. Techaisle forecasts that global SMB Cloud spend will grow by 22 percent in 2013, Mobility by 14 percent, Managed Services by 15 percent, Virtualization by 25 percent and datacenter by 8 percent.
• The adoption of cloud-based productivity suites among SMBs will accelerate which will begin to balance usage of collaborative and individual SaaS applications. Office365 will go main stream along with increased usage of ERP and more sophisticated applications, offering new customer and other value-added opportunities in data and application integration. We expect SMB Cloud productivity suites spend will almost double from relatively slow adoption through 2012.
• There will be a significant increase in emphasis on data integration rather than application integration; data will be combined from several sources to power different application blocks and embedded business intelligence functionality, as we first predicted in 2008.
• The SMB server and network will start becoming less visible as they progressively move offsite physically and from a remote management perspective. Cloud-based server spend will likely grow by 40 percent as compared to on-premise new server spend growth of 5 percent, the benefits of remote management overwhelming the on premise for headcount-constrained firms.
• Although social media will gain importance, SMBs will continue to struggle to determine ROMI from their social media initiatives and its usage will be considered a “productivity drainer” by many lean-staffed and short-skilled SMBs, unless they are in a local business that requires high customer intimacy to grow and build business. Aggressive SMB adopters will realize benefits but many others will be disillusioned unless advised, encouraged and shown a path by early adopters. The market will be inundated by advisors causing more confusion, especially as big data analytics start showing strong results for Enterprise-level companies.
• ISVs will focus their attention on developing client applications that integrate email, context and workflow to build other productivity applications. New business models and solutions from ISVs and Service providers will appear for SMB mobile apps that will deliver content based on context, beginning with a few verticals and then spreading horizontally.
• BYOD will be the new normal; with priority for SMBs on data and applications management rather than managing devices.
• The next generation of business intelligence and Mobile BI will be widely adopted within SMBs; Upper mid-market firms will experiment Big Data using combinations of Hadoop and other technology (e.g. Greenplum) whereas lower-mid-market and small businesses will look for insights from federated big data deliverables provisioned by cloud application vendors.

Channel Partner focused Predictions

• There will be an accelerating trend to vendor direct through development of remote integrated-service interfaces and inbound marketing initiatives. To counter, channel partners will aggressively develop outbound sales capabilities to compete with vendor direct sales and rise of the Independent Consultant to prevent from being cut out of the distribution chain.
• Successful Channels will finally realize and pursue their individual respective competencies and roles as consultants, business process advisors, integrators, aggregators or plain vanilla cloud deliverers.
• Expect that channel partners will be more successful going deep with integrated suites or a few applications that they integrate rather than trying to provide a complete infrastructure, communications, applications and vertical solutions.
• Channel partners will begin to put together a repeatable, profitable SMB solution that will include proprietary integration value-added services or software, accelerated with productivity suites and collaborative combinations, such as Office 365 and SharePoint, or Google Apps, or the new Citrix ApplicationMe@Work or XenDesktop.
• Cloud aggregators will continue to enter the market, however, few will be profitable as aggregators will need to be able manage reseller relationships with structured sales and marketing programs, implementation and post-implementation support for the channel, and tier-2 customer support for end users.
• Mid-market focused channels will look up to their vendor partners to help combine mobility, cloud, virtualization offerings while others will rely on a partner-to-partner network

Tavishi Agrawal
Techaisle