The New Channel Normal: How Solution Providers Are Adapting In The Midst Of Coronavirus

In the midst of the global coronavirus crisis, solution providers are transforming the way they do business even as they work to keep locked-down customers humming and uncover new paths to growth.

If you had asked Anexinet CEO Todd Pittman a few months ago to close a deal with a brand-new customer without ever meeting in person, he might have looked at you funny.

But now, amid the global coronavirus pandemic, Pittman can proudly say his Blue Bell, Pa.-based solution provider business is a veteran of virtual sales.

Anexinet secured a new customer—a national energy company—without an in-person visit, then collaborated virtually with 19 people at the customer to carry out the complex process of prototyping a new mobile and web app.

“We have now moved into the next stage to start designing that,” Pittman said. “And we’ve been able to do all that without ever having to set foot at the customer’s location.”

That was a first for Anexinet, which used collaboration tools such as Microsoft Teams, Zoom and the Miro virtual whiteboard to deliver its “Kickstart” process for digital transformation projects as an online experience. Typically, such projects mean flying four staff members to the customer site for long workdays and numerous nights of hotel stays over the course of three weeks. The virtual model, though, “eliminates a lot of coordination that’s not really a value-add to the process,” Pittman said.

“We’ve revamped our approach with our customers,” Pittman said, calling the virtually delivered project a major success that Anexinet is now replicating with two other customers. “Frankly, [the stakeholders] at our first customer were raving fans.”

Anexinet’s ability to transform itself to do business in new ways is emblematic of the variety of shifts solution providers throughout the channel are making as they adapt to “the new normal” of doing business amid the far-reaching impact of the novel coronavirus outbreak.

They are changing not only the kinds of solutions they sell but the vendors they work with to build them and the ways they sell them.

In a time of uncertain budgets, for example, solution providers are evolving to increase their recurring revenue, particularly as customers are seeking to consume IT as a utility more than ever.

That shift means that Braintree, Mass.-based IntraSystems is re-evaluating the vendors it focuses on, with the aim of emphasizing those that are consumption-oriented, said Paul Kunze, vice president of sales and marketing.

“We’re looking at the business models they have, and aggressively saying to them, ‘You need to have a consumption model.’ We’re already seeing increased customer demand to move to that model,” Kunze said. “There will be new vendors [for us]—we’re looking to vet that out now.”

Due to the changes in the market, the solution provider expects to move from 28 percent recurring revenue currently to 35 percent by the end of the year, he said.

“What we’re seeing now is this [recurring revenue] model that we started on four years ago is aggressively growing even more now with what’s happened with the pandemic,” Kunze said. The coronavirus crisis is also expected to transform many of the fundamentals of running a solution provider business, spanning sales and marketing to events and travel—amid the evolution of a more tech-driven society.

“There’s going to be a change from this, and I think it’s a permanent change,” said Paul Clifford, president of St. Paul, Minn.-based Davenport Group. “Our reliance as a society on IT was already growing and growing, and the pandemic has actually increased the reliance on IT. That’s not going back. So for solution providers like us, we’re going to have to adapt to those needs as they become even more important.”

Solution providers, like other companies, have been forced to overhaul their approaches to sales and marketing as a result of stay-at-home orders and other travel restrictions. For salespeople, the pandemic has meant a “dramatic shift,” Clifford said. “We’ve got a team of salespeople and engineers who thrive on being out with customers, and they don’t get to do that.”

And yet, the business world has been collectively learning how to communicate better over video. “It has forced us to learn how to bring [video meetings] into our skill set,” Clifford said.

Even as lockdowns are beginning to ease, video communication—including for sales—is certain to remain higher than it once was, he said.

“I see us incorporating it much more going forward,” Clifford said. “It’s not as good as sitting down and going out for a beer, but you can still get things done and not take as much time.”

Mark Wyllie, CEO of Boca Raton, Fla.-based Flagship Solutions Group, said he used to travel to Atlanta every other week to meet with customers.

“Am I going to go up every other week after this is all over? I don’t know,” he said. “I definitely think I’ll do more with either Zoom or Teams.”

Flagship is utilizing collaboration tools to transform its messaging to clients from a traditional sales approach to educational, thoughtleadership and relationship-building activities, such as webinars.

The company recently hosted a wine tasting event over video, shipping three wine tubes from Vine Box to each customer for sampling during a group video chat, Wyllie said. It’s been a lighthearted way to stay in touch with customers during a trying time, he said.

Ultimately, the COVID-19 crisis marks an inflection point for the channel that requires adaptability and flexibility to thrive.

“This change that our customers are going through will create opportunities for us to better serve them, help them innovate and bring new solutions to bear to keep pace with the turmoil that this pandemic has created,” said Anexinet’s John Kolimago, executive vice president and general manager for cloud solutions.

Those that can adapt are finding new paths to growth, solution providers said.

Finding Opportunities Amid The Downturn

An economic crisis might not be a time you’d expect to be land ing new customers, but iCorps Technologies CEO Mike Hadley said that’s exactly what’s been happening.

