On The Record
By Robert Faletra
Back To The Future Channel
December 14, 2012
Get ready for a year of accelerating consolidation in channels and the industry as a whole in 2013.
There are many reasons why 2013 looks to be a year of heavier-than-usual action. From a channel perspective there are a number of factors. First and foremost, many partner organizations that are in the $100 million range and above have a large appetite to acquire. Many of these players believe they will gain significant advantage in the market as more businesses move to the cloud. While that may prove to be true, the more important driver here is expertise acquisition. Specialization gained through mergers can help accelerate organic growth.
Some manufacturers are even encouraging these rollups and, in some cases, helping them along by either bringing the right parties to the table or helping them with funding.
Another factor for the acceleration is being driven by a generational shift. Some very solid partner organizations in the $25 million to $50 million range are owned and run by people approaching retirement age, and unless there is a family member with a desire to take over the business then a transition has to take place. This is just a reality of the industry.
Personally, my belief is that we are seeing a bit of back to the future in channel makeup right now. When the indirect sales channel was first born in the late 70s, it was made up of a lot of small players that got the model right, making them huge players in the market. That happened in a few different ways via both the franchise model and company-owned model.
Looking ahead, the channel makeup will be different in that we will have many more larger partners in North America. At the same time, we will see thousands of newly formed partners move into the market with born-on-the-cloud models that are very different than many of the partner business models of today.
Born-on-the-cloud partners sell business-solving solutions and more often than not avoid a bill of materials in the sales proposal. The reason for this is that they want to focus on the solution and not be shopped based on product set.
It's an excellent model that from my experience is showing higher margin and resulting in rapid growth. In short, I believe it's the preferred sales model of the future for solution providers.
At the same time that this is happening, the DMRs are seeing the same pressure and many are trying to remake the business for solution sales. Some will make the transition, and those that already have a services arm are better positioned to do so. In the end, those DMRs that cross the chasm will be more profitable. Those that don't and remain in the volume game will become less so.
While all this is happening there are new competitors and suppliers to the channel. Amazon.com is highly likely to make a more concerted effort to get the partner community to sell its hosting services in the future and is looking to build out a channel team to do so. The service providers are clearly getting more serious about building the data channel.
A few years from now, the strength of the billion-dollar channel players will be able to push vendor thinking in directions we don't see today. All this is not being lost on the supplier community, the brightest of which are already preparing different go-to-market plans with partners.
It's going to be an exciting time in the channel, and the opportunity to get the new model right and build a stronger business is high.
BACKTALK: Make something happen. Robert Faletra is CEO of UBM Channel. You can contact him via email at robert.faletra@ubm.com.
Every Website Tells A Story
November 21, 2012
You've heard the old saying, "Do as I say, not as I do." It obviously refers to people who talk a good game about what they are going to do but far too often don't follow through.
It's a trait that runs strongly in politics, the only profession in the world in which you can create a problem and then run against it for re-election.
But talking a good game and saying all the right things happens in high-tech channels as well. Oftentimes, manufacturers talk in grandiose terms about how dedicated they are to the channel and how they want to push more sales through "partners."
So how do we measure that? If I or a reporter on the CRN staff head down that discussion area with a line of questioning, we will often get a response that sounds something like this: "We are committed to the channel and we want to double our business through the channel in the next two years." Or it might be something that sounds even more compelling like "We are 100 percent channel." Getting to the real story is a bit more difficult, of course. Many companies don't break out sales when they report as direct and indirect.
With all that as a background, on a whim I decided to take a look at company websites recently, and in a completely unscientific way determine who is really putting partners front and center. To me, that means if I were a customer and I went to a company website to investigate from whom to buy, the website would make it really easy for me to find a partner. Getting that information would be prominently presented and would work. Here's what I found on the morning of Nov. 16, 2012.
IBM.com: Sorry, IBM, but I have to put your site in the really bad category. First off, you need a magnifying glass to see the "find a business partner" link in the footer of the page, and even then it is sixth on a list of buy possibilities where all the others are geared toward a direct sale. To me, find a business partner should be a lot more prominent.
SAP.com: SAP deserves to be congratulated. 'Our Partners' is prominently displayed at the top of the page, and in just two clicks I was well on my way to getting a partner contact.
Juniper Networks: A "close, but no cigar" here. "Partners" is prominently displayed at the top of the homepage but, unfortunately, when I clicked and then went to "partner locator," the message came back that Juniper is updating its partner locator to serve me better, and I should come back another time. Serving me better would be giving me access to the old locator until you make whatever improvements you feel necessary. Juniper rival Cisco was better because its link worked.
HP: The site seems to be totally geared toward a direct sale. I did find a way to search for a solution provider partner on the site. It wasn't easy, however, and even when I drilled down into buying a Point of Sale solution, the "find a reseller" option was below "request a call from a POS specialist," which I suppose could generate a lead that might be passed to a channel partner, but it might also go to the direct team.
