Techaisle Analyst Insights

Techaisle’s SMB Channel Partner Trend study shows that there has been a big leap in percentage of SMB channel partners offering cloud computing services to SMBs in the last year across several countries. For example, in the US the percentage offering cloud services has jumped from 38 percent in 2012 to 64 percent in 2013 and another 22 percent are planning to offer cloud solutions. Similarly, in Australia the percentage has gone up substantially from 34 percent in 2012 and in Germany from less than 30 percent to over 60 percent. The biggest change is seen among the VARs. In 2012 only 34 percent were offering cloud solutions and in 2013 74 percent of them are offering cloud solutions to SMB customers. In Germany, the biggest jump has been within the SPs (Service Providers). However, not all channel partners (VARs, SPs, MSPs, SIs) have become successful in selling cloud to SMBs. Techaisle’s Winning Strategies of Successful SMB Cloud Channel Partners study finds that there are quantitative, meaningful and actionable differences between channel partners who are successful in the business of selling cloud and those that have not developed successful cloud practices.

Industry expertise and the ability to offer vertical solution is one such key area that is creating a distance between the successful and unsuccessful SMB cloud channel partners. Techaisle’s SMB studies have shown that SMBs are increasingly looking for vertical industry solutions but channels have been relatively slow in offering such solutions. Year 2014 will be important as this is the first year when SMB business issues have flip-flopped from reducing operational costs to increasing business growth and cloud-based line of business vertical solutions is an important area of investment.

Combining the data from Techaisle's SMB and Channel Partner studies we find that a significant gap exists between percent of SMBs adopting vertical cloud solutions and percent of SMB channel partners offering such solutions though it must be said that the gap has narrowed in the last 2 years as shown in the chart below.



The Winning Strategies of Successful SMB Cloud Channel Partners study data shows (chart below) that 21 times as many successful cloud partners are offer vertical solutions to SMBs as those that are not successful.



Most of the successful SMB cloud channel partners have product/service portfolios that are mapped to the full set of SMB technology needs: compute and storage infrastructure, applications, communications, support for test/development, and solutions addressing specific vertical requirements. The majority of unsuccessful SMB channel partners have limited their offerings to storage, backup, and basic SaaS offerings like Office 365 or Google Apps.

Some may argue that there is a ‘chicken and egg’ effect: that successful partners have broader portfolios because they have more engaged SMB customers. As with the chickens and eggs themselves, though, it may not matter where the cycle begins, if SMB channel partners that are not currently successful in the cloud wish to compete with those that are, they will need to develop portfolios that extend beyond IaaS to vertical-specific applications.



Above chart from the Winning Strategies study shows that 50 percent more successful cloud channel partners than unsuccessful partners report that vertical industry knowledge is a key component of the value that they bring to their SMB customers. These successful channel partners are able to demonstrate knowledge of the SMBs’ industry, and are therefore able to create confidence within their SMB clients. These channel partners are also the most likely to build and maintain long-term relationships with their SMB customers. Unsuccessful channel partners claim that they are able to demonstrate understanding of their SMB customers’ business needs – but at a technical level – and are constrained by a lack of vertical understanding. 70 percent of unsuccessful channel partners emphasize their technical expertise during interactions with SMBs as they lack the understanding of their SMB customers’ industry vertical to be able to offer sophisticated cloud solutions. They emphasize service quality without necessarily understanding what this means in a cloud context. In addition, many of the unsuccessful partners tend to stress price when positioning cloud computing solutions.

Therefore it is imperative for SMB channel partners to go beyond technical knowledge and really understand the dynamics of industries in which their SMB customers operate and become industry subject matter experts.

Techaisle’s Winning Strategies of Successful SMB Cloud Channel Partners study covers critical differences between the activities and approaches of successful and unsuccessful cloud partners in three key areas: Business Priorities and Resource Allocations, Current and Planned Cloud offerings, Sales and Marketing Strategies and Tactics

Techaisle’s SMB Channel Partner Trend report covers: Mobility, Cloud, Managed Services, Virtualization, Backup, Data Integration, Sales & Marketing including Social Media & Lead Generation

 

 

Cisco and the SMB market

Cisco has established an undisputed leadership position in the enterprise market. The company combines a widely-adopted and well-integrated portfolio of networking products with a highly-skilled (and paid) direct sales force to manage/expand its presence within major accounts.

