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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.

Midmarket technology and business buyers – must sell to two different groups

Over the past six months, the need for advanced solutions and professionals supporting strategy, implementation, integration, and optimization has become much more acute. Business patterns changed by COVID-19 require businesses to accelerate digital transformation within their operations. Purchasing authority has shifted from IT to business management, requiring solution providers to position their offerings and services in terms that emphasize business metrics, such as time to market and measurable revenue and cost impact, rather than technical specifications and targets. This focus on business outcomes ripples through partner marketing and technical operations: marketing needs to emphasize time-to-benefit, the ability of individual solutions to contribute to overall business agility, and the direct application of IT features to pressing business needs; on the technology side, partners need to focus as much as possible on services centered around pre-built vertical solutions that can be deployed and integrated rapidly, with replicable processes and predictable outcomes, so that delivery matches the vision set by marketing and the requirements of the customer executives.

In a unique survey, Techaisle posed several and the same questions to both BDMs (business decision-makers) and ITDMs (IT decision-makers) and probed to identify what each expected from the other. Techaisle data shows that although BDMs have higher expectations of ITDMs, they align reasonably well in some areas, and there is a broad expectation gap in others.

  • 53% of midmarket BDMs say that it is very critical for business success that ITDMs can identify and associate IT solutions with business efficiency, productivity & profitability. On the flip side, only 30% of IT executives in these midmarket businesses say that business executives should be able to associate IT solutions with business efficiency, productivity, and profitability. Responsibility for delivery rests with IT, and BDMs have very high expectations from ITDMs.
  • Data also shows that BDMs have high expectations for support in using technology to build customer experience. Over 40% of BDMs believe that IT must understand solutions that enable beneficial customer & supplier interactions. In contrast, less than 25% of ITDMs say that BDMs should understand such solutions.
  • Employee productivity is an essential aspect of a business, and in most cases, business management expects IT to understand and deploy core technology solutions to make employees more productive.
  • Business process automation is an area where there is better alignment between IT and business. Nearly 40% of BDMs say that it is critical for business success that IT can identify requirements for automation and associate IT solutions with these needs.
  • Cross-organizational integration is vital for both BDMs and ITDMs, and over 50% of both groups agree that the other should associate and adopt technology solutions with changing business demands.

Business decision-makers (BDMs) are an intrinsic force in most midmarket organizations. They are the primary decision-makers in some high-growth technology areas, including collaboration and analytics – meaning that increasingly, BDMs are 'the boss of IT.' These BDMs view IT as a component of business processes rather than as a stand-alone silo. Techaisle SMB & Midmarket Decision Authority data shows that twice as many BDMs as ITDMs (IT decision-makers) in midmarket businesses say that IT must understand how technology contributes to overall organizational success. These BDMs have specific objectives for technology usage, clear perspectives on adoption drivers and impediments, and tend to be influenced by information sources that are different from the inputs used by ITDMs.

This pressure from business managers leaves IT leaders scrambling to stretch limited budgets to meet seemingly limitless requirements, striving to deliver predictable, secure systems that respond to their business users' increasingly varied needs and competitive environments. The divide increases because business perspectives on technology are shaped by information channels that are not part of the IT professional dialogue. The different information channels create an environment where businesses are struggling to develop the cohesion needed to promote or embrace new IT capabilities to achieve business objectives within existing IT and business process structures.

ITDM and BDM divergence will continue, and although there is cross-pollination, they may continue to operate from different pods. Although it may be tempting to try to bring the various parties together, IT suppliers cannot successfully act as intra-corporate matchmakers: they have to grasp the reality of selling to two different constituencies with different expectations.

 

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HPE is serious about addressing the technology needs of SMBs

In 2019, the phrase doubling down on SMB was mentioned several times, including the keynote address by Antonio Neri at HPE Discover. Fast forward to the present, HPE's SMB momentum is building. George Hope, a 22-year veteran with SMB channel experience, is the new worldwide channel chief. With more than a decade of SMB market understanding, Maciek Szczesniak is the new Vice President and General Manager SMB and Mid-Market. HPE's GreenLake, a flagship, "as-a-service" product, which offers a flexible alternative to traditional IT hardware consumption, is now available in a smaller starting capacity targeted at channel partners and their SMB and midmarket customers.