Microsoft: For a company that is so partner-focused, I was surprised by what I found. The homepage is totally geared toward what seems to be a direct-sale attempt, and there is no intuitive way to easily find a partner contact. I was able to get to a partner locator but it took five clicks and, frankly, wasn't exactly simple to get to.
Of course, a website doesn't tell the whole story of channel commitment but the little things count, and to me there's lots of room for improvement on these sites, and many others.
BACKTALK: Make something happen. Robert Faletra is CEO of UBM Channel. You can contact him via email at robert.faletra@ubm.com.
Skate Toward The Puck
October 19, 2012
Historically, trends in this industry need many more years to play out than predicted. That’s not the case with the current move toward cloud services.
I just came back from the Best of Breed conference (BoB) where we spent two days talking about building a channel business model to match the market. Wayne Gretsky, considered to be the best all-time goal scorer in hockey was once asked why he was so successful. He answered by telling the interviewer his strategy is to skate to where the puck is going to be, not where it is.
I’m convinced solution providers need to do the same. You need to assess your business model now and ask yourself if your customers are going to buy the way they do today in a year or two. You need to realize that customer buying behaviors are changing and you need to match your product and service portfolio to that spend. You need to skate to where the spending is going to be, not where it is today.
Here’s the danger as I see it. No customer is going to proactively tell you that they are less likely to do business with you in the future because they see themselves going in a different direction. Customers that don’t believe you can fit with their future needs will simply look elsewhere unbeknownst to you. Months after they have made that decision, you will figure it out by realizing your business with that customer is down.
Fact is, the traditional buying process inside corporations is changing. The CIO is no longer the sole decision maker. In some cases the CIO is not involved, especially when it comes to off-premises public cloud purchases. Oftentimes, these decisions are being made by line-of-business managers who are buying a service that gives them a competitive advantage in the market. Those services are being paid for with operating budget money and are not being capitalized as has been the case in the past. As such, the approval process inside of the organization is completely different.
The solution provider attendees at BoB are mostly the largest and most elite partners in the market. These players will make the transition. I’m concerned about the larger channel community. I talk to far too many partners that tell me business is good, and at some point they need to figure out what to do about the new model.
I can name a dozen partners off the top of my head that are growing at phenomenal rates because they have built a sales and delivery model for the future. One partner I talked to at BoB told me their company grew 65 percent last quarter. Mind you, this is a $60 million company. You don’t grow that fast unless you have a model that is built for the future.
My personal feeling is that if you are not building a futuristic model that is designed to deliver services rather than products, you are at huge risk. Your model of the future is to sell services and not even quote products separately. Some of the smartest partners I know are keeping the product makeup of the proposed service/solution completely off the quote because they don’t want to get into a discussion around pricing of piece parts. Let’s face it, products that go into a solution are less important when selling a service.
For those of you that missed the event, take a look at the discussions at BoB by going to bobconference.com.
Most importantly, it’s time to begin thinking deeply about it now or you are going to find yourself skating to where the puck is one of these days only to find out it has been passed so far ahead of you there is no way to get there.
BACKTALK: Make something happen. Robert Faletra is CEO of UBM Channel. You can contact him via e-mail at robert.faletra@ubm.com.
Microsoft's Case Of Apple Envy
September 24, 2012
Apple's playbook centers on looking at the market, finding product categories that are proven but can be exploited with significantly better execution. It was not first to music players; Sony was. It was not first to the cellphone market; dozens of others beat it there. It was not first to the tablet; Amazon beat it there.
But in each and every category, it brought a product to market that was so superior it left the competitor without a ride home from the dance. In essence, Apple shows up late to the prom but it understands that when you do, you have to be prettier than everyone else.
In October, Microsoft is finally coming to market with an operating system that is optimized for the tablet. The challenge is that it's not only late on this one, it is going to have to compete against Apple, which takes a vertically integrated approach where it controls every element of the products it builds.
Despite the odds being in Apple's favor, I believe that in the enterprise Windows-based tablets will do very well and have a high likelihood of being bigger than Apple. Microsoft's channel is going to make tablets from Lenovo, HP, Samsung and a host of others successful because it has the relationships and Windows will integrate better with the network. For reasons of security and compatibility, Windows based-tablets have an advantage -- not to mention that Apple does not yet have a large value-added channel and Microsoft does.
But Microsoft has a serious case of Apple envy these days and has convinced itself it can copy Apple's model and effectively compete -- think Microsoft stores and its own vertically integrated tablet.
It feels as though Microsoft believes that to compete in the consumer space it has to copy Apple. Trouble is, Microsoft can't seem to envision how to do what Apple does better. The Apple store to Microsoft store comparison is a perfect example.
