The shift towards outsourcing — as highlighted by last week’s mammoth Qantas $1.4 billion deal with Telstra and IBM — will only make life tougher for the channel, according to Gartner.
Vice-president of the analyst firm, Rolf Jester, said channel players would have to learn new types of selling skill and find new markets if they were to survive.
Distributors told ARN they agreed with Gartner, and they were moving into newer and more profitable markets like services and mobility.
This week, Qantas signed a $1.4 billion deal to outsource IT and data centre services to IBM and Telstra.
The 10-year deal will see IBM receive $650 million to acquire and manage data operations, mainframe and midrange computing.
Telstra will get $750 million for handling domestic data, voice and desktop services.
The move is seen as a shift towards turning information technology into a service as the flexible nature of the contracts allow technology use to rise and fall with demand — a process known as utility computing.
Many vendors have already moved this way, with HP joining IBM in offering its own services division.
Smaller outfits such as Volante and Dimension Data were also shifting into services while still dealing in products, Jester said.
“The news for the channel [from this deal] is it’s a bit of a challenge,” he said. “Longer term, product is going to be bought by service providers — not as big as IBM — but the big are getting bigger and people selling longer term have got fewer customers.
“That’s something they are going to have to put into their plans every year.”
IT services — a $4.5 billion market in Australia — is growing by up to 8 per cent a year, faster than the economy and the rest of the IT industry, meaning a net shift towards services from product.
“They are still buying products but the people doing the buying are wily negotiators,” Jester said.
“It puts pressure on those people selling.”
Upcoming outsourcing deals are expected across the Federal Government and the South Australian government, though the bulk of deals involve smaller organisations and are typically worth less than $1 million. Jester said deals with a services element needed different selling skills as they were longer term, involved more patience, more general business understanding and a more consultative approach.
The Qantas deal took a year to negotiate. Such a high-level of pre-sales involvement could be high risk as while you would win some deals, you would lose others, he said.
While some sales staff might excel in the quick turnover sales environment of product, Jester said some managers could not adjust to the softer sell of services.
Ingram Micro Australia managing director, Steve Rust, said the longer sales cycle of services needed a strategic selling approach similar to that of the old mainframe selling skills of the 1970s and 80s.
They did not have the dynamic nature of selling desktops. Such big deals required patience and an ability to deal with committees and their related politics.
Customers would also need the back-up of a large organisation able to supply all its needs over the years.
Rust insisted such outsourcing deals would have little impact on the wider channel because the market was fragmented and outsourcers still needed to get their product from somewhere.
But eXeed managing director, Michael Bosnar, said this type of deal was a threat because it eliminated opportunities for channel partners to go to enterprise customers unless they had a niche value proposition to offer.