HPE is undoubtedly doubling down on the SMB segment. Last week HPE made several announcements:

- Smaller starting capacity for HPE GreenLake
- SMB FlexOffers program for SMB and midmarket customer
- Specialist support for HPE GreenLake and Storage portfolios

Smaller starting capacity for HPE GreenLake

HPE GreenLake packages now are available from as low as $70,000 with storage (HPE Nimble Storage) and compute (HPE ProLiant servers). The storage starting capacity is 15TB and compute at 4 servers. HPE will continue to offer a 17 percent reseller rebate to drive profitability with partners selling HPE GreenLake. In the coming months, HPE plans to expand to provide a lower starting capacity across the technology portfolio. The speed with which HPE is lowering the minimum threshold is commendable. In mid-2019, HPE had announced a $200,000 minimum targeted at midmarket customers, only a year ago.

The announcement is very significant in addressing the technology needs of SMBs and midsized businesses. Most SMB executives understand that technology plays a central role in their management processes. Many also realize that payback on any technology asset increases as one approaches full utilization and that economies of scale tend to benefit larger rather than smaller organizations. SMBs know that they cannot realistically target and reach optimal IT resource utilization. A small business has trouble consuming all of the new systems' capacity, meaning that they often pay for resources they are not using. Those that do get to full utilization have a different problem: systems that lack adequate storage, memory and compute capacity frequently crash. SMBs cannot rapidly deploy new servers, storage, and networking equipment. Even if they were, the SMB would know that it is paying some form of premium: an SMB will never get to the purchase volumes needed to warrant large scale discounts. Hence, HPE's GreenLake, with its consumption-based business model, is an excellent fit for SMB customers.

However, the awareness and advantages of a consumption-based technology acquisition model are limited and challenging within the SMB segment regardless of whether SMBs are the front-runners in cloud adoption. Techaisle data shows that as the complexity of technology increases over the next five years, most small and midmarket firms will not realize the return on investments for long periods or as their businesses scale. HPE and its partners are well-positioned in the market to gain from the massive shift to XaaS procurement models.

SMB FlexOffers program for SMB and midmarket customer

Channel partners are the primary conduit to HPE's SMB and midmarket success. Price-conscious SMBs are demanding agility from their channel partners in their digital transformation deployments of core infrastructure solutions. To meet the SMBs and the partners' needs, HPE debuted its FlexOffers program providing distribution and SMB-focused solution provider partners the ability to customize their built-to-order (BTO) products at bundled discount prices. Partners get the flexibility to select preferred options that, through dynamic attach-driven pricing, can help them access and ensure the best price. Besides, solution providers will drive quicker delivery times by leveraging distributor inventory, and distributors will benefit from an automated, simplified claiming process. In the initial phase, SMB FlexOffers include HPE ProLiant Servers and HPE Storage products. HPE FlexOffers is being offered through select distributors during the pilot starting in November 2020. Partners will leverage the iQuote partner portal that HPE has been refining for the last two years.

Specialist support for HPE GreenLake and Storage portfolios

However, selling "as-a-service" requires that channel partners invest in pre-sales activities. There will be a proverbial opening of floodgates of latent demand from channel partners with the new announcements. Recognizing the need, HPE is committed to providing specialist support for HPE GreenLake and dedicated pre-sales for the channel. HPE will also be providing training for partners to accelerate their HPE GreenLake knowledge and positioning. The additional support will be in the form of dedicated enablement initiatives, like workshops with experts, to help partners personalize their as-a-service journey.
HPE is serious about equipping its partners to participate in the "as-a-service" business model. It offers partners training on HPE GreenLake and an opportunity to self-assess partner "maturity" to shape their own consumption/aaS journey with HPE around their (and their customers') needs.

The shift to "as-a-service" has been in the making for a long time. In FY21, HPE plans to extend partner support and activation through unique and specific enablement initiatives piloted last year with a few partners, who also participated in HPE's "Consumption Advisory Council" meetings. An example is Advizex, an HPE Platinum partner for 35 years.

