It is often said that “The Only Constant Is Change”, and this is certainly true in business. All businesses are affected by change, some suffer during periods of change, but some thrive. Like you all I’m sure, I have witnessed much change in the business world and I’m sure we will all agree that, in times of great change, there are winners and losers.
The ground breaking and innovative music producer, Pete Waterman, calls these moments “Thriller Moments”, referring to the moment he first saw the video for Michael Jackson’s song, Thriller. The moment he saw it he knew the music world would never be the same again; he recognised it as a quantum leap forward in the way artists showcased and presented their work; in fact he knew then that nothing would ever be the same again in the music industry.
However, despite this massive period of change for the music industry, did it stop his production company and record label, Stock Aitken Waterman, from being successful? Absolutely not! But did it revolutionise the music industry? Absolutely!
Sometimes we are lucky, if we pay attention, if we come up for air and if we look, the warning signs of impending change can be seen, and we can prepare, adapt and then take advantage of the changes brought about by natural evolution in our business sector. And this is what I think is happening in the IT industry at the moment, in fact, think of this post as notice that the “Thriller Moment” is coming to a business like yours.
I believe the “Thriller Moment” in the IT sector will be the evolution of software. Namely, cloud based SaaS (software as a service) companies that are disrupting every function, in every company across every industry. In the US companies such as Salesforce, Workday, NetSuite, Marketo, and dozens of other platforms, have created new ecosystems that support tens of thousands of software start-ups and hundreds of thousands of non-traditional technology channels jobs.
Recent data from the US, (Traditionally 12-24 months ahead of the curve, when compared to the UK), shows that cloud implementations reduce IT resourcing by over 55%. This includes outsourced services that many channels have lived on since hardware and software licensing margins began to dry up. Traditional “Generalist” IT providers are being out-manoeuvred by firms (or individuals) that focus on the 5 main vectors (LOB, sub-industry, segment, geography and technology). In many cases these aren’t “born in the cloud” companies, but industry or LOB focused consultants, service providers and independent contractors, that have been forced into technology as the industries they serve have made the same transition.
The data is now showing that cloud implementations are being won by ecosystem specialists as opposed to traditional IT and telecom partners. An example of this shift is Salesforce, which has 695 partners world-wide, driving over $20B in consulting and integration services. Using data and guidance from CompTIA and CRN, the best estimate is that the channel in the US has shrunk by 36% since the 2008 recession. Now this is over 100,000 less partner companies in North America and 400,000 less world-wide.
For those surviving, it is estimated by major distributors, that a majority of their SMB partners are operating as “Zombie Businesses”, (technically insolvent!) Adding to these discouraging numbers from the US, is that 40% of surviving partner executives are planning exits (retirement or M&A) in the next 8 years.
On the positive side, CompTIA predicted that 75% of the channel will be made up of millennials in the same time period.
Now unfortunately, many industry experts assumed that these millennials would be starting new businesses based on reseller, VAR, managed services, agent/sub-agent or solution provider type business models. Businesses affectionately known in the US as, "Born in the Cloud". The problem with this assumption in the US, and we have to assume that we will follow this inconvenient market trend in the UK, is that the number of born in the cloud partners being created is drastically lower than the hundreds of thousands being lost in the US.
While the IT and telecom channel numbers are declining, this new generation of SaaS platform partners are exploding in the US. But, unfortunately, before your business can explore this new vector-based, millennial-led world, you will first need to understand how your company and products play, with the decision makers in your target demographic;
•Do your products and services integrate seamlessly with the major SaaS ecosystems?
•Are they priced in a per-person, per-month recurring model that can be added to your customer's current arrangements?
•Are they packaged in a way that you as a consultant or integration specialist can profit?
•Do you know who you are targeting with your services and how to identify and engage with them?
To put this into perspective, in the US it is estimated that the current cloud opportunity stands at $204B, according to Gartner, growing by double digits for at least the next decade. Unbelievably, 67% of current channel firms in the US are reporting that cloud demand has outstripped their capacity, whether that is technical capability or bandwidth, while a new generation of non-traditional partners are growing and profiting in this new world.
And all this at a time when many of the IT companies we are working with at the moment, are facing the stark realisation that their sales professionals have actually never sold very much in the past. In fact many directors and business owners we work with have realised that their expensive, highly paid sales professionals, have been mainly handling incoming enquiries and providing IT solutions to customers contacting the business.
Now, having said that it is important to realise that proposals still need to be constructed and delivered, meetings attended, current customers maximised, presentations made and business earned! But what happens when the phone stops ringing? Is your business equipped for the new reality of business development combined with selling services required by your customers, to customers who have not contacted your business?
So, if this resonates with you and you want to explore how we can help you prepare for the coming challenges, identify and target new market sectors and build the business development and marketing initiatives required, in order to take advantage of these opportunities, then please do not hesitate to contact Andrew Banning on either 0118 947 1010, on 07769 990719, or at andrewb@virtuosoconsultancy.co.uk.