“We’re forecasting for continued growth,” Hadley said. “Our security practice is really thriving. We’re landing new clients based on cybersecurity, based on the need for remote support, based on the need for collaboration with Microsoft Teams. We’re doing a ton of work with Teams, Office 365, Azure. We’re selling a lot of laptops, printers, firewalls, managed security.”

Hadley’s Woburn, Mass.-based company is among the many solution providers that see the ramp-up in technology investments spurred by the COVID-19 pandemic as just getting started—with managed services, security, collaboration and cloud solutions among the areas set to keep growing in coming quarters. Many in the channel report continuing to be slammed with opportunities even after the initial shift to remote work and distance learning in mid-March, which helped buoy a record first quarter for countless solution providers.

“We’ve actually been insanely busy—growing a lot faster than we were expecting,” said Chuck Crawford, chief strategy officer at Fishtech, a security-focused solution provider based in Kansas City, Mo.

Amid the health and economic crisis, solution providers have redeployed to focus on the new growth markets as opportunities abound to enable everything from ongoing distributed work to cost-saving measures.

Many solution providers see reasons for cautious optimism in the rest of 2020, particularly those that have a strong emphasis on recurring revenue streams, according to a recent survey of 265 solution providers by The Channel Company’s IPED Consulting group. (The Channel Company is the parent of CRN.) Sixty percent of solution providers expect a positive impact or no impact to their managed services businesses in coming quarters, the study found.

At solution provider 10th Magnitude, the managed services business has been growing faster than expected amid the pandemic and “will be a very strong part of our essential business, especially in the next six months,” said Lori Borg, chief growth officer at the Chicago-based company.

According to the IPED study, 50 percent of solution providers expect growth ahead in their cloud business, despite the challenges in the economy.

While customer spending overall is highly uncertain for the rest of 2020, “because so much of our revenue is recurring, we’re generally insulated from that,” said Tony Safoian, CEO of SADA Systems, a Los Angeles-based cloud solution provider.

Safoian said that SADA recently closed several new deals, including one of its largest deals ever.

“This crisis has just naturally created a much higher sense of urgency around digital transformation—that these are not optional things that customers can take forever on to decide,” Safoian said.

Cloud solutions also have greater relevance due to the potential for cycles of restarting society and then having to lock down again if the virus returns, said Bob Bailkoski, CEO of global solution provider Logicalis Group, based in Slough Berkshire, U.K.

“It’s likely that the lockdowns will become a feature of life for the foreseeable future—we’ll restart, then lock down, restart, lock down,” Bailkoski said. As a result, “businesses need to be agile. They need to be flexible. And therefore, there has got to be a public cloud component.”

Shifting to operating expenses instead of capital expenditures should help to drive spending on cloud and other pay-as-you-go offerings, solution providers said. There’s no question that customers right now are focused on capital preservation, said Anexinet’s Pittman.

“Everybody wants to ensure that they have the capital required to keep their business operating through this uncertain time. And so I think that will continue to drive more conversations around leveraging the cloud, pay-as-you-go models, GreenLake,” Pittman said, referring to Hewlett Packard Enterprise’s GreenLake pay-per-use offering.

Scott Dunsire, CEO of Buffalo Grove, Ill.-based ACP CreativIT, said his firm anticipates continued growth for as-aservice solutions amid the broad interest in Capex reduction. Offerings in Device as a Service and Infrastructure as a Service, such as GreenLake, are poised to become more attractive to customers than in the past, Dunsire said.

Device as a Service pairs PC leases with technologies for device management and security—though it has not been the preferred way for ACP CreativIT customers to procure devices to date. “But I think that the current conditions potentially could regenerate those conversations,” Dunsire said.

Cost-cutting is also expected to drive greater demand for managed services in the form of outsourced IT, while cost-saving service management and automation technologies are seeing rising demand as well, solution providers said.

Customers are clamoring to maximize the value they can get out of their enterprise service management (ESM) platform, typically ServiceNow, while also increasingly exploring automation solutions such as VMware vRealize Automation, said Stephen Ayoub, president of Chicago-based solution provider AHEAD. “They’re focusing on cost control within their IT environment and are becoming more open to looking at different ways of using technology, which maybe they weren’t open to prior to COVID,” Ayoub said.

“There are so many manual processes that go along with IT. And the more that they can automate—from VMware all the way up to their ESM layer—it’s just a massive savings from a staffing cost.”

For the coming quarters, security is another opportunity that solution providers are feeling bullish about. Following successful implementations of work-from-home solutions, “now we’re seeing a big pivot to securing those environments,” Anexinet’s Kolimago said. “That’s top of mind for many of our customers.”

Along with seeing off-the-charts demand for VPNs, solution providers say they are finding multifactor authentication and cloud security to be key areas in the current environment.

For security-focused solution provider Fishtech, demand is surging for solutions around identity and access governance, which ensures that employees only have access to the applications and data that they need.

“Identity access governance is a huge push that we’re also leading with, to make sure organizations are looking at things holistically,” Crawford said.

