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By Kelley Damore

The New Channel Normal: Why You Can't Talk About Products Anymore

April 01, 2013

Fresh off our XChange Solution Provider conference in Orlando, Fla., one thing became crystal-clear. It is not business as usual, and disruption, confusion and angst will be the new normal.

If you have five to seven years left in your career, you may be able to ride the wave, tweak your model ever so slightly and earn a good living. But if you need to pass your business onto the next generation or sell your business for your retirement, today's typical VAR model won't work and the valuation you get for your business will be disappointing at best.

Here's why you need to change now: The IT decision-maker is changing and changing fast. According to Gartner, 41 percent of IT budget is outside IT now and the shift has happened more quickly than anyone expected. The implication of this shift is twofold.

First, you need to change the conversation you are having with clients. You can't talk about products anymore. You must talk about business outcomes.

At XChange, Tiffani Bova, Distinguished Analyst at Gartner, suggested that you take a few cues from the McKinseys and Bains of the world. Look at how they position their practices and their services. They don't sell technology solutions; they sell business outcomes. While most VARs got into the business for the love of technology, you will need to get out of your comfort zone and reposition the conversation around the business. This new IT buyer wants a problem solved, period.

You also need to get in front of this customer with whom you may not have a relationship. To reach the head of HR, or the executive that handles supply-chain, or the marketing executive, you must market your services. Traditionally, VARs have not been good at marketing, but if you want to expand your customer base and grow, you need to bring in some skills and leverage new platforms such as social media, search engine marketing and optimization, and email marketing.

Cloud is obviously forcing this change, too, and you need to figure out where you should play. There will be lots of opportunities to provide guidance in melding public cloud and private cloud, and cloud management will be an opportunity in the future.

With cloud computing comes even more skills that you will need. A recurring-revenue model will force you to think about billing differently and you will need to bring in some expertise there. Bova asserts that you need to fire your sales force if reps can't change and sell in this new world. While it is jarring to hear, there were a few VARs at XChange that said, "I listened to Tiffani and I wished I had done it earlier." While you need to understand where the model is going, traditional vendors also must encourage the shift. The whole industry is too reliant on the transactional portion of the business. Products make money for the vendor, but they have to be dragged in after the consultative sale. In this model the vendor's brand may be less visible, but if the industry is going to move to IT as a service and to new customers, everyone needs to embrace the fact that disruption is a foregone conclusion.

For more information about what we covered at our XChange event, which featured dozens of renowned speakers, a channel chief round table, our Channel Champions Awards and more, go to our XChange 2013 coverage page.

BackTalk: Kelley Damore, SVP, Editorial Director for UBM Tech Channel, writes a monthly opinion column. You can reach her via email at kelley.damore@ubm.com.

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Your Customers Have A Secret: Why Now Is The Time To Transition To Cloud

March 04, 2013

The clock is ticking. You've got about four years to transition your business model to one offering cloud-based services with recurring revenue. Here's why: Customers are making their last hardware purchases now—they just aren't telling you.

I was talking to the former CTO of one of our Solution Provider 500 companies recently and in the past 30 days alone, he has spoken to 20 CIOs who are in the process of buying hardware for the last time as they build their own infrastructure and platform to operate as a service model.

You can convince yourself that your situation is different and your customers are different. And you may indeed have tight relationships with your customers in offering them solutions and services. But think about it: Have you ever told someone that you were buying something from them for the last time? Of course not; it hampers your negotiating power.

To make matters worse, your particular contact may not be in the loop. Cloud-loving line-of-business managers might be circumventing your points of contact. The cloud computing model is so compelling in terms of price and capability that your customers may be forced to go elsewhere if you don't offer those services to them. In the not-so-distant future, no one wants to maintain a server room. They want to invest in strategic IT.

The change will be profound. According to our research, partners will need to have at least 50 percent more customers to derive the same amount of sales. The future of the channel will be about integrating cloud infrastructures, growing your SaaS business, making it recurring, and making it unique. It will not be about selling products and stitching together solutions.

The transition ahead will be expensive and, frankly, risky. We've already seen large data center solution providers be forced to sell their business because they didn't have the capital to grow.

And we've seen solution providers that have been forced to sell their company at one-third of its sales because they relied too heavily on product sell-through. Learn from their mistakes.

There's no doubt that moving to this type of model is scary. But remember, it could also be liberating. You won't need to rely on your vendor as much as you have in the past. You won't have to wait for the next product turn to see an uptick in sales. In today's world, you have control over the customer and the service, you don't have control over the quality of the product.

