The five new threats resellers must counter

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This article appeared in the December issue of CRN magazine.

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The five new threats resellers must counter

The CRN Fast50 – celebrating some of the savviest businessmen and women reselling technology – is a great point to stop and look at how the landscape is changing.

As everyone in the channel knows, IT is not an industry for the complacent. What works one year may not work the next. New ideas, products, trends can sweep away today’s kingpins who were thought unshakeable.

I’m going to play to my strengths here. Trying to pick the winners for 2013, across the board of technologies, is a mammoth task. I’m happy to leave it to the analysts to get wrong. 

Instead let’s take a longer term (and hence safer) view of the industry and ask – what will the channel look like in a couple of years? Who will your peers and rivals be? What will be your relative strengths and weaknesses against newcomers, and who will quietly fade into history? My observation is that the channel is shrinking and growing simultaneously.

How? Unfortunately the number of traditional IT resellers is on the way down, mostly due to the changing nature of tech support, the raison d’etre of the IT reseller. Advice generally falls into four areas: what to buy, how to install and configure it, how to operate it ongoing and how to fix it when it breaks (ie, support). 

But the type of advice is changing with the evolutionary migration of business applications from servers to cloud applications. Businesses will always need advice on what to buy – but they can get that advice from more sources, including their peers through social media. How much are businesses willing to pay just for advice? 

The initial assessment is often expected to be free, with the money made on the migration to the cloud program.

Applications in the cloud no longer need to be installed, operated or repaired. That’s now the responsibility of the cloud software vendor. In fact, cloud vendors are taking over a lot of the territory once owned by the reseller.

Exhibit A: The perpetual gravy train of IT services is support. But there’s much less need for that with cloud applications which often come with free support. Look at the accounting software space. Xero and Saasu, two of the biggest cloud-only players, offer free support. Granted, it’s email only, but it has a strong reputation and is comparatively far easier to provide because there is only one version of the product to understand and explain. 

Support is far easier for them than for desktop software vendors MYOB and Reckon, distributor of QuickBooks and Quicken. They have to support multiple versions of their software, all slightly different to each other, going back years and years. The support costs must be enormous. 

Configuration is one area where IT resellers can still get involved. Can services based on advice, migration and configuration generate enough revenue to run a profitable business? That’s only two services instead of the previous four. Resellers have relied on selling as many services as possible to make their margins but it’s a constant balancing act. Staying profitable with fewer services may not be possible.

This changing landscape is creating the risk of resellers being outflanked. Newer skills are needed to survive the migration to the cloud. Business technology these days is a lot less about the technology and a lot more about the business. There are at least five new threats to the traditional reseller.

The first relates to improving the inner workings of business. A reseller needs to know exactly how to apply a cloud program to processes. It’s no longer acceptable to dump a server in the closet, load up the application and wave goodbye. Businesses want someone who can understand what they do and find technology to exactly match those processes and make them more efficient.

Workflow, process, efficiency – these terms can be foreign to the average reseller who is more familiar with rebuilding a NAS. But other consultants are slowly moving over to fill the void. The most obvious is the management or business consultant.

These are few and far between in the SME market but one consultant I spoke to last week was booked up nearly till Christmas training staff in accounting firms on using cloud solutions.  

Businesses want to know more than just which technology to buy. They want to know how to use it specifically to improve their business. Many resellers these days just don’t have that type of knowledge, either of their customers’ businesses or of workflow management.

1. The first new threat to resellers is from business consultants.

2. Bookkeepers and accountants are the second. The accounting profession has always recommended accounting software to clients ever since it was sold in a shrink-wrapped box. Cloud accounting software can integrate with many types of business software either for free or for a small monthly fee.

The removal of technical barriers makes it much easier to recommend combinations of cloud software. And while resellers have aimed to become that trusted adviser to customers, they come a distant second to the authority and trust claimed by accountants who are seeking to be their clients’ trusted business advisers.

Luckily for resellers the accounting profession is extremely conservative and slow to change but the seeds have already been sown. Check out accounting firms such as Hansens Accountants in Victoria and Interactive Accounting in Sydney for examples of tech-savvy businesses that aren’t afraid to recommend cloud software.

3. The telcos. Optus resells Google Apps, Telstra Microsoft Office 365. The telcos together have every single business as a customer and are ideally placed to sell cloud software to the masses. It’s only at scale that Microsoft’s paltry commissions on Office 365 make sense, but the telcos aren’t really interested in the commissions.

Their goal is retention – a customer who sticks with Telstra can be encouraged to buy a range of services including broadband provision, which is where a large chunk of profitability lies, after the declining cost of the fixed-line phone call.

4. The fourth threat comes from telephony integrators who are moving up the chain via the drive to mobility. Mobility is seen as the next stage of computing – from mainframe to desktop to web to mobile. A huge growth area for IT advice is showing businesses how to use mobile devices to make their sales teams, warehouse operators and field forces more efficient.    

Connect Tel in Victoria is a good example of a business focused on solutions based on smartphones and tablets.

5. The fifth threat is the vertical operator. Businesses aren’t waiting for IT resellers to discover the right combinations of programs that make their lives easier, they’re working it out for themselves. 

The smarter ones are then taking that tech combination and showing their peers in a bid to raise the efficiency of the industry, and so putting resellers under more pressure to be better vertical specialists.

Look at TradiePad, a two-man consultancy in Sydney’s northern beaches that advises plumbers, carpenters and maintenance services on how to run their business from an iPad. 

Is there a sixth threat? Who knows? Why not? The definition of a technology adviser is going through a full-scale renovation. Witness the changes being made by channel associations such as the International Association of Microsoft Channel Partners (IAMCP).

Note that the global association is for “Channel Partners” – it recently changed its name from Certified Partners, reducing the skill level required for membership and deliberately opening the doors to non-conventional resellers. 

“We are now recognising there are many different types of channel partners in the community,” says Mal Shaw, general manager of IT training provider DDLS, who is re-establishing the dormant Australian chapter.

The association now accepts gold Microsoft partners, distributors, independent software vendors and service providers. It hopes to be the leading trade association for Microsoft channel partners and represent their interests within the wider community and with Microsoft.

Its greatest attraction is partner- to-partner networking. IAMCP members have access to Microsoft channel partners offering other skills and services in other geographies, whether in Australia or internationally. Shaw points to a recent research report that estimated partner-to-partner networking at $10 billion a year globally.

“We think there’s a significant opportunity” in Australia, Shaw told CRN. He estimates there are 10,000 channel partners in Australia and he hopes the Australian chapter could eventually have hundreds of members in each state.

For the reseller who wants to survive this transition to cloud technology, networking could be crucial. In Victoria last month (November) tech-savvy Hansens Accountants merged its solutions division with one of Australia’s leading Office 365 resellers, HubOne, to better service the SME market. 

Could your future be linked to an accounting firm or a telephony operator? Today’s reseller can look at these trends two ways. The traditional IT reseller may be tempted to see it as a loss of relevance with customers, a loss of power with relation to vendors and an influx of competition from non-traditional areas.

Or one could view it as a world full of opportunity in which resellers can forge new alliances and learn new skills to give even better service to their customers. The cloud delivers far more bang for buck and opens the door to enormous efficiencies and cost savings. The door is wide open to transforming the way IT is harnessed by your business customers.

Are you up to the challenge?

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