First off, just look at the traffic in any Apple store and compare it to a nearby Microsoft store. One problem it has is it can't provide the level of support that Apple does via its Genius Bar because Windows is just an operating system and the rest of the product is built by someone else.
The Win tablet OS looks slick from the little I've seen of it and the few minutes I've had to play around with it. Again, I believe it will do well in the enterprise, but it has some really big hurdles in the consumer space and will not get the pull that Apple is getting from the BYOD phenomenon.
When Microsoft was late to the personal music player market with Zune it got no traction because it was flat-out not as cool as Apple, and the thought of buying Zune over iPod was a big hurdle.
It is going to face the same thing in the tablet consumer space. In addition -- and Microsoft knows this and is working to get where it needs to be -- the number of apps that are available on the Win tablet is and will be woefully behind iOS for the foreseeable future.
In the end, Microsoft has a very real shot of beating Apple in the enterprise space because of its channel and that of its OEMs. It's in the consumer space where Microsoft's hurdles are higher and its leverage points far lower. Two years from now I'm betting Windows tablets have high penetration in the business world and low penetration in consumer.
BACKTALK: Make something happen. Robert Faletra is CEO of UBM Channel. You can contact him via e-mail at robert.faletra@ubm.com.
Is It Curtains For DMRs?
August 27, 2012
As Edmund Burke, the 18th century British statesman, said, “Those who don’t know history are destined to repeat it.”
I believe direct market resellers, or DMRs, are going to be an extinct species in five years, and a quick recap of the open sourcing model of the 1990s (a sales model not to be confused with the open-source software model) reveals why. In the early days of the PC industry, the major PC manufacturers had a closed sales model that prevented distribution from carrying their products. Preferring instead to sell through franchise organizations and the few company-owned store chains of the day, the manufacturers limited access to their product.
That all changed around the middle of the decade when first Compaq and later IBM and others authorized the broadline distributors to carry and sell their systems.
With systems readily available from multiple outlets at better pricing, franchisees had options other than buying only through the franchisors and, within a few short years, a dozen or so multi-billion-dollar companies were out of the market as we knew it. Names like ComputerLand, Intelligent Electronics, Inacom, BusinessLand, The Computer Factory and others that once graced the front page of CRN on a weekly basis were gone seemingly overnight. The reason was a business model change they were ill equipped to deal with.
Business model changes are much more difficult to adjust to for large players than a technology change. As the franchisors began to falter, what we now call the DMRs began to gain strength and today carry a powerful position in the market.
But there is a new business model change afoot that is challenging the future of the DMRs the same way open sourcing challenged the franchisors. This time it’s a technology shift as well: cloud computing.
The VAR community and distribution are adjusting well to the cloud, but the jury is out on whether the DMRs will make it through this change. The biggest reason is actually pretty simple.
Cloud computing is forcing all IT suppliers to sell to multiple decision-makers. More importantly, it’s about solving problems -- not supplying product. The DMR business model is all about supplying product at a low cost and has very little to do with solving problems. It really boils down to when you call a DMR, the question is, “What can I get you?” That worked for a long time, but the rest of the supply chain is now asking, “What problem can I solve?”
So what is a DMR that has built a business on low-price delivery of product with little value-add but which commands rebates and lots of marketing dollars from manufacturers to do? They have to make a decision to get out of the model they have and either become a distributor or a mega-VAR because over the long term there isn’t going to be a middle here that looks anything like the traditional model they have exploited so well.
Distribution is well ahead of the DMRs in making the cloud model transition. UBM Channel research is showing 72 percent of the VAR community is in the progressive transition stage with only 13 percent remaining in the vintage sales model we have described in our evolving channel model.
Fortunately for the DMRs, the cloud model is evolving much more slowly than the open sourcing model of the 1990s. But they need to pick their poison and shift or we will begin to see the signs of extinction in a few years just like we did with the franchisors 20 years ago.
BACKTALK: Make something happen. Robert Faletra is CEO of UBM Channel. You can contact him via e-mail at robert.faletra@ubm.com.
- Private Dell: A Positive Move
- Back To The Future Channel
- Every Website Tells A Story
- Skate Toward The Puck
- Microsoft's Case Of Apple Envy
- Is It Curtains For DMRs?
- Playing The Tablet Card
- Microsoft's Tablet Advantage
- The Startup Advantage
- The Cloud Solution Spin
- Cloud Is About Cost Transfer
- Picking Up The Pieces At HP
- High Tech's Toughest Job
- Cloud Spawns New Type of Supplier: a 'Vendorgrater'
- The Plight Of Partner Portals
- Where In The Cloud Do You Sit?
- HP's Move: Boon For Partners
- A Path To The New Channel
- The Channel's Best Bet
- The Tablet Invasion
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