The convergence of traditional IT and the telecommunications industry has meant that players from both industries are looking at a broader range of opportunities. But what services do traditional IT resellers and integrators need from their distributor and vendor partners to adopt a broader role in the market, and where is the value for all in making the transition to telecommunications. This roundtable was sponsored by Distribution Central, Express Data, ICT123, VMware and Aastra. Check out the slideshow of the event. ATTENDEES:
- ASEIT, ANDREW SJOQUIST
- DISTRIBUTION CENTRAL, IAN KELLY
- AVAYA, DAVID ELLIOTT
- TELSTRA, BRENDAN DONOHOE
- EXPRESS DATA, DAVID PEACH
- ARN, MATTHEW SAINSBURY
- BRENNAN IT, KEN JEFFREYS
- ICT123, BEN O'LEARY
- VMWARE, JOHN DONOVAN
- AASTRA, TONY WARHURST
- ARN, SPANDAS LUI
Here's the transcript ...
MATTHEW SAINSBURY (MS): One of the great trends we see in the IT industry is the convergence between telecommunications and traditional IT. It’s both exciting and presents its own set of challenges. What have been some of the challenges when it has come to helping partners transition from traditional IT to become involved with the telecommunications industry?
DAVID PEACH (DP): One of the biggest challenges is that a lot of traditional IT integrators didn’t see that there was even a driver for them to get involved in the first place. This telecommunication business has been seen as someone else’s part of the solution and so traditionally in IT an integrator might do their work, and they would then say to the customer “we can’t come back until you’ve got a connection at the wall. This is what you need, go and organise it”, and they would never consider this part of the opportunity for them. When they started to realise the way convergence was driving certain behaviors of the customer they also started realising they had to partner with telcos. There were trust issues, and for some partners it became a little too hard to deal with it and so they put it on the backburner and tried not to deal with it.
BEN O’LEARY (BO): The IT reseller channel and telecommunications are two very, very different models. If you consider telecoms years ago there was a myriad of systems and a myriad of products that were completely foreign to the IT industry. It was complex. Now it’s slowly coming together. It has taken 20 years for a convergence start happening.
TONY WARHURST (TW): Having said that though there were a lot of voice resellers around – Commander, for example. They’ve been out there, but the problem was a lot of them didn’t understand the convergence. They had their heads under the desk, cabling and patching stuff, instead of working out quality service, going after the desktop and running voice across it.
DAVID ELLIOTT (DE): That’s a key point; a lot of the traditional IT resellers didn’t understand the complexity of what was required for getting into voice. When you start getting into the voice world it’s a unified communications world. It requires real time quality assurance because none of us like bad voice calls, conference calls and so on.
TW: Additionally, the voice guys are used to making margins. When I first got into voice, they were sitting back saying “well unless I’m making 30, 40 points or I don’t get out of bed”, whereas you talk to a lot of IT guys and they say the services they wrap around what they’re selling is where they make their money. How they look at business is a different mindset.
DP: Monetisation is something that we’re even seeing in Cloud today. One year ago, organisations were springing up thinking that they could go into business and just make margin in selling a public Cloud solution from a vendor and that is something that has become rapidly commoditised. We saw that in the voice space as well; it shouldn’t be about setting up business where you are going to make your profits through the margin only.
ANDREW SJOQUIST (AS): On one of the points there: One of the challenges in the market these days is in identifying the quality differences between these different offerings that you mentioned are popping up all over the place. That’s a big issue. The traditional IT distribution structure means you can pick a quality product based on certification or various other standards, but when you get to billable services there is no way to differentiate between one service and another service.
BRENDAN DONOHOE (BD): The voice market is traditionally different because we were in the voice market and then outsourced it. With the other IT markets it’s been a case of us moving towards them. They are two different ends of the spectrum. However, the key point is collaboration and starting to bring it all together. There are a lot of dynamics that are changing at the moment in the market – some from a convergence point of view, and some from a Cloud point of view. And there are new opportunities opening up at the moment.
DP: Would it be fair to say that Telstra has had to do a pretty big transition in your channel, because where you had a traditional channel selling voice out of a Telstra shop, now you’ve started wrapping other complex IT solutions into the offering. Who is able to successfully sell those things?
BD: Yes, and you can broaden that. You look at our account executives for example, some of them are very good at using third parties and leveraging their skills and others struggle. Unless they own it end-to-end they don’t trust anybody and they struggle, so it has definitely brought about some new challenges. As we move into Cloud if you look at our T-suite offering, we can’t do it end-to-end unless the customer has some IT skills themselves and can do all their migration themselves. So we don’t do the full end-to-end service, and unless we can partner we’re going to struggle to make it through that.
