ARN Roundtable - Distribution is the new facilitator
- 11 April, 2016 16:09
George De Bono (rhipe), Max McLaren (Red Hat), Walter Rosada (Datacom), Paul Turner (Zynet), George Kazangi (BlueCentral), Carolyn Darke (Microsoft), Tom Mason (Seera), Nick Beaugeard (HubOne), Ben Town (Hosted Network), Warren Nolan (rhipe), Hafizah Osman (ARN), Barry Silic (The Cavalry), Jennifer O'Brien (ARN), Eric Jewett (SkyKick), David Nicol (Citrix). Photo: Mike Gee
It is a time of sweeping changes. The market is in a state of ongoing disruption and now Cloud-based distribution is being challenged rather than being the challenger.
The winners will be the innovators who embrace disruption as opportunity, and relish evolution to not just keep up with the market, but to define new ones.
Certainly, the engagements between resellers, distributors, vendors and partners are also changing as business adapt and react to new technology and industry trends.
ISVs are becoming suppliers, competing vendors are now collaborating with each other and partnership and opportunity is everywhere.
Collaboration, “coopetition” and alliances are the new frontier, and new relationship models continue to evolve to address customer needs.
At an exclusive roundtable in Sydney – a group of thought-leaders assembled by rhipe and ARN – discussed the changing channel landscape and how businesses can start looking for new opportunities and innovative ways to add value and profit.
The group examined some significant changes to affect the distribution landscape in recent times, while also highlighting their respective company journeys.
Due to the sweeping market changes and need for new skills and a host of services, the channel is strategically partnering and collaborating with other players – former rivals and fierce competitors – and having to rethink the entire partnering strategy.
Max McLaren, Red Hat A/NZ regional vice-president and general manager
"The company’s partnership with Microsoft is a major example of this new age of relationships in vendor world.
“We have 4000 to 5000 customers in A/NZ, but 80 per cent comes from the enterprise. Obviously Microsoft has a very strong partnership with vendors that have been very strong in the SMB channel
"But we’re pretty excited about the opportunity to figure out where the opportunity is with those traditional partners that have done a good job in the SMB space.
"The as-a-service value proposition means that the barriers to entry that traditionally existed for organisations that wanted to acquire technology was very enterprise focus has disappeared because it’s a consumption-based model. There’s an opportunity for us to use our imaginations through the whole spectrum of the ecosystem and figure out the new opportunities.”
Ben Town, Hosted Network managing director
Today’s supercharged cooperative and collaborative partner environment is being considered on a case by case basis. No doubt partners need to transition, however, I agree that it is certainly an exciting time for the channel.
“How each partner deals with the coopetition opportunity depends on the partner at the end of the day. We don’t deal with a huge number of partners but we do work with partners that can see the opportunities resulting from the changes, and they understand that they need to change.
“Traditional managed service providers need to adopt new ways of thinking, and adopt new revenue streams. It’s about changing the way we’re thinking to stay profitable and stay ahead of the times.”
Carolyn Darke, Microsoft small to medium business channel and distribution manager
The company has drastically changed its view in the area of partners, thereby embracing a whole new host of players.
“When I think about the different business models, about coopetition, we obviously have a lot of different relationships now in the market and partnerships and we’ve obviously changed our personal view on the partnerships.
"We’ve always had partnerships with OEMs, but now we see very much that it’s about ‘how do we scale into different ecosystems, how do we get the customer reach, and how do we focus on innovation?’
"We don’t want to buy everything; we don’t want to own everything. We know to innovate quickly we may need to partner with someone who has different capabilities in different areas. If you have that principal in mind about partnership, you can do some great things on some hard solutions that you would not have done before separately.
“We encourage partners to have a think about what they are good at, what they are not good at and what they don’t want to do. If you see an opportunity in those areas, focus and specialise on things that you’re good at. Outsource what you’re not good at or work out some different partnerships with those that you can network with and work well together with."