At the Davenport Group, many of the new opportunities uncovered since the initial work-from-home surge have been around security. In the past, protecting a business often meant providing security at just a handful of locations, Clifford said.

“Now you’ve got literally hundreds of endpoints with potential security problems. It’s a whole different game,” he said. “The threat actors are aware of that as well. They’re working to get in and they know that you’re vulnerable.”

There are numerous signals that the need for enabling work-from-home is not likely to dissipate any time soon. A recent survey of CFOs from PwC suggests that half of companies plan to permanently allow remote work as an option for applicable roles—while 26 percent are already planning to reduce their real estate footprint.

The crisis has “changed people’s perspective very quickly, in a way that technology providers never could have, about work-from-home and work-from-anywhere,” said Zac Paulson, CEO of Fargo, N.D.-based solution provider TrueIT. “In one fell swoop, in the middle of March, we taught the whole world that all those tools work just the way we said they did. And we could have never done that. I’ve been doing this for about 15 years now, and even though the technology has existed, we used to always sit there going, ‘How are we ever going to convince people this is possible?’”

Customers will also re-examine their usage of office space, he said.

“I do think that we’re going to see the real estate market change,” Paulson said—citing estimates from research firm Gartner that even if companies see a 5 percent loss in productivity from remote work, they will still save 20 percent on costs for real estate.

For businesses that do keep their offices, the concept of hoteling—where employees don’t have assigned desk spaces at the office, but are scheduled to come in as needed—is likely to make a comeback, said Kelly Yeh, president of Chantilly, Va.-based Phalanx Technology Group. Hoteling can enable employers to have fewer workers in the office at a time, which is good for social distancing and provides the benefit to employees of continued working from home and less time commuting.

“We’ve just had a proof of concept of eight weeks of 100 percent teleworking,” Yeh said. “If businesses were able to be as productive as they normally are and didn’t really feel like there was that much of an interruption, then there’s no reason to not allow more fluid on-site work.”

The return to the office is also creating brand-new opportunities for solution providers around supporting crucial health initiatives such as temperature measurement.

Salinas, Calif.-based Alvarez Technology Group is now providing several solutions for checking temperatures of employees or students before they enter the workplace or school each day, said CEO Luis Alvarez.

The company’s Thermal Protect temperature testing solutions include two types of thermal cameras—one that can screen 30 people a minute, and one that can screen 30 people a second. Alvarez Technology Group is also reselling a temperature-taking kiosk developed by HP Inc. and kiosk manufacturer Meridian.

Demand for the Thermal Protect solutions has been huge, and the company is now exploring other technologies that might be useful to help businesses operate their offices safely, Alvarez said.

“We’re building a toolkit that we call ‘Get America Back To Work,’” he said.

To keep workers connected wherever they happen to be located, collaboration tools are expected to continue to be among the most important areas for solution providers. Videoconferencing platforms such as Zoom, Microsoft Teams and Cisco Webex have been surging and will continue to play a pivotal role, solution providers said.

Maryann Pagano, CEO of New York-based BlackHawk Data, said that now that many customers are getting used to remote work, there remain opportunities to enhance work-from-home deployments with business-grade collaboration tools and security.

“Tech Data and Cisco have offered us MDF, which doesn’t come easy for people like us because we’re small. We’re going to run a campaign with Cisco on work-from-home solutions like Cisco Umbrella, Cisco AMP or Duo for security, as well as on different collaboration tools—whether it’s Webex Teams or Webex Meetings,” Pagano said.

Virtual desktop infrastructure is also having a moment as a core component of many remote work deployments. For instance, delivering Microsoft’s Windows Virtual Desktop—with the help of Azure automation platform Nerdio—has been among the fastest-growing areas for 10th Magnitude since the shift to work-from-home began, Borg said.

“When I’m looking at the strategic direction of the business and how we can serve enterprise organizations going forward, we expect that there will be a lot more opportunity to deepen our relationships with organizations around Windows Virtual Desktop,” she said.

Alvarez said the massive changes left behind after the Sept. 11 attacks can give some sense of how COVID-19 might transform society. “If you told people before 9/11 that someday, to get on a plane, you’ll have to take off your coat and your shoes, they’d look at you like you’re crazy. But now that’s the new normal,” he said.

With the current crisis, Alvarez said, “We’ve been looking at this and saying, ‘What is going to be the new normal from this? And how can we help people, and get in front of people we previously haven’t been in front of?’”

Anexinet’s Pittman also sees this environment as “a great opportunity for us to expand our reach and do more with more clients”—especially when it comes to using a virtually delivered approach for digital transformation projects, as his company has rapidly learned to do during the pandemic.

“When you think about being bound by time and space, and having to fly people into different places, clearly that’s a competitive disadvantage when you’re not as close to the client. I think this opens up a whole ton of clients that may have [previously] been averse to a virtual model,” Pittman said. “For us, it offers a great opportunity to expand and grow and provide our services to a wider set of clients.”