Those considering a major change in their lives often ponder whether it is better to remain a big fish in a small pond they know well, staying where they are and dining off the meals that have so far proved sustaining, or to set off across oceans unknown.
Being a newly small fish in a larger pond brings risk as well as possibility - and the truth is that it may not be possible to grow further unless the horizons are expanded first. This is the situation that many in the channel might recognise when it comes to managed services.
Scott Haddow (pictured, right), chief executive of a Trustmarque -- a company once known primarily as a "Microsoft LAR from York" -- told the packed room of delegates at CRN's annual Channel Conference - this year held at Prince Phillip House near St James' Park in London - that if you do not move to transform your business from traditional reselling, you probably have fewer than 10 years left to survive.
The sad truth, the Trustmarque chief executive said, is that the value of the reseller in the end customer's view is diminishing and will continue to do so. Channel players must find ways to add genuine value, and that has become harder and harder to do over many years.
Meanwhile, the industry has continued consolidating - and that too will continue.
"We were a large Microsoft partner and we still are, and very reliant on public sector business," Haddow said.
"I joined the company around Christmas 2009 and have been chief executive ever since. We have been building a platform for growth that we think is sustainable, because you can provide much more value as a managed services provider (MSP)."
Haddow said that he had seen fewer and fewer resellers trawling for less and less revenue over the years, and those that do not move to transform their businesses for a future most can as yet barely imagine will quite simply end up dead in the water.
So although hardware - and public sector - has remained a profitable part of Trustmarque's business, it was necessary to take the last five years to begin expanding the revenue stream.
There is still perhaps another five years before the VAR's transformation and refocus on managed services will be complete, Haddow suggested. The sign of its success? An eight per cent gross profit margin in 2008 has climbed to 13.2 per cent in 2013, suggesting the company is on a positive track.
"The value of the reseller is diminishing, said Haddow. "I would say that the value of the traditional reseller is dying and will be dead, because of competing pressures everywhere, from vendors, from customers, in the market, and so on.
"If your customers haven't completely changed yet, then they will."
Deepening customer relationships
Haddow's remarks were echoed by most of his fellow presenters. Ian Lockwood, commercial director at MSP Taylor Made Computer Solutions, said that SMBs are increasingly looking to outsource a great deal of their IT. For Taylor Made, the transition is already enhancing long-term revenues and deepening customer relationships.
"We talk to our customers about what their business needs are. Not boxes, mice or cables," said Lockwood. "And we're going in the right direction - but it is challenging. It's a massive challenge."
It is really important, he noted, that providers move their focus from product sales to concentrating on actually helping their customers. This does not mean being able to do everything, and it might mean making tough choices.
Matt Tomon, founder and managing director of Green Fields Technology, explained that channel partners must choose what they want to do and narrow the field of possibility in managed services - not trying to be all things to all comers.
You need something that complements what you already have, even though the overall environment in which you swim may be expanding.
"You must align customers' technology with their business strategy," he said. "And sometimes we will recommend something - even if we don't sell it - if it is the right strategy for them. It is about being solution oriented, and they become loyal."
How difficult an issue this is for most channel partners became abundantly clear in the panel discussion, which looked at the need to restructure the sales organisation.
While all panel members talked about the need for consultancy and solutions selling as well as reincentivisation of the sales force - perhaps by annualising their rewards, for example - the language they used still reflected a long-term culture of focusing on and selling product.
Larry Walsh, president and chief executive officer of Channelnomics, presented exclusive research at the event that showed how the US, several years ahead of the UK in terms of managed services, had made mistakes from which the UK could learn.
"MSP is a sustainable business model, providing recurring revenue and exciting possibilities. What we're seeing is a steady migration away from product sales," Walsh (pictured, right) noted. "In the US we've been doing it for 10 years: many companies failed. A lot of resellers treated managed services like a product, rather than as a business model."
The channel can survive in the larger pond, but it cannot behave the same way. It cannot get by on simply seeing services as something else to add to the portfolio; it must transform its approach to customers and to making money and its idea of what it has to offer and how that adds value.
Individual "solution providers" of the future must develop a very clear vision of all of the above, which they must then plan and execute.
Transformation is happening over the next 36 months - channel partners can no longer take years to make changes to their businesses. They must become more like business process outsourcers to give the overall value to customers, the real business benefits, they seek, Walsh said.
The pace of change in the industry has accelerated - and in all likelihood, it will continue to, he added.
Other speakers included major sponsors Avnet, whose SolutionsPath lead Frank Bennett talked about how to sell managed services with assistance from distribution; Abiquo, whose product vice president Ian Finlay talked about how to maximise the sales and technical skills you already have; and Alvea Services' head of professional services Neil Gardner, who spoke about how to be a reseller of other companies' managed services.
Autotask, Mimecast and NetApp all gave a five-minute presentation on their offerings and how they could help the channel in the managed services arena.
The good news bible
The research for CRN's annual Top VARs report provides better news for resellers that are still geared towards more traditional revenue streams and may be yet to fully embrace cloud and managed services. We asked more than 300 UK CIOs to open up and tell us what they really thought about the IT industry's biggest buzzword trends, including things such as cloud, BYOD and collaboration technologies. While it is fair to say a number of respondents could not wait to tell us about the importance of cloud to the future plans of their business, the broader picture is one that tends towards a lack of trust and interest.
Security emerged as the number-one concern for IT chiefs unwilling or unable to move towards the cloud, with one explaining "we barely trust ourselves with our data, let alone anyone else". Others were sick of cloud and unconvinced of the business case. "It is just hype, fluff and even lies," said another respondent.
The lack of reliable connectivity also emerges as a major bugbear for a number of the IT decision makers we quizzed, with one CIO claiming cloud is "a great idea in theory but hopeless in practice, given how poor mobile and fixed telephony can be in rural Norfolk". One reason given time and again by end users for not accelerating their journey to the cloud was the desire to maintain long-standing partnerships with existing technology suppliers. Many respondents told us they wished to start heading in a cloudy direction, but wanted to do so in unison with their existing providers of hardware, software and support.
• Top VARs 2014 will be published with the 4 November issue of CRN
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