But it’s not about subcontracting. “It’s more about working with who has those skills that you can develop a business model with and can go to market as a single face to that customer.
"You will still own the customer relationship, but have other systems in the background around some capabilities or skills, which you never wanted to develop into any sort of depth.”
George De Bono, rhipe A/NZ general manager of sales
"I agree partnering today is all about finding a shared business outcome for the customer and being mutually profitable. The as-a-service equation is the main focus and pursuit.
“It goes back to that phraseology which is as-a-service. It’s an ability and a conversation we have daily and internally, asking ‘how do we deliver a better service to both sides?’
"How do we have the conversation with partners about growing their business, but not just leading them with ideas but rather talking around ‘what are you trying to do and how do we help you get there?’ and being able to bring the right people from the vendor side into that conversation.
“We need to be committed to the success of our partners in the same way that our vendors are committed to our success – then everybody wins. It truly has to be that three-way collaboration to get to the end point.
“If we’re not delivering either side as-a-service, either providing our vendors with more opportunity, or providing our partners with ideas around potential new revenue lines, then it’s not successful. It’s through driving that economic proposition that we become a more valued piece of your ecosystem and that’s where we’re trying to drive to.”
David Nicol, Citrix director of workspace product sales <
"Knowledge sharing about key business drivers and objectives is key.
“We sit down with partners. We don’t provide the answers but we talk to them about the framework of all the considerations they need to make.
"What is their real value proposition and differentiation in the market? Who do they see their competitors are? Where do they need to partner to develop a service offering that they think appeals to their segment? What’s their specialisation and value proposition?
"Just saying the market is shifting to as-a-service and, therefore, I need to host services is not going to deliver them a sustainable business. It has to be done by understanding where they’re going to differentiate and there’s definitely a role for vendors and distributors to help them go through that process."
Warren Nolan, rhipe chief commercial officer
The main objective is to bring people together. This new age of partnership bodes well for the founding principles of rhipe. Revenue models, licensing models and the way companies are engaging with customers is changing.
“Our business has been predicated on being able to bring people together who don’t necessarily work well together and identify where the opportunity might lie.
"They, as individual vendors, may not have been working well together but have brought their programs together for partners.
“When it comes to partners working with other partners, we can offer both commercial models, and partnership measurement models, and education on how to work together if you’re using the one central acquisition or provisioning point.
“For example, through a Rhipe portal, there’s an opportunity for us to put in place a commercial relationship that benefits all the partners involved in the solution that goes to market – and in that way we can add real value.”
What are some of the significant changes to affect the distribution channel in the last few years?
Carolyn Darke - Small to medium business channel and distribution manager, Microsoft
"In traditional distribution we used to talk predominantly about hardware. It was about warehousing, logistics and real efficiencies on supply chain, but also efficiencies around licensing.
"Now with the change that we’ve seen, specifically with Cloud and the massive growth in Cloud services – it has resulted in the decline in PC shipments and service shipments. It has had a massive change on the distribution landscape and framework and our expectations on distribution.
"Today, we’re talking about marketplaces and how we can deliver cloudy solutions and scale down to our partner base with a great partner experience. There’s a proliferation of Cloud vendors so we need to support those Cloud vendors, which is really important.
"We need to understand what partners are looking for, what they expect, and we need to help them in their transformation. We have a big responsibility to be accountable as a vendor, and we also want to partner with our distributors to look at moving from transactions to true value-based services."
"We’ve moved away from the traditional distributors and moved more into a channel that’s driven by the customers. Customers today want to consume IT as-a-service and that’s driving a lot of the change in partners, and in distribution.
"We’ve moved away from selling products; we’re now talking about solutions. The only way distribution can find out what solutions should be sold in the market is by immersing themselves in the partner channel.
"We’re seeing many distributors coming down working closely with the partners and vendors to try and find that out. Any distributor selling tin these days with the low margin and expecting to get higher volume won’t be around for that long."