The SMB market is a separate challenge. Here, buyers are less likely to require integration across multiple network components and more likely to emphasize price. They are also more likely to receive advice/management from channel partners, further reducing Cisco’s control over the acquisition process.

Against this backdrop, Techaisle’s SMB Channel Trends research illustrates the strengths and challenges Cisco must manage, as it looks to expand its share in the SMB segment.

Cisco Commands High Trust and Reputation

Within the channel community, Cisco enjoys a sound reputation and a high degree of trust. Techaisle’s latest SMB channel partner survey shows that 78 percent of Cisco’s SMB channel partners trust Cisco, a higher percentage than is registered by competitors such as HP and IBM. Nearly 70 percent of the partners believe that Cisco has quality products – again, the highest ranking recorded within the ‘hardware leader’ group including Cisco, HP, IBM and others. However, only 52 percent mention that Cisco has cutting edge technology, a percentage lower than that for both IBM and Microsoft. Moreover, 60 percent of Cisco’s SMB channel partners say that they Like Cisco, lower than corresponding rates for HP and Microsoft, only slightly higher than is found for IBM.

In its 2013 Annual report Cisco has written, “A substantial portion of our products and services is sold through our channel partners, and the remainder is sold through direct sales.” With specific reference to SMBs, Cisco wrote, “Generally, we define commercial businesses as companies with fewer than 1,000 employees. The larger, or midmarket, customers within the commercial market are served by a combination of our direct salesforce and our channel partners. These customers typically require the latest advanced technologies that our enterprise customers demand, but with less complexity. Small businesses, or companies with fewer than 100 employees, require information technologies and communication products that are easy to configure, install, and maintain. These smaller companies within the commercial market are primarily served by our channel partners.” Techaisle’s data shows that Cisco has attracted positive attention within this channel partner community, but that its technology and relationships do not leave it especially differentiated from competitors.

Technology Shift has Created SMB Messaging Challenges

In recent years SMB technology demands have shifted to cloud, mobility, analytics, social media, collaboration, managed services and virtualization. Cisco is seeking to capitalize on this market transition through the development of cloud-based product and service offerings that enable its customers develop and deploy their own cloud-based IT solutions.

In communications channel partners in the U.S. including those specializing in the SMB segment – Cisco has been steadily driving them to offer products and services that deploy cloud, mobility, virtualization, managed services and data center solutions. This is by no means an easy task as most SMB channel partners are being actively courted by competitive vendors that also want to grow their emerging technologies’ business. SMB channel partners selling advanced technologies have an average of 3.46 vendor partnerships which average jumps to 4.21 for Cisco SMB partners, a difference of 21 percent. With this increased contention for mind/market/wallet share, it can be difficult for Cisco to manage brand identity and its related messaging.

This difficulty is illustrated by study findings showing that of all the Cisco SMB channel partners, 44 percent consider Cisco to be their top partner. The other 56 percent mention Microsoft, Oracle, HP, IBM and several others. Within the VAR/SI community, Cisco’s share of preference is 48 percent and drops to 39 percent amongst the MSPs/SPs that are viewed as critical to the success of future cloud initiatives.

Cisco’s SMB Channel Partner Brand Equity

Techaisle believes that it is time for a new metric to represent presence (and opportunities for growth) within the SMB market. Techaisle refers to this second-generation measurement approach as Brand Equity Management. It is measured by a robust proprietary index, the Techaisle Brand Equity Score (BES-360).

Techaisle believes that it is important for IT vendors to measure their Brand Equity within SMB channel partners as well as SMBs. Techaisle’s Brand Equity Score, BES-360, helps to identify areas where IT vendors can improve to increase share of wallet. BES-360 is a KPI (Key Performance Indicator) that measures the strength of brand within a segment.

