Tackling technological disruption
December 7, 2018
In today’s rapidly changing market, the distribution model for information technology products has changed more in the last 5 years than in the previous 25 years. For IT companies across the board, there is now an urgent need to support customers as they transform their operations for the cloud. Yet, for partners to be able to grow their businesses, they need the right skills in order to take advantage of new opportunities.
- What the new distribution model is and why it benefits partners and customers alike
- Why it is increasingly important to develop intellectual property (IP)
- How to develop your business to meet the changing demands of customers during their digital transformation
A new distribution model
Today’s market requires IT businesses to adapt to a new distribution model. The traditional, linear distribution model that has been in use for three decades is well-suited for hardware. When a company sells a hardware product, there is a 1 to 1 relationship between product and customer. Just a few years ago, it used to be the norm for Microsoft Windows to be delivered on CD-ROM and be distributed to customers in physical boxes – and, in this context, the ‘Supplier → Distributor → Reseller → Customer’ model made sense. At each point of the supply chain, value was added by each party before the product reached the end customer.
Yet, today this model does not allow companies scale as quickly as they want to given the current context and market environment. In today’s world, where the cloud subscription model is becoming the new standard, there is a 1 to many relationship between product and customer. 1 product is created and access is granted to customers – wherever they may be – via licensing. Take Microsoft’s Cloud service, Azure; when a customer signs up for Microsoft Azure services, they register for the product online and then use certain features of the service according to their payment plan. In this model, the division between each part of the value chain becomes blurred.
To drive profitability today:
- Software resellers increasingly need to provide professional services to support the integration and maintenance of the products they sell
- Professional services companies – who have developed additional SaaS solutions and services around their product – need to build software to manage the sales of the services they provide
To do business in this environment, IT companies need more connection points so they can sell to one another. Yet, the traditional linear model does not drive enough of these connection points. Companies instead need to operate within an ecosystem – or a platform – where licensing, IP and products are visible and can be sold, to meet the demands of the cloud customer as they arise. To monetize IP, companies need a community with range and scale. Tech Data, one of the world’s largest vendors, is now moving towards that distribution model to allow its partners to take advantage of opportunities that digital transformation affords.
The importance of IP
In a cloud-first world, more specialized skills are required to deliver, integrate and maintain the services that customers demand. To that end, creating IP is becoming one of the main ways that partners can differentiate themselves in the market. Yet, while skill sets within companies become more specialized, it becomes more difficult to serve broader customer demands.
This is why being part of an ecosystem is becoming more and more crucial for service providers to drive profitability. Firstly, IP such as products, software and services can be consumed by community members to broaden and galvanize the range of services that a company offers. In this new distribution model, collaboration is also becoming increasingly important. Members of the ecosystem can connect to any other members to transact business in a timely and efficient manner, which helps to serve and satisfy the goals of each party, more effectively.
To be successful in a cloud-first world, partners need to:
- Locate and develop necessary skills to drive IP
- Make sure to create an org structure and sales structure to deal with rapidly changing market demands
- Partner channel that is comprehensive and can programatically be executed against
A transforming customer
As customers move more of their services to the cloud, it is time for IT companies to focus on business outcomes, rather than products. To self-assess their readiness for today’s market, partners can use the 4 stages shown in the diagram above as a way to chart their proficiency and/or progress:
Stage 1: Supporting simple migrations and assessments such as on-premise to cloud.
Stage 2: Helping customers adopt specific solutions (e.g. GDPR).
Stage 3: Planning and executing cloud strategy including complex workloads. Usually work in specific verticals, including data center monetization and modernizing applications to be very cloud aware.
Stage 4: A strong focus on business outcomes and achieving this via next-gen technologies such as AI, IoT, Machine Learning.
Merging supply and demand
In today’s world partners must identify how they can and will adapt. They have 3 main options: training, hiring, or partnering with other companies. Since the first two options require significant time-investment – and arguably more risk – they are not ideal for the current market. Furthermore, the nature and frequency of opportunities that arise, means that partners must act fast to take advantage. Option 3 is recommended: by partnering with other companies who have complementary skills, partners can make use of specialized skills without having to develop them in-house. This is, generally speaking, a more flexible approach and allows partners to maintain their own respective specializations, develop their IPs and react to changes in the market as required. To learn why Dynasource is the Tech Data partner of choice for this new market environment, watch the full podcast below.
Watch the full podcast
Does your company have the right cloud skills?
Learn more about the state of today's IT ecosystem with our study on the Dutch IT services market.Download now