"We started life as a managed hosting business about 20 years ago. We are now more of a full-service IT infrastructure company. The major changes we are seeing are around sales.
"We used to have our sales team deal with the vendors directly and we used to get conflicting answers. It was cumbersome to manage many of the vendors. But the good shift around working with value-based distributors is now we have one point to go to, we have one account team and they understand our business more.
"Instead of having to tell all the different vendors about why our business is changing, and how it has already changed, we work with one team and they understand our business better so they can consult.
"The biggest change for us is that we’re shifting away from doing a lot of the pre-sales, all of the technical pre-sales ourselves and we’ve become solution sellers. We utilise the technical resources, especially around licensing, which is for us the most complex thing from the distributor."
Warren Nolan - Chief Commercial officer, rhipe
"The things that I’m seeing in the market today are reinforcement of the nature and the structure of our business, our natural DNA. Having said that, though, we are still striving to innovate and change our business to become more adept at the requirements of our partners.
"Interestingly, I remember fighting vehemently with Microsoft in terms of suggesting that our business model should be offering technical service, technical support to partners in the hosting environment versus business transformation.
"Our strategy was business transformation. The vendor distributor relationship typically underpins the technical product and support education, and we didn’t think that was the particular way for us to go. But we’ve now come full circle.
"The fact that we’re now taking solution sets to market, there are multiple vendor engagements and ISVs coming into the picture means we’re now employing people with the technical background to underpin the solution with a more product orientated knowledge and awareness.
"Whether it be a partner, a vendor, distributor/reseller, aggregator, if they aren’t thinking continuingly that ‘I still need to adapt and change and innovate’, they are never going to survive."
Max McLaren - Regional vice-president and general manager, Red Hat
"We’ve seen a lot of transformation. The major change in the industry is moving from that traditional license-based procurement model, which was a perpetual license over time, and moving to the subscription-based model, which we’ve been championing from our subscription for many years.
"It wasn’t a major change for us there. Customers want as-a-service, and Australia is way out in front relative to the rest of the world in the as-a-service requirement, everything as a service.
"Aggregators, whether they’re vendors and partners or ISVs, is the destination that organisations want to procure from the market. We’re excited we’re now partnering, for example, with Microsoft in this space.
"Five years ago you would have never of said that. Two years ago, we started this plan to start working with Microsoft because we realised that the platform was the value proposition. That’s what customers want. They want that platform; they don’t really care about what elements are provided, they just want to buy the outcome.
"How do we get together with that traditional partner set that we’ve never been with before at Red Hat and provide additional value from that as-a-service requirement? We’re looking to work with distributors like rhipe to try and deliver that."
Tom Mason - APAC channel manager, Seera
"We’ve seen the transformation from computing as a product to computing as-a-service and with the millennials that are coming in today everything is on-demand for them.
"The biggest transformational change from a distribution perspective is about providing that value add. Because there is so much white noise out there, there are thousands of vendors, thousands of partners and our customers are a lot more educated because they can literally go to Google and search for anything that they want, but how do you filter the good stuff from the bad stuff?
"That’s where companies like rhipe come into their own because they can provide that value add and they can be that trusted advisor."
Ben Town - Managing director, Hosted Network
"As with any changes in the market we had to adjust our business model considerably. Luckily though, it worked out for the best as we’ve been able to move from a traditional MSP model to a channel focused service provider and have built a business around helping other MSPs / IT integrators adjust and benefit from the changes themselves.
"We’ve been around for about ten years and we originally started as a managed service provider or IT integrator. We were traditionally selling boxes and doing software and perpetual licensing, but due to the change in the market we realised we had to change our own business.
"In doing so, we identified a market opportunity, recognising that other IT integrators and managed service providers suffered from some big challenges. We sell to the channel and provide the education piece around how to survive, discussing our own learnings and highlighting mistakes that we’ve made.
