Adapting to Change

The Channel has been in a constant state of flux since its inception. As a market we are
constantly debating the impact of new technologies such as cloud, mobile, IoT (Internet of
Things) which many refer to currently as Digital Transformation (DX). Software seems to
be taking over the world and, in particular, mobile applications are disrupting parts of
the market which have been resistant to change in recent years. Here, we take a look at
how these trends are impacting Channel partners in 2017 and beyond.

According to IDC, by 2020 the spending on IT cloud environments will exceed total enterprise IT infrastructure spend. Cloud infrastructure growth sits at about 13% and according to the Cloud Industry Forum 93% of UK organisations are now deploying at least one cloud service in their business. In the RightScale 2016 State of the Cloud Report they state the figure is actually 95%. The survey asked 1,060 IT professionals about their adoption of cloud infrastructure and related technologies. Whichever set of figures you decide to settle on the trend is only one way… up!

The general consensus is we are going to be in a hybrid environment for quite some time when it comes to cloud. The investment into on-premise systems and equipment by many businesses is far too large and complex for many to want the risk of walking their company completely into the cloud.

Forrester released its predictions in the cloud market recently and have indicated that buyers of cloud will be able to save money in many ways. Their cloud predictions for 2017 are as follows:
Hyperconverged infrastructure will help private clouds get real
Size still matters, but the megaclouds won’t be your only option
Lift-and-shift tools will improve to make cloud migration easier
Hybrid cloud networking will remain the weak link in hybrid cloud
Enterprises will shun large, complex, and costly private cloud software suites
SasS will move away from one-size-fits-all to regional and industry solutions
Chinese firms will be key drivers of global cloud evolution
Containers everywhere will shake up cloud platform and management strategies
Cloud service providers will design security into their offerings

New Technology
One to keep an eye on this year is the Internet of Things (IoT); there is no reason why resellers cannot engage with this market. There are several ways to get involved through partnering and the opportunities are vast. Virtual Reality has also started to turn a few heads in the market as the business applications become clearer. When it comes to new in technology in the Channel, some things take more time than others to gain traction and VR is probably one of them. Whether it will manage to break away from niche solutions for specific applications is currently in question.

Keep your eye out for these areas too:
UC/ mobility trends
Big Data Analytics

Areas of Interest/application
Diversification, working the niches, recognising and acting upon the right trends and providing service excellence has always marked out the successful reseller from the crowd.

Resellers need to differentiate themselves, distributors likewise and vendors want 100% coverage of every market they can address.
We therefore have a channel that can address most, if not all, of the business needs of UK Plc.

However, new channels are growing and partners are joining ecosystems built around SaaS software companies like Salesforce, different lines of business, solutions, and industry sectors. The phrase ‘Software eats everything’ has been a key theme for the Channel and with an influx of business being driven by millennials it is a trend which can’t be ignored.

Connectivity is still the backbone of business today and will continue to be so in the foreseeable future. BT and Virgin have committed huge sums to build out their ultrafast networks as the demand and need for fibre related services is exploding. As connectivity becomes more crucial for businesses we are also going to see more back up services delivered over 4G giving customers more resiliency. In the M2M sector we are seeing 4G connectivity being used as a primary connection on sites where fixed line services are not available in the short term. When the fixed line services are installed the 4G connection reverts to a back-up service.

Customer Retention
In an evolving market it is important to invest some time, and money, in looking at the horizon and ensuring your business is still relevant to your customer’s needs. As always, it is far easier to sell new things to the customer’s you already have rather than going out and acquiring new ones. Retaining customers is a vital metric in determining success in the Channel. There is so much choice for customers it has become easier than ever to move providers if they aren’t happy with the relationship.Retaining customers is a vital metric in determining success in the Channel. There is so much choice for customers it has become easy than ever to move providers if they aren’t happy with the relationship. With this in mind, in the Channel Insight Survey conducted last year the Channel were asked what their customer retention rate is. 31.1% of respondents have a customer retention rate of between 96-98%. 29.1% said their retention rate was between 91-95% and 17.5% said it was between 80-90%.

At either end of the scale we have 13.6% that stated their retention rate is at 99% or better and also 8.7% of people said they have a retention rate of 79% or lower.

Customer retention is a good metric to understand for many reasons, some people don’t appreciate that retaining customers is far cheaper than acquiring new ones and can deliver a higher ROI also. According to econsultancy and their Cross-channel Marketing Report, 70% of companies say it’s cheaper to retain customers than acquire new ones, 49% also say that they achieve better ROI by investing in relationship marketing rather than acquisition marketing. In the same report it states that only 30% of companies it surveyed are committed to relationship marketing.

From the chart above on customer lifetime the majority of relationships tend to last in the over 5 years. It’s worth thinking about what kind of world we’ll be living in when contracts are due to expire. If you are no longer relevant to them at this point it is unlikely you will get a contract renewal. Customers generally want to have long relationships with good suppliers.
From the data in the Channel Insight Survey it would seem that resellers are good at retaining their customers for long periods of time. The common theme which has emerged is that the Channel puts this down to the relationships they have cultivated, the service they deliver and experience they can bring in their chosen sector. This market has traded for many years off the back of relationships, but as consumer habits start to encroach on the business world in the form of social media use and service switching websites the Channel may find customers more willing to shop around for services.

Beware of the disruptors
Historically, technology decisions were researched and made by the IT department. According to Gartner, today only 28% of those decisions rest with the “IT guys”. They also predict that by 2020 90% of technology decisions could be made outside of the IT department. This is a radical shift in the buying process and one which the Channel should be hyper-aware of.

Customers are being forced into becoming technology companies themselves and today we see likes of Tesla, AirBNB, Uber and many more being considered technology led rather than simply a car manufacturer or a hotel booking service. Digital disruption is threatening traditional companies with extinction across the board. This also means that every ancillary service or consulting company supporting these industries is being forced into technology as well.



Ed Says…

The Channel WILL continue to change. Those still selling traditional equipment with traditional models may do ok in the short term but they will have to go through some pretty intense business gymnastics to remain relevant in the long term. Don’t let your customers leave you because someone else can serve them better.

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David Dungay

Editor - Comms Business Magazine