Grounded in the Cloud
cancel
Showing results for 
Search instead for 
Did you mean: 

Cloud Disruption and Channel Evolution (1st of series)

Ed_Choi

The lessons of history provide a wealth of knowledge and strategies focused on winning in combat that often can be applied to winning in business. Many modern day strategists have learned from the teachings of military generals like Sun Tzu, best known for the book “The Art of War”, a collection of strategies and tactics devoted to every aspect of warfare. Sun Tzu believed that strategy was not planning in the sense of working through an established list, but rather it was agile, requiring quick and appropriate responses to changing conditions.

 Hewlett Packard co-founder David Packard shared Sun Tzu’s philosophy. Seventy-five years ago David said, “to remain static is to lose ground.” If David were here today, I imagine his stated philosophy would be even bolder: “innovate or die.”  I believe this concept presents an accurate way to describe the cloud’s disruption on the IT market, and its subsequent impact on the channel ecosystem.

 Market Dynamics

As CIOs constantly look for ways to drive IT value, agility, and cost effectiveness, their buying behavior is shifting from a capital intensive on-premises IT solutions to a more pay-as-you-go services.  

At Hewlett Packard Enterprise we expect 26% of all IT workloads will be migrated to an ‘as-a-service’ (or ‘consume’) model by 2019. The IT consume services market is dominated by hyperscale providers like Salesforce, Workday, and AWS.  They provide frictionless, easy, self-service solutions and a new economic model (pay-as-you-go) that is having a major effect on the channel ecosystem.  

What does this mean to the channel ecosystem of distributors, resellers/VARs, service providers, and ISVs? Let’s break down the ways these companies are reacting to the shifting market demands:

Distributors:

  • Most are expanding service offerings through M&A to maintain relevance in the marketplace
  • Many are branching out to provide cloud services catalogs, provisioning and billing, and developing their own branded marketplaces to create new partner ecosystems 

Value Added Resellers: 

  • Many remain focused on transactional business of reselling hardware and software licenses but the majority is being more efficient and focused on high value customers
  • Some VARs are investing significant resources to transform (organically and via M&A) to more service-led businesses, and hence requiring vendor support in talent transformation, enablement, and joint go-to-market efforts

Service Providers:

  • Tier-2 SPs such as telcos have made significant investments building their public clouds, but many are struggling to translate the investment into tangible revenue
  • Many tier-3 SPs (regional MSPs and hosters) are under pressure to transform their business models but most have failed to make significant progress to-date

ISVs:

  • Many are struggling with go-to-market and distribution scale
  • Cloud transformation is driving ISVs to new business models to retain customers and gain access to new markets

The bottom line for channel players is that they must adapt their business models in this new economy to survive while looking for new sources of revenue.

Four Pragmatic Steps to Adapt and Survive

Similar to how they adapted to the shift from mainframe to client/server to distributed computing, technology suppliers and channel players need to adapt and evolve again. They must take a pragmatic approach to transform their business models and invest in areas where they can sustain a competitive advantage and long-term growth. They must:

  1. Understand the shifting buying patterns: the business needs of their target customers and their technology purchase preferences
  2. Understand the real competition and their unique differentiation
  3. Build a viable business model and a go-forward strategy
  4. Establish the right relationship with vendors who are strategic to their business

Let’s look at each of these steps in more detail:

Understand the shifting buying patterns

  • Have a deep understanding of the business needs of the target customer segments, their desired outcomes and what technology solutions can enable or accelerate those outcomes
  • What are the solution or service requirements such as performance, availability, security, data sovereignty, and cost?
  • What are their customers’ preferences in purchasing and consuming those solutions and services? Do they prefer to build and own their own datacenter, manage a service by a third-party vendor, or consume directly from public cloud?
  • Understand channel needs to view all customer options, including non-traditional options and competitors to understand impact to their businessWho are the influencers in the decision-making process

Understand the real competition and unique differentiation

  • Based on the findings of customer needs, assess who is the real competition in the new market landscape. Competitors might include new entrants such as AWS or software vendors who are directly selling to customers
  • Understand the changing landscape – not just traditional VARs/resellers as competition; but include cloud vendors, application vendors – how do you differentiate yourself and offer value

Build a viable business model and a realistic go-forward strategy

  • With a clear understanding of the customers’ needs and the competitive landscape, you can assess your company’s ability to meet those customer requirements while providing differentiating offerings from the real competitors
  • Develop a business model with a clearly defined strategy on how your company can succeed, as well as the necessary investments you need to make
  • Understand the right applications and services that you need to deliver and support to enable and accelerate your customers’ business
  • Establish yourself as more than just a fulfillment vendor--be viewed as a trusted advisor in your customers’ transformation

Establish the right relationship with vendor(s) who are strategic to your business (or who can complement your offerings)

  • You don’t have to do it alone: partner with others that bring the technologies and capabilities you need
  • Leverage strategic partners to provide technical, sales, go-to-market and financial assistance
  • According to Forrester, 52% of channel partners expect revenue share generated by partner relationships to increase by 10% or more. Therefore, leverage partner expertise to train your sales and technical people to address new market and new buyers (as the decision maker or influencer is not always the traditional IT person)

Summary

Cloud is disrupting both technological innovation and business models for businesses, IT professionals and supply chain players.  Traditional channel partners must swiftly adapt to their customers’ changing buying behaviors and evolve their business models to create unique differentiation, develop new routes to market and sustain profitable long term growth.  Having a pragmatic approach and the right partnership will ensure a smoother transition and increase the probability of success. 

 Learn more about how HPE is helping channel partners on their transformation journey at http://www8.hp.com/us/en/solutions/partner-programs/partners.html

 

0 Kudos
About the Author

Ed_Choi

Edward Choi is the Vice President of WW Cloud and Indirect Channel Programs. Choi is an accomplished, results-focused executive with a passion for driving large-scale strategic initiatives and solution delivery transformation. In his current role, he is responsible for the cloud channel strategy development and execution to drive market testing and scaling of a collaborative ecosystem of service providers, VARs, and ISVs that will leverage HPE and 3rd party technologies, JGTM motions, and financial innovations to build/sell/deliver differentiated services-led hybrid-Cloud solutions. Prior to his current role, Choi was the Vice President of Cloud Customer Success Management. He was responsible for the “One-HP” client experience for the delivery of cloud services across all HP business units.

Events
28-30 November
Madrid, Spain
Discover 2017 Madrid
Join us for Hewlett Packard Enterprise Discover 2017 Madrid, taking place 28-30 November at the Feria de Madrid Convention Center
Read more
HPE at Worldwide IT Conferences and Events -  2017
Learn about IT conferences and events  where Hewlett Packard Enterprise has a presence
Read more
View all