"As a company, we provide mainly infrastructure as well as the solutions architecture around those different pieces."
George De Bono - General manager of sales A/NZ, rhipe
"Distribution is not a word we use a lot internally at rhipe. It’s not a word we use to describe us. Instead, two words spring to mind: aggregation and enablement. The aggregation piece is how we face our vendors and ISV partners.
"It’s taking all of the things that partners do and bring and putting them into a solution that we can then take to our partners, and then enable our partners to take that to market and build revenue streams, build product lines, build incremental offerings so that we can help their business grow. It’s a cyclical thing.
"We’re in that space now where collaboratively we do need to work together to drive everybody’s growth. If we are the choke point of the hourglass, which regulates the flow through, we need to open that throttle forward.
"We need to open that up to both sides so our vendor partners have greater access to a broader community of partners, and our partners have to access to a broader community of solutions and offerings and things they can take to market.
"Our challenge is to stay current and relevant and stay ahead of the curve so we can bring to both sides, ‘this is the next big thing'."
Nick Beaugeard - CEO and founder, HubOne
"We’re in a very dynamic market, and vendors can be slow to move business models. rhipe helps aggregate requirements and feedback and because they do that, they have more muscle with the vendor.
"A year ago, I ran a Cloud integration business, but today we’re turning into an ISV. Smart integrators are developing their own IP. We’ve spent the last four or five years building solutions and delivering them to accounting firms.
"It came to our attention that the demands for what we’re doing far out stripped our ability to supply it and so we decided we’d go to market and look to build a partner community.
"The key role of a distributor is about enabling the solutions. I’ve got a product; I’ve got a customer base; but how do I build a channel and take that to market? It is so hard to talk to a traditional distributor. Distributors like rhipe, however, are dynamic and agile and can help new ISVs get noticed.
"They consider changing business opportunities and can help partners move to the next level. Back when I started HubOne in 2008 the business models that were available to partners were interesting to say the least.
"It’s in no small part to efforts by organisations like rhipe, petitioning the vendors on behalf of the channel, that we’ve seen business models become much more channel friendly and workable. It’s not just made a difference to us, but it has made a difference across the entire marketplace."
Walter Rosada - General manager of sales, Datacom
"In the last few years we’ve evolved our hybrid Cloud for the marketplace. The single biggest significant change that I’ve seen in the last two years is our client facing functions have shifted.
"Clients are not asking us to sign up to SLAs or anything particular in terms of our solution, but they’re asking for outcome based. It’s a whole different ballgame because we’ve had to reinvent our backend completely, our commercials, how we consume technology from our distributors, from our other partners.
"The fact is that we now have an expectation that we go out and do a whole lot of four-legged selling because relying on our own sales functions or our sales capability isn’t sufficient anymore.
"We are having to retool reskill all of our traditional managed services capabilities. It’s a massive transformation the marketplace is going through - and that indirectly impacts how we partner with our distribution channel."
Paul Turner - Managing director and CEO, Zynet
"We are a business solution provider because we very much focus on the business needs of the customer rather than the technology and trying to align that. In terms of distribution, I don’t see rhipe from a distribution point at all.
"I have always seen rhipe as a partner with open arms, a provider that you can approach and get help from. I’m seeing that more and more now in the industry. I’m seeing the enhanced partnering as creating uniqueness, creating opportunity, allowing partners to make it their own and leveraging the skills of the providers to be able to differentiate in the marketplace.
"We are also an ISV, although our service pillars are solution selling and IT management and moving into information exchange protection, but we’re trying to combine all those things into a Cloud market so we can deliver a much better outcome for the customers.
"The market has changed and it is all about outcomes now. It’s about increasing the customer base, it’s about change and it’s about making sure we can deliver what the customer needs - and we’re using the likes of rhipe to do that."
Eric Jewett - Vice-president international, SkyKick
"Within distribution and the channel it is all about business transformation. Within the reseller channel we see partners in different stages in the various parts of the country.