Not three years ago, the HPE Channel & Pointnext team started to help partners shift to consumption IT and HPE GreenLake to expand opportunities, accelerate digital transformation, and gain competitive advantage. HPE's team collaborated with Advizex on marketing initiatives, education, and dedicated workshops and enablement. This strategic effort allowed Advizex to assess their readiness to shift to consumption, identify the knowledge and actions needed, become proficient in selling HPE GreenLake and consumption IT ahead of the competition, and develop a strategic plan to drive consumption IT with HPE. Now, as HPE doubles down on HPE GreenLake specialist resources, it can extend this kind of support to all partners who decide to focus on HPE's consumption offering.

Solution providers and distributors will also have the opportunity to elevate their conversations and accelerate sales by working with HPE's "Storage Rangers" - outcome-based solution selling experts with a high degree of technical skills. These specialists will help partners enhance the request for quotation (RFQ) process to execute existing campaigns and initiatives.

Storage Rangers are funded heads (aka Champions, partner-badged) with a specific focus on storage. The geographies that have opted-in to the program have nominated a Program Lead (HPE-badged), and that is the go-to person if a partner wants to have a Ranger. HPE offers a specific training curriculum for Sales & Presales Rangers and local support to help them deliver on the request for quotation (RFQ) process and generate new business opportunities.

Each IT supplier is currently focusing on streamlining deal registration for its channel partners. Techaisle's latest global channel survey research of our 2400 partners shows that fees and activity-based incentives, solution development funds, and deal registration are significant enablement incentives for 40% to 50% of partners. Partners have an unmistakable idea of their criteria for partnerships - vendors that are easy to do business with, technical support, quality of partner programs, and those who offer end-to-end solutions that are easy to deploy, integrate are preferred. HPE is increasing its commitment to providing its partners with price and margin protection and new incentives as part of its deal registration program.

Final one-line Techaisle Take

Competition with Dell is on full display. There is no reason to ignore HPE as an IT supplier and a vendor partner for addressing the technology needs of the SMB and midmarket firms for better business outcomes.

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Delivering digital transformation benefits to SMB and mid-market customers

79% of US SMBs are either in the planning stage for digital transformation or have a formal strategy but only 19% are actively following through. Small businesses are behind midmarket firms. 29% of small businesses have no ongoing digital transformation strategy as compared to 9% of midmarket firms. As a result, there is a growing digital divide in the SMB segment and most SMBs need guidance in building a vision that involves separating digital transformation components into two nested and complementary ladders, one focused on technology, and second, focused on business outcomes.

The figure below presents a single-image depiction of these twin ladders of digital transformation. The bottom set of steps is labeled “the technology ladder,” and stretches from the deployment of modern, flexible infrastructure to advanced IT-enabled capabilities. The building blocks that are needed to establish an infrastructure that is capable of supporting digital transformation include mobility, virtualization, hyper-converged infrastructure, and other technologies essential to provisioning advanced IT services. These building block technologies are an essential foundation for digital transformation but deliver modest discrete value. The point automation solutions positioned at the base of the business outcomes ladder provide rapid but limited benefit through substitution and augmentation.

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SMB-Midmarket Digital Transformation fast-forwarding adoption of several technologies

Pandemic has changed how businesses operate, employees work, customers purchase and goods/services get delivered. This has also changed how small and midmarket firms are evaluating their core, cloud and edge technology needs to address their accelerated digital transformation objectives of cost efficiencies, operational excellence, innovation, business growth, organizational empowerment and customer intimacy. Clearly, core infrastructure has evolved to meet future digital transformation demands, but the question is how are small businesses and midmarket firms planning to adopt forward-facing solutions, like Artificial Intelligence, 5G, AR/VR, IoT, analytics and several others. There is a general sense within the SMBs that these advanced solutions will increase insight into and control over key aspects of their business operations and deliver benefits in different ways and to different ends.

Remaining true to the core belief of tracking the future of SMBs and channel partners, Techaisle studied global SMBs to determine future, planned and likely adoption patterns of several technology areas. The study of SMB and Midmarket digital transformation trends identified top 15 technology categories where the adoption growth rates will likely be highest in the next six months to a year. There are some surprises, for example, chatbots (for customer responsiveness), 5G (for enhanced mobility), open source (for cloud management, modernization and lower TCO), AI (for customer experience, security, operations) and several expected, for example, SD-WAN, HCI, WVD/VDI/DaaS and UCaaS.

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