EDGE 2017 - What the customer wants

New-look tech buyer open to delivering new projects, favours collaboration and craves outcome-driven results
Mark Iles - Executive Consultant, Tech Research Asia

Mark Iles - Executive Consultant, Tech Research Asia

As new technologies and business models flood the market, new customer demands are emerging, placing pressure on partners to adapt and reboot.

Consequently, starting with the customer is crucial when creating any viable channel strategy, with EDGE Research outlining the end-user priorities across Australia and New Zealand (A/NZ).

After quizzing buyers on both sides of the Tasman, a clear picture is emerging for partners, with clarity around who the customer is, how the customer is spending and crucially, what the customer wants.

Following an in-depth research process - delivered during EDGE 2017 -  findings highlight a new-look tech buyer, a buyer that is open to delivering new projects, is in favour of collaboration and craves outcome-driven results.

“The business outlook from both customers and partners during the next 12 months is overwhelmingly positive,” Tech Research Asia executive consultant Mark Iles observed.

EDGE Research 2017
EDGE Research 2017

“This reinforces what we see in our interactions with CIOs and business executives in the region as customers continue to look to technology to drive efficiencies and new revenue streams and are turning to partners to help execute these efforts.

“This is supported by continued low interest rates making funding for expansion attractive along with relatively stable labour markets — noting that some higher-level skills in technology are in short supply in some geographies e.g. cloud and security architects and business analysts.”

EDGE Research 2017
EDGE Research 2017

When asked about budgets the story was equally buoyant with nearly 1/3 of customers planning to increase their IT budgets for the coming year and only 10 per cent forecasting a decline.

“This is obviously a good news story; however, the market has been buoyant before and we didn’t see this behaviour then so what’s different this time?” Iles asked.

Within the context of IT budgets, EDGE Research asked customers to outline where the overall total spend on technology related initiatives and projects was controlled within internal departments, with findings highlighting the emergence of a new breed of technology buyer.

Do you know your new customer yet? Because it’s not the CIO

Partners within the channel have proven to be remarkable change-agents, both in front of customers and internally — Forrester principal analyst Jay McBain outlined the next end-user hurdle to overcome during EDGE 2017.

Jay McBain - Principal Analyst of Global Channels, Forrester Research
Jay McBain - Principal Analyst of Global Channels, Forrester Research

Thinking about the amount of churn in the channel over the past 35 years can be downright dizzying. Starting from the first disconnected PCs to the recent WannaCry ransomware attacks, channel partners have transitioned their skills to dozens of new technology opportunities.

At the same time, they have transformed their business models from resell, break-fix, installation, maintenance, to solution providing and recurring managed services, among others.

The one thing that has stayed relatively constant over these decades is how customers decide and procure technology.

Led by CIOs and IT departments, channel partners and vendors have fine-tuned their product and messaging mix to capitalise on this customer buying journey.

Over the past couple of years, driven by cloud and the growing acceptance of software-as-a-service (SaaS) business ecosystems, this journey just took a hard-right turn.

EDGE Research 2017
EDGE Research 2017

Similar to local EDGE Research findings, global analysts are now reporting that 72 per cent of technology decisions are influenced and/or made by line of business executives.

These leaders of departments such as sales, marketing, finance, operations and HR are increasingly taking ownership of their own digital transformations.

In fact, it is predicted that this number will rise to 90 per cent by the year 2020, according to Gartner.

Here are some other startling numbers that are reflective of this new buying journey:

  • 29 per cent of technology decisions have no involvement by the IT department - business executives are building solutions without internal help and in many cases are using external talent to advise on security, back-up, compliance, disaster recovery etc (Forrester)
  • 52 per cent of business executives are using business-unit budgets to buy technology as opposed to assigned technology budgets from IT departments (CompTIA)
  • 58 per cent of business executives are significantly involved in deciding and hiring third party services firms to implement and integrate these projects (Forrester)
  • 73 per cent of B2B buyers prefer buying from the web or self-service functionality from the vendor —reselling technology and taking a margin will soon become a relic of the past (Forrester)
  • 68 per cent of purchases through distribution are now categorised as simple or transactional — buyers are doing the upfront research, building the solution and in the absence of self-service options, are purchasing at the part number level (National Association of Electrical Distributors)

Business leaders are clearly looking for full-service solutions and are putting together the resources and teams to make it happen.

EDGE Research 2017
EDGE Research 2017

They are increasingly relying on a new set of influencers including SaaS ecosystem partners, industry-based professional services firms, ISVs, born- in-the-cloud firms, and the start-up community - these shadow channels are discussed in more detail in the next round of EDGE Research.

In my opinion, this change is more difficult than adding a new technology practice or specialty to the line card — I even think this is harder than changing a revenue model.

Working with a completely different buyer, with different preferences, motivations, requirements, and levels of influence will profoundly challenge the channel like nothing before it.

Project focus

EDGE Research asked customers to document how many projects and programs of work were scheduled to be delivered this year, with 48 per cent planning to use more external providers than 2016.