"We see people that are still hanging onto that legacy business as long as they can, versus other partners that have embraced transformation, are giving up their legacy business and moving as much as possible and as fast as possible to Cloud.
"There is a need for partner enablement to move partners into the Cloud, and helping partners with their profitability of how they build an on-going current revenue business model. Partners might lose money initially, but it’s really about the future of business."
David Nicol - Director workspace product sales, Citrix
"We’re clearly seeing the trend of customers transitioning to as-a-service. Our fastest growing business is our service provider business that reflects that.
"Interestingly, the clear majority of that business is small to medium end users that are ready for that transition, compared to large enterprise that’s still often stuck with their on-premises deployments. This means the nature of deals is very different.
"The alternative is not a large transaction for the channel, but rather a lot of smaller transactions. A challenge that presents for the channel in that transformation is the revenue transition. When it comes to business transition for partners, there’s a role both for vendors and distributors to help partners through that journey.
"The other aspect is with end users, who are no longer consuming a project or a specific one-time outcome but an ongoing service. There is more importance on aspects like end user experience and service and support.
"What can distributors do to help partners establish best practice in those areas so they’re not just acquiring a customer but retaining customers and delivering on the revenue stream that should be more profitable for all parties?
Time of transition
Partners are tasked with transitioning to evolving business models and dealing with the subscription-based consumption model, according to HubOne CEO and founder, Nick Beaugeard
“There are lots of different very confusing revenue models. Certainly in partner land, just to take a single value [Microsoft licensing models, Citrix licensing], it’s infernally complex and when that drops down to the reseller you have a customer saying, ‘look Mr Reseller I just want to pay a single price per user per month, what does that look like?’ There are not a lot of partners I know that have the wherewithal to really get that right and make it competitive,” he said.
Agreeing there are challenges, Zynet managing director and CEO, Paul Turner, said the industry needs to be flexible and agile in order to collaboratively help customers get a desired outcome.
“You have to be agile now – not only with your customers but also with your other partners and providers. It’s going to be agility across the board. You have to recognise what level of help a customer wants. Customers don’t even know what they want and some of them want to be told or understand or make the decision based on the information you give them.
“I find sometimes you have to balance that because if the customer knows what they want and you don’t listen, they’re not going to be a customer for very long. But if a customer wants your advice because you are the trusted advisor, you need to be able to recognise that so that you can then solidify a solution and be able to deliver that professionally and capably to make sure it has the outcome that they want.”
Microsoft small to medium business channel and distribution manager, Carolyn Darke, said partner profitability needs to be carefully considered at this time of market disruption.
“We want our partners to be profitable in the new world, in the new Cloud world. They’re struggling to find out how they can perform in the current world and transform into the new world.
"We have a checklist of how we can approach all those different skills that are needed, as well as the capabilities that are needed to think about profitability in the new world: including differentiation, unique IP, and marketing skills [marketing-as-a-service] in the new digital world.
"Because you’re looking at customer acquisition, you have to think about investing in marketing, but also the types of marketing they do because customers are looking in different places these days.
Top 5 considerations in the age of disruption
- What is the line of responsibility? Who owns the client? How do we allocate blame? Who’s responsible for the delivery of all aspects and the individual elements of the service? - Warren Nolan, rhipe
- How do you determine profitability as opposed to billable hours? - Eric Jewett, SkyKick
- How does the channel transition from appealing to an IT audience to a business audience? The value propositions today are business value propositions - David Nicol, Citrix
- Partners need to understand the customer’s chain of pain (what the CEO/CIO needs), which is often foreign to a partner. It is having meaningful conversations at all different levels (IT, HR, C-level and marketing) - Tom Mason, Seera
- The outcome is the issue. That’s what the customer wants. Partners need to rethink the outcome strategy, which is both a challenge and an opportunity - Max McLaren, Red Hat