Of course, the vendors want your reliance and will reward you for your loyalty. Make sure you do the right thing for your business. Marty Wolf, a global M&A investment adviser and columnist for CRN, said in a recent interview, "I would rather run a $2 million SaaS business than a $50 million VAR business."

Hard decisions need to be made now. You may have to cannibalize some of your profitable infrastructure business to truly make the transition.

Naysayers believe the channel won't have the stomach or wherewithal to do it, predicting more than half of the on-premise VARs will not survive.

Prove them wrong. Make the moves, make the hard choices, and be the half that does survive and comes out the other side stronger than ever.

BackTalk: Kelley Damore, SVP, Editorial Director for UBM Tech Channel, writes a monthly opinion column. You can reach her via email at kelley.damore@ubm.com.

PUBLISHED MARCH 4, 2013

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Microsoft, HP: Time To Make It Right For Channel Partners

February 04, 2013

It is sad to say, but the oldest, largest and longest-standing channel partners in the industry — Microsoft and Hewlett-Packard — are becoming less and less relevant to solution providers. And unless they change course and more actively engage solution providers, both companies are going to do serious damage to a program, a culture and a heritage they spent decades building and cultivating.

Let's start with Microsoft. Of all the decisions in 2012, this was the one that has perplexed me the most: Microsoft's surprise Surface announcement and its decision to circumvent the channel for distribution. From its secretive last-minute news conferences to the Microsoft retail stores, the company is so obsessed with imitating Apple that it is turning its back on the enterprise—the one area where it could actually displace iPads.

Yes, the BYOD threat is real and the tablet market-share numbers are foreboding, but why isn't Microsoft ighting the battle in the enterprise market where it has a stronghold? That would play to its strength and heritage and give it chance to enter a market where Apple is weak. Honestly, if my company gave me a tablet that had all my enterprise apps on it and I was able to download a few personal apps, I would use it. And I would probably use it at home and not buy an iPad. But this isn't Microsoft's current approach. Instead, Surface today is a wanna-be iPad with a slightly interesting keyboard that I have to buy on my own dime.

[Related: The Worst Channel Decision Of 2012]

Solution providers building out data centers and working with the enterprise make no money on Microsoft's software offering. But they could on the hardware if Microsoft created a program to get the devices out to companies where partners could provide the mobile integration services. By upsetting the channel and focusing its efforts and dollars on consumers, Microsoft stands to lose in the place where it is the strongest. In fact, it is already losing. Hundreds of millions, if not billions, are being spent on broad-based marketing and, despite this effort, analysts report anemic sales, and Samsung recently said it will no longer produce a Windows RT tablet.

Now let's move on to HP. Righting the ship has proven harder and will take longer than HP executives anticipated. While the company is looking inside at operational issues within each product line and declining sales of HP's core products, it has dropped the ball on engaging the channel. Channel conflict in the field is growing and business units are driving individual partner programs, according to solution providers. Many feel there is no advocate for them within HP. What's more, partners say that market development funds and incentivebased funding dropped significantly in 2012. The worry is as HP looks to fix the problems internally, the market will have passed it by. Some solution providers are vocal about their displeasure, but others are just quietly investing in Cisco, Oracle, VMware and EMC.

The sad part is most solution providers are rooting for HP. They wanted HP to turn this around. But the reality is they need to be profitable to survive themselves and if they don't see programs and incentives to sell HP product, they will be forced to look elsewhere.

Microsoft and HP say the channel is important, but 2013 is the year they prove it to solution providers or become the latest in a list of companies whose time has come and gone.

BackTalk: Kelley Damore, SVP, Editorial Director for UBM Tech Channel, writes a monthly opinion column. You can reach her via email at kelley.damore@ubm.com.

PUBLISHED FEB. 4, 2013

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Giving Back: Business4Better

December 14, 2012

Want to give a gift that keeps on giving? Give your time and talent. UBM, our parent company, IBM, Salesforce.com, Twitter and other tech companies are doing just that and invite you to do the same.

Corporate giving is hardly the sole purview of technology companies. Yet, we in the tech sector have a unique responsibility to give back to those who have less access, opportunity and education than we have. This responsibility is greater than it was 30 years ago when R. Edward Freeman’s 1984 Strategic Management: A Stakeholder Approach helped popularize the notion of corporate social responsibility. Back then, technology was LANs and a server closet for companies to harness and maintain their networks. Today technology is changing the way societies interact, and serves as a platform for global change that we never would have imagined.

Take IBM, for example. IBM has created its World Community Grid, which pools surplus processing power from individual computers into a massive computing system that is used for scientific research, such as studies on malaria or clean water. The company also established a program called Reading Companion, which uses IBM voice-recognition technology to help children and adults learn to read.