Specifically, 57 per cent of local businesses are aiming to deliver more projects than last year, ahead of 19 per cent of organisations seeking to deliver less, while 24 per cent of companies plan to deliver the same.

EDGE Research 2017
EDGE Research 2017

But who are customers going to call?

According to findings, 38 per cent go customers consider brand “unimportant” when selecting a new provider, with five per cent of customers reporting greater satisfaction with their main IT providers today.

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Yet crucially for Iles, the problems for partners comes through differentiation, or a distinct lack of, across A/NZ.

Because of the 20,024 IT business operating in Australia, 3,928 have the word ‘cloud’ in the name - consequently, the channel remains challenged to standout in a crowded marketplace.

EDGE Research 2017
EDGE Research 2017

Delving deeper, customers outlined the top five mistakes partners make when selling, with selling product features over business value ranking the highest.

Followed by a lack of understanding around business problems, coupled with not providing sufficient business case support, end-users are also turned off by poor account management and communication, alongside a failure to provide competitive pricing or suitable customer references.

"Partners know their customers of course but what customers want and expect from partners is rapidly evolving and solution providers they are starting to fall behind,” Iles added. “You only have to look at the recent acquisitions of digital media agencies made by some partners to see where the market is heading.”

Today, customers want deep solution expertise from the channel, a channel capable of delivering solutions ‘as-a-service’, while at the same time being easy to engage and do business with.

“Overall, the market is buoyant and budgets are increasing but spending patterns are changing,” Iles added. “What’s clear from customers however is that specialisation by industry and/or solution will continue to be more important than product expertise.

“As a key takeaway for partners, traditional IT buyers are being surrounded with decentralised technology business representatives with budget control and a focus on operational outcomes.”

Customers crave collaboration, so partner up

Tech Research Asia executive consultant Mark Iles assesses the importance of collaboration in the channel today.

Mark Iles (Tech Research Asia) and James Henderson (ARN / Reseller News)
Mark Iles (Tech Research Asia) and James Henderson (ARN / Reseller News)

The early 1990s, a time when the PC era was in full swing and new computer resellers were popping up seemingly every day as businesses and consumers couldn’t get enough of the personal computing revolution.

It was also, arguably I grant you, a great period for music with the likes of Nirvana, Chili Peppers and Oasis topping the charts (the less said about ‘MMMbop’ and Vanilla Ice the better).

One song that perhaps you missed from 1990 was the frankly forgettable ‘She Ain’t Worth it’ by Glenn Medeiros and Bobby Brown.

Why all the nostalgia for the early 90s and a long forgotten song by a Hawaiian crooner and an up and coming rap artist?

Well, that particular song is credited as being the first to debut the word ‘featuring’ on a no.1 hit starting an explosion of musical collaborations over the following 25 years.

It’s hard to listen to anything from the current charts that doesn’t credit more than one person and this song has come to be seen as a watershed in changing attitudes between artists on collaboration.

But outside of academia, few other industries have really embraced collaboration.

The IT industry in particular has built a very public reputation over the last couple of decades for its un- collaborative spirit between vendors and partners, much to the frustration of customers.

In part this was driven by a general attitude at the time that all competition was bad and that it was better to lose than to work with rivals.

Anyone who attended large vendor conferences in the 1990s will have seen the level of fury aimed at any and all competitors, which also bled over into competition between the big systems integrators based around who ‘owned’ the customer.

Mark Iles - Executive Consultant, Tech Research Asia
Mark Iles - Executive Consultant, Tech Research Asia

Fast forward to 2017 and there has been a noticeable shift in attitudes and behaviour, perhaps in part due to the rapid emergence of a new breed of cloud vendors and partners.

A large number of new businesses are run by younger Gen Y staff who seem naturally more open to collaboration and remain untainted by history.

Plus, these businesses typically have a very specific solution focus so there is no concept of being a 'one- stop-shop', leading ultimately to a strong need and desire to collaborate with others.

Combine this with growing demand from customers for rapid adoption of ‘bite-sized’ solutions for specific business needs and you have a landscape that is shifting under our collective feet.

Integration is the new byword for IT and in a world where services are increasingly fungible, anyone not seen to be playing nicely with others is much easier to replace than before.

For some the change will be easier to digest than others.

Ask yourself this, how many strategic partnerships do you have (exclude your large vendors)? How many of these are with start-ups? What percentage of your deals involve another party, either introduced by you or by the client?

Any talk of customer ownership in the modern era is nonsense and it is time to move beyond the flawed ‘co-opetition’ model we have been operating on for the last few years and into an arena of true collaboration.

Ultimately, it’s what customers are looking for and they have a nasty habit of being right most of the time.

And finally, whatever you do, resist the temptation to watch the video for ‘She Ain’t Worth it’, don’t say I didn’t warn you.

Tech Research Asia, in conjunction with ARN and Reseller News, created three unique and correlated surveys to analyse trends and alignment between customers, partners and vendors in Australia and New Zealand. Over 240 respondents including IT decision makers from a broad range of industries and business sizes, traditional and ‘new’ partners and a broad mix of vendors took part in the online survey conducted from June through July 2017.