Lukas Bedi, Dell Senior Director, Global Channel Strategy & Competitive Intelligence at Dell Technologies
Taking stock in these times of uncertainty is vital in order to effectively support partners, as trusted advisors, while they adapt to the so-called ‘new normal’ – and getting under the skin of key Channel trends as they evolve at pace is key.
As the Channel continues to specialise around industries, the ripple effect of the pandemic has brought both challenges and opportunities – accelerating trends to a break-neck pace. The spotlight is now well and truly on Edge Infrastructure and Multi-Cloud management. The growth in these market segments was already underway thanks to the convergence of innovative technologies including AI, 5G, Data Management and Security and growing data demands.
But behind the scenes, the lines between customer and partner are becoming increasingly blurred as the ecosystem evolves and adapts to the vertical opportunity. An onslaught of new, nimble market disruptors are shaking up the Channel. Understanding the bigger picture has never been so important.
- Covid-19 reality: The long and short of it
It is fair to say no industry has been left untouched by the pandemic, but the scale of impact is nuanced. Understanding the impact of the pandemic on Channel business requires breaking down the vertical outlook with long and short-term views. For example, the healthcare industry has seen positive impacts both in the short and long-term; meanwhile the financial sector has seen a negative impact in the short-term – but there is comparatively less of a significant threat in the long-term, and finally transportation has seen negative impacts across both short and long-term prospects.
As shockwaves from the Covid-19 impact rippled across the Channel, partners moved to differentiate their portfolios and solutions – both supporting customers as they addressed the challenges together, as well as uncovering new opportunities. Partner relationships have been tested and strengthened in these conditions. Those providing the best care are likely to be remembered for it.
- Shifting business strategies
The partners that are moving to virtualisation over solution riders, bringing predefined solutions to the market targeting specific problems, are truly the digital leaders. They will continue to accelerate, leaving behind the more traditional partners focussing only on the resale business. In this sense, a lot of churn is expected, with smaller partners likely to grow into the medium space and medium partners to grow into the bigger partner space – while others go out of business. In the long-term, the acquisition of the more successful partners as they grow in size and depth of expertise is fully expected – with bigger partners absorbing their niche knowledge.
Looking ahead to the rest of the year, product payment timelines are likely to expand as customers’ payment capabilities fall. This will feed into partner prospects – which based on the current pandemic are hard to predict. However, there is one certainty, consumption models will be re-assessed in light of the current crisis, likely with a growing appreciation for ‘pay-as-you-go’ services. This type of flexible payment structure will help to support customers that are struggling financially through these difficult economic times -- while transforming payment terms altogether.
- Tech in the spotlight: Edge Computing and Multi Cloud
Getting down to the trailblazing tech that is turbo-charging Channel sales – edge computing is number one. Bringing compute closer to the source accelerates data processing, it supports a host of innovative technologies like IoT, AI, and5G – so there is a real hunger for it in the Channel. Between 80 - 100 per cent of edge computing infrastructure is deployed through the Channel, as these are very specific solutions, requiring a chain of partners to roll out. For example, as we battle the pandemic, predictive healthcare edge computing solutions would require software teams to work with third-party providers linking to the thermal screening, as well as servers.
The opportunity here is massive. Over the next three to four years, there is an estimated market growth of $120 billion, which is huge and it's 500% increase. It is interesting to note that 20 - 30 per cent of this growth will be attributed to hardware – and the remainder are services costs charged back to partners. This promises to be a really lucrative focus in the Channel, in the coming year.
Supporting the edge – and in a strong second place in terms of leading tech trends – is the increasing importance of Multi-Cloud management, as the growth in hyper-scalers continues. Looking back, we can see how the Cloud landscape has shifted from a focus on On-Premises to Public hyper-scalers like AWS and Google. This will continue and is supported by the general trend towards the hybrid-cloud, bringing more public cloud environments into the fore and adding weight to the growing importance of excellent Multi-Cloud management.
This means that businesses are taking advantage of the benefits of on-prem for more critical applications – and the flexibility of hyper-scalers, the scalability of which makes cloud management more affordable. It’s estimated that by 2023, 70 per cent of the enterprise will be deploying multi-cloud strategies. With cloud complexity increasing as a direct result, Channel partners have an opportunity here to support customers with consistent cloud management solutions – streamlining data management and enabling the full value of their data to be realised.
- Seas of change: The ecosystem, blurred lines and influencers
The partner ecosystem is changing. The line between customer and partner is not as defined as it once was – this is thanks to the tech take-over. Businesses that were previously customers are transforming into tech businesses in their own right. For example, 25 per cent of Goldman Sachs are now software developers, it has gone from being a financial company to software development company operating in the financial markets.
This critical shift highlights the changing role of partners, who are more vertical focused – subject experts if you like – that are defined by their activity rather than title as a reseller, or cloud partner for example. This is essential in order to differentiate and remain relevant. As previously noted, this means an acceleration in verticalization of the Channel in the coming months. In turn, those lacking the necessary expertise to truly differentiate will look to acquire it, feeding into Channel churn by buying smaller, more niche companies.
This has strong implications for the ecosystem, placing more pressure on vendors to effectively manage and connect the partners with the best expertise and synergies to work on solutions. As edge computing becomes more prevalent this will add to the pressure of getting that consortium right. This is in turn transforming distribution. Some of the large solutions and focus areas can be managed and governed by the distributors, who will become more like an aggregator.
Meanwhile, in the background a new dimension in the ecosystem is developing – it’s non-transactional and designed to influence end-user decisions on infrastructure. For example, a vendor’s partner bringing software solution to customers is increasingly working as an ‘influencer’ – encouraging a service flow from customer to partner, to vendor. Given the shifting Channel landscape, with an increase in these smaller disruptors and greater collaboration in the ecosystem, vendor promotion will reinforce Channel position and ultimately sales.
- The ones to watch: The disruptors
Times of uncertainty open the doors for smaller market disruptors – and in the Channel, bigger vendors welcome them into the ecosystem and seek out relationships with them as they grow. In the midst of a pandemic and market disruption this is the case today, but the pace of evolution is once again accelerated. Vendors are developing tight relationships with promising partners, keeping a keen eye on those most likely to succeed.
The interesting point here, is that under the current conditions in which partners are working hard to differentiate, they are simultaneously competing with one another for survival, and at the same time they are collaborators, working together on solutions. For example, applying edge infrastructure solutions means bringing together a chain of partners to bring to life. It’s intense and it has implications for the role of the vendors’ sales managers – which is shifting more towards an account manager role. But in future, it will change further, looking more like the role of a community manager.
In these challenging times, with the Channel heated by sharp shifts, increased vertical innovation and a pulsating ecosystem, there is plenty to be excited about. But stepping back to understand how it all comes together is key to supporting partners sensitively and effectively – ensuring tailor-made future proof strategies are in place.
Vendors must foster a spirit of collaboration within the channel, in order to seize the opportunities presenting across the edge infrastructure and multi-cloud trends, while innovating and adapting to meet current market challenges. Being a trusted advisor in times of uncertainty will strengthen relationships beyond the pandemic, paving the way for even greater innovation as the convergence of AI, 5G, Security and Data Management trends manifests.