Salesforce.com, for its part, has donated 360,000 hours of community service and is offering its product for free or at steep discounts to more than 16,000 nonprofits. It also awarded $40 million in grants since it was founded 12 years ago.

Twitter is working with an organization called Girls Who Code, whose goal is to train 13- to 17-year-olds with skills to pursue opportunities in technology and engineering. (For more on these efforts and what tech companies are doing, download the CRN Tech News app in the iTunes store and read the story there.)

Our parent company, UBM, is taking a similar approach. We are leveraging the talents we have in marketing services and event management to launch the Business4Better conference in the United States after two successful shows in Brazil and India on the same topic. On May 1-2, 2013 in Anaheim, Calif., Business4Better will bring together 2,000 business executives from midsize companies who want to establish corporate philanthropic programs. UBM also will offer free exhibitor space, signage and marketing services to 200 nonprofits that are looking to create partnerships with midsize private-sector companies. We believe medium-size businesses have the highest potential for impact because of their sheer number, and proximity to their communities. The goal of the conference is to bring together midsize businesses and nonprofits with a mission to create successful partnerships.

I am very excited and proud to be part of this effort. If you want to create some philanthropic programs or are interested in the conference, please check it out at business4better.org or email me with any questions. And if you have your own philanthropic story to tell, we would love to hear it.

Lastly, I wish to express my gratitude for the wonderful group of people that I get to work with day in and day out at CRN. They make my job interesting and rewarding. I am also grateful for the industry that we cover. I have met a number of truly amazing people: savvy business people who take risk, change course, and do it with dignity and respect.

Here’s wishing you a safe and joyful holiday season.

BACKTALK: Kelley Damore is SVP, Editorial Director for UBM Channel. You can reach her via email at kelley.damore@ubm.com.

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30 Days That Humbled IT

November 21, 2012

From Superstorm Sandy to the presidential elections, the past 30 days have provided a treasure-trove of insights that a solution provider can apply to their business today and help them prepare for tomorrow. Here are some of the lessons I observed:

LESSON 1: What are you waiting for? Move to the cloud.

One of the biggest positive outcomes of Superstorm Sandy was that backup and resiliency was a nonissue for those who had already moved to the cloud. The very nature of cloud and the ability to have a distributed data center can help protect against disasters like Superstorm Sandy. And because it is distributed, hosted services and cloud computing offerings force organizations to think harder about their contingency plans. So move to the cloud and build out BRD practices if you have not already. Keeping a client up and running during a disaster is the best customer retention plan you could have.

LESSON 2: BYOD is here. It works. Embrace it. Don’t fight it.

Let me tell you CRN's personal story and what we did. Much of our IT and IT support is in Manhasset, N.Y., with our editors dispersed in Massachusetts, New York and California. We do not have hosted email because our corporate email, as well as our phones, were down for a few days. (Thankfully our content management system was up and running.) While corporate IT was working around the clock to get communications restored, CRN was still able to post stories and get our work done through cloud-based personal email accounts and cellphones.

BYOD is here, and traditional IT is forever gone. The best you can do is figure out how to make it secure for a company. This could be another opportunity for solution providers to add DLP, endpoint and mobile security, and authentication to the mix.

LESSON 3: Know what is at stake and what you have to gain or lose.

High-profile technology projects can help grow your business or get your foot in the door. Or they can go horribly awry, such as the case with Mitt Romney's Project Orca.

For those of you who don't know, Project Orca was a web-based app developed to help the Romney campaign track which supporters had voted and report back to headquarters from polling centers about any issues with voter suppression or fraud. It was designed to replace phone and paper get-out-the-vote efforts by sending realtime data to the campaign, which would then, in turn, allow volunteers to reallocate and microtarget grassroots efforts. Think mobility meets business analytics. From a VAR's perspective, if all goes well, this project could be a big break that brings a small development house to the national stage. Unfortunately, the project did hit the big time, but for all the wrong reasons.

Project Orca was a colossal failure, and much has been said about its shortcomings -- miscommunication, lack of training, poor documentation, server overload, and the list goes on. This is a good lesson for all solution providers who may have that make-or-break client. Make sure you do the basics, remember who the user will be, and deliver on what was promised.

LESSON 4: Technology can't solve everything. It is all about the human connection.

Humans are more resilient than technology will ever be. And when we are faced with a crisis, we always come through even stronger. People inspire in ways technology can't.

BACKTALK: Kelley Damore is SVP, Editorial Director for UBM Channel. You can reach her via e-mail at kelley.damore@ubm.com.

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