Cisco’s Brand Equity Score within its SMB channel partners is higher than most competitors – but lower than scores for both IBM and Microsoft. The implication of these findings is that even through Cisco has high brand equity amongst its channel partners; it is not necessarily true that its entire SMB-focused channel base is firmly wedded to Cisco’s game plan.

SMB Channel Partner Brand Equity Measurement– the New Prescription

Breaking down the data for Cisco, Techaisle’s study finds that almost 25 percent of Cisco’s channel partners have a Brand Equity rating of 80+. This group forms Cisco’s core partners. The data also shows that almost 35 percent of Cisco’s SMB channel partners have equity of less than 40. These are the partners that Cisco needs to work on.

Interestingly, small business focused channel partners give a higher Brand Equity Score to Cisco than mid-market focused channel partners. This is a segment that Cisco should address as the mid-market has become a battleground for most IT vendors and there is yet no clear dominant player.

Among all SMB channel partners of Cisco, VARs are actually driving up the Brand Equity Score. In fact 41 percent of VARs constitute the HBE (High Brand Equity) group. On the other hand, MSPs constitute only 20 percent. In order for Cisco to continue to grow its CMSP program and build on its initial successes, Cisco has to turn its attention to the MSPs that serve the SMBs to understand the key reasons for lower brand equity which when fixed can lead to better wallet share among MSPs.

Drilling down further into the data, Techaisle finds that Cisco is not doing better within the overall managed services community than it is within MSPs focused on cloud. A higher percentage of Cisco’s HBE partners are offering managed services to SMBs whereas a higher percentage of ABE (Average Brand Equity) partners are offering Cloud to SMBs. Cisco’s SMB cloud ambitions would benefit from moving some of these ABE cloud partners to HBE segment. The HBE segment offering cloud services need extensive training on cloud solutions to become more successful in offering cloud to their SMB customers. More than 40 percent of these channel partners are working with SMB customers that have private cloud. This may be good for Cisco in the short-term but it does not represent best practice in this segment, and it is misaligned with the ongoing acceptance of public cloud as a preferred IT delivery platform.

Product resale revenue is 43 percent for HBE partners as compared to 38 percent for ABE. Similarly, recurring revenue is 57 percent for HBE as compared to 61 percent for ABE. Naturally, this bodes well for Cisco’s current revenue as the High Brand Equity partners are driving higher revenues from products. However, if Cisco plans to increasingly promote service-centric partners then a lot more work is required to identify partners with higher services revenues and move them into the High Brand Equity segment.

Practicing the Prescription

Techaisle’s brand management work is anchored in the belief that if a vendor’s brand equity is good, then it can compete successfully with vendors with lower brand equity for sales of comparable products or services. Vendors with sound products/services but low brand equity will struggle to maintain parity with competitors that have higher brand equity, even if that vendor’s products/services are (somewhat) inferior. Hence, Brand Equity Score findings help indicate potential areas of expansion or exposure as vendors, like Cisco, assess their potential for expanding the footprint of their brands within the SMB channel partner community. The composition of Cisco’s BES across its channel indicates the core strength of its brand. Techaisle’s analysis indicates that Cisco has both strengths to build on and areas requiring focus as it moves to position its next-generation solutions (especially, cloud solutions) through its channel to the SMB market.

Techaisle's Big Data study of 3,360 businesses shows that mid-market businesses typically started their big data journey in one of four ways. However, the highest success rate (determined by reaching a successful implementation of a big data project within six months of initiation) was achieved when an external consultant or organization was brought in to develop proof of concept, advice on database architecture and ultimately develop the big data analytics solution.

Once a decision was made to embark on a big data deployment project, the mid-market organization tended to quickly align behind the initiative. They did realize that big data was not a typical cloud application deployment where independent department purchases could be made, nor was it infrastructure deployment where only IT could be involved. Big data required a new type of alignment between business heads, namely, Marketing, Finance, IT and a completely new set of players known as data scientists or data analysts.