JOHN DONOVAN (JD): That’s a good opportunity for the IT partner community. IT, in terms of value add to the customer base, has been around for a quite a long time and has been through some fairly intense consolidation over that period. Companies became skilled at determining what their points of differentiation are: if you’re offering the same sort of kit as the other person, how do you differentiate? You can’t do it on price because you would disappear within a week. As an industry we’ve become pretty good at saying “well this is the value add that I provide”.
Where the telecommunications organisations can really benefit from some of these relationships is in partnering with somebody that ultimately knows the customer in a different way than they know the customer. They bring a tremendous amount of intellectual property around how traditional IT systems have been built and managed over the last, in some cases, 20 years with some of these partners. It’s an interesting opportunity with these partnerships that are being forging between the telcos and the IT guys. We’ve had a robust differentiated relationship with the customer.
BD: And they are the companies that are going to survive. Once we start going head-to-head to compete for the same thing challenges start to emerge.
JD: Then both sides get bloody noses, but the telcos are generally bigger.
TW: Just on that point, from a vendor point of view through to a carrier, a reseller and even a distributor, I wonder “who actually owns the customer?” Nobody does, but that’s where a lot of discussions are going on in the distribution channel, through our resellers, and even through the carriers.
DP: And so it becomes a definition of ownership. Some of the partners that I’ve spoken to over the years very clearly define ownership by who invoices the customer and who owns the transaction. That is a challenge for some people to get their head around, and will definitely be in the future. They won’t necessarily get the chance to own that transaction.
JD: I don’t think the billing relationship defines what we like to call ownership.
KEN JEFFREYS (KJ): But as the services are merging and you are doing everything as a service somebody has to define that overall service.
JD: But there is a tremendous response already for the advisor in the relationship and the advisor or the influencer, particularly around the building of Cloud-based solutions. That advisor is not necessarily going to be the person who sends them the bill, but they’re tremendously influential in that relationship. Once again, that is a interesting opportunity the IT industry has – being thought leaders or trusted advisors for these accounts. There is so much intellectual property that’s built up between the IT relationships that the telcos can benefit from, so it’s more complex than the concept of whoever gives them the bill owns the account.
DP: Sometimes we’re all guilty as an industry at looking from the vendor down, but not from the customer up. If you look at ownership and who has the customer – who is the customer going to pick up and call when either they want to spend some money or they’ve got a problem? Whoever it is they call is the company that owns it. If you’re taking that call you have to make sure either they are paying you for that call and doing that work or perhaps the vendor or another partner is paying you. The point is you are responsible for setting up your business so you’ll be rewarded for your efforts.
IAN KELLY (IK): There are a lot of partners that are involved with some customers, though – particularly large customers. There is quite often more than one partner’s role with that customer, so it depends on your technology area, what you’re looking at and what the customer is looking to solve from a business point of view.
TW: But if you look at the way that the partnerships can work by moving a lot of the pain the small reseller may have in dealing with some customers in this market and moving some of it into Telstra, it may make for a more profitable transaction. A company such as Telstra can work independently by themselves and invoice their customer, carrying the credit risk with that customer, shipping and all the other things, but the reseller can still get a healthy margin for doing so.
AS: From a vendor point of view I don’t think there is any more recognition that there may be more than one partner involved. A lot of their programs are geared around who is the first to register the deal and that is who makes the margin or has the customer. From a vendor point of view that needs to change and get even more diversified.
TW: What we’re seeing – from a vendor’s point of view, is a lot of partners being more proactive and listening to their customers. What their customers are looking for and driving us to deliver is a different partner model, go-to-market model or the way that we package our solutions and products to take out to the customer.
MS: What do you think the distributor’s role is in this convergence of telecommunications and traditional IT?
BO: The first big challenge we’re experiencing, particularly with Telstra, is that it is a very large organisation with many, many systems, and lots of complexity. Resellers don’t want to be engaged in this level of complexity. They want a solution that they can deliver to their customer which compliments the overall solution that they’re delivering. So we’re going to find a way to take that complexity out. Telstra has about 10, 12, 14 systems that dealers would access if they’re a direct dealer with Telstra. What we have done is deliver one system to our resellers and feed out any of the Telstra products via one system. It’s a big investment, but again it’s an areas where we can reduce complexity.