The New Face of IT Channel – Changing Business Models

Author: Sherifa Hady, Channel Sales Director, EMEA, Aruba, a Hewlett Packard Enterprise company

In a world of consumer changes and connectivity everywhere, channel partners are primed to sell new services and products and play a key role in the development of the next wave of technology trends. The channel is now being driven by three key trends: partner digital transformation; new business models with a focus on services; and customer trends driving new types of demand.

It’s not just about what’s in the box anymore, we’re seeing networks open up a new world of services and solutions for the channel to offer, and customers who are eager to tap into these to deliver a cutting-edge customer experience.

TREND ONE: Channel business models – it’s not just about the box, it’s about what the box gives you

Across the entire channel, from alliance partners to distributors and systems integrators, we’re seeing partners start to ready themselves, and their business models, for a new technological landscape and how to keep their offerings relevant within it. Partners are looking five years ahead to anticipate what they will be selling, and where their revenue will be coming from.

Distributors who once would have been a logistics partner or driving channel enablement are now rethinking their role for example. The cloud is a prime example of this – it’s changed the business model of partners significantly. Hardware is no longer the key revenue driver, and whereas before you might have expected hardware sales to account for most of your business, it’s now completely swapped to be a software-first market instead.

The role of the vendor to help support and enable partners through this transition is vital. It’s about ensuring the incentives and support you give your partners is correctly aligned to the market they are trying to sell to. It’s also about how you advise on the advantages and disadvantages of CAPEX and OPEX installations, and ensuring you’re embedded within the channel to give your partners the use cases, case studies, and best practice to sell in this new type of market.

Some partners are already there and know where they want to go next. Others are still figuring out what their path ahead looks like.

TREND TWO: Channel partners race to bring new service offerings to the market 

The channel knows that services are an essential part of their business model. The future lies in consumption.

There are three ways that partners are pursuing this now. They might be reselling the services offered through vendors, managing assets and services for customers, or developing their own services and intellectual property offerings.

Here again, we can clearly see the role that the cloud has played in influencing the market. It was a wake-up call for partners – if everyone goes straight to the cloud provider to buy their services then how do you sell around this? The cloud has hugely disrupted how people consider buying IT.

For partners who embrace services however the rewards can be significant. From a profitability perspective, if everyone is just selling the same AP then the opportunity for margins is limited – but if you can sell maintenance and services on top of this then there’s a huge business opportunity.

It also means you can get much closer to your customers. Longer term service agreements mean you learn to understand their challenges and how you can solve them together. The benefits for customer retention are huge.

Finally, partners with the technology and technical skills to develop their own IP offerings will be able to really stand out and differentiate themselves in the market. It drives their capabilities beyond just vendor specific offerings.

By the end of 2020, this is one of the most significant developments we expect to see in the channel market.

TREND THREE: Partners who focus on selling based on business outcomes can win big

Customer needs will always be a driving force in the market. For many companies, IT is no longer just a cost centre in their business, used for data analysis and report creation. Instead it’s often a profit centre, driving revenue, new business models, and enabling the creation of billion-dollar companies along the way.

For partners, reacting to these changes is central to setting themselves up for success in the year and decade ahead.

Fundamentally the usage of IT has become very different. The customer may want a new system for their hotel in order to allow their guests to check in via their phone and get straight onto the Wi-Fi, but they’re unlikely to be interested in the detail of the systems they are buying. They just want to be able to deploy.

This is a huge opportunity for partners to talk to their customers about business outcomes and take a more significant role within solution development. However, as customers move away from hardware to services partners won’t be able to rely on them ringing up to order new parts – this sell requires a much more proactive approach.

The rise of the Edge is one of the final parts of this puzzle. Over the course of this year we will continue to see the exponential growth of connected devices, and within that a need for data and network power to sit at different points of the network.