Study shows that businesses are moving from “whack-a-mole” analytics to “business perspectives” to get newer insights into their operations and better knowledge about their customers as they rethink their marketing strategies because mobility, social media, and other transactional services have increased the number avenues for connections with their customers. There are many different tactical objectives for deploying big data projects but the top among them are sentiment monitoring, generating new revenue streams & improving predictive analytics. And businesses are expecting some clear cut benefits from big data analytics such as increased sales, more efficient operations, improved Customer service.

 

Techaisle’s global mid-market businesses’ Big Data Adoption & Trends study shows that the promise of superior data-driven decision making is motivating 43 percent of global mid-market businesses to either invest in or investigate Big Data technology. Out of these, 18 percent of mid-market businesses are actively investing in big data related projects. The possibilities of analyzing a variety of data sources, producing action-driven business insights is too big to ignore for mid-market businesses.

Big Data requires a certain level of IT sophistication and a history in the linear investment in Information Technology enablers to be successfully. While these factors predispose larger accounts to Big Data, the competitive imperative to understand customers, innovate products and improve operational efficiencies has already started to reach down to the mid-Market, forcing a search for how to leverage primary and secondary data that is generated by the business.

The current and planned investment represents a sizable opportunity considering that the segment is relatively new and requires a certain level of IT sophistication and a history in linear investment in Information Technology enablers to be successful. North America has both the largest market and the highest level of investment in Big Data overall in SMB and mid-market segments. Mid-Market attitude towards Big Data transitions from “Over-Hype” to “Must-Have” technology with the increase in employee size. However, nearly one-fourth of lower mid-market businesses consider big data to be over-hyped and yet 29 percent think that it will be an important part of their business decision making process in the future.

Business intelligence by itself has provided enough business insights, however, mid-market businesses are now looking for extracting business perspectives to drive superior decisions and ultimately achieve superior results.  Extracting business perspectives has become important as they rethink their marketing strategies because mobility, social media, and other transactional services have increased the number avenues for connections with their customers and partners.

In addition to understanding customers, mid-market businesses are also considering big data analytics as an important initiative to help them improve operational efficiencies.

Techaisle’s study shows that there are many different tactical objectives for deploying big data projects but the top among them are sentiment monitoring, generating new revenue streams & improving predictive analytics. It must also be said that businesses have figured out that there is a lot of publicly available data which could also be analyzed to their advantage.

The mid-market businesses actively investing in big data technologies are expecting some clear cut benefits from big data analytics such as increased sales, more efficient operations and improved customer service. These objectives differ slightly by different geographic regions. As the growth rates continue to lag in mature economies, the pressure to increase revenue grows resulting in developing robust analysis and extracting insights from all sales and customer data including transactions.

When specifically asked about preferred deployment choice in terms of on-premise vs. cloud, mid-market businesses are unsure as they are still navigating through their technology options. However, Hadoop dominates as the preferred platform but confusion exists.

In terms of analytics skill-set and long-term vision, the potential of linking structured and unstructured data sources to create new business insights is being considered very useful but at the same time mid-market businesses are not really prepared for it. In fact one-third of mid-market businesses agree that linking structured and unstructured data would be very useful for big data analytics but over 70 percent mention that they have either none or very limited capabilities of analyzing unstructured data. This is where they are turning to external help for guidance.

Needless to say, survey reveals that big data deployment is posing tremendous challenges. Technology confusion, lack of skilled resources and potential unclean data are being considered as the biggest roadblocks for big data project implementations. Big data technology and its far-reaching capabilities are being viewed by mid-market businesses as very complex resulting in very steep learning curves.

In spite of challenges, the study shows that there have been some successes when business units, IT & data analysts exhibit extraordinary alignment. Highest success rates for project implementation and generating new insights have been achieved when IT and data analysts work with external consultants from project inceptions.

Detailed Global Mid-Market Big Data Adoption and Trends report is available for purchase. Details are given here.