New from BookNet Canada for 2024: Loan Stars - Tech Forum 2024
4 Takeaways on State of IT Channel
1. 4 Key Takeaways on IT Channel Today
Carolyn April
Sr. Director, Industry Analysis
CompTIA
Copyright (c) 2014 CompTIA Properties, LLC. All Rights Reserved. | CompTIA.org
3. How Far Along the Path to Business Transformation?
Self Assessment Business Transformation
17%
2012 2014
59%
55%
24% 24%
22%
Low degree Moderate
degree
High degree
Current State of Transformation by Size
Small channel firm
Medium channel firm
Large channel firm
CompTIA MPS Trustmark Value Proposition
1. Validation of MPS expertise to customers
2. Mechanism to evaluate internal MPS
operations / follow best practices
3. Differentiator
15%
72%
13%
20%
49%
31%
15%
48%
37%
Low degree Moderate
degree
High degree
Source: CompTIA 4th Annual State of Channel: Base: n=350 IT channel firms
4. Primary Catalysts for Channel Business Transformation
27%
23%
23%
36%
35%
32%
41%
Cloud computing pushing us in new
directions
Customer demand for different services
and IT delivery models
Desire to move to a recurring revenue
model
New financial models are more lucrative
Vendors pushing us to change
Margins on product sales declining
Defensive move against obsolescence
In 2010, just
37% of channel
firms sold cloud
solutions; today,
nearly all do in
some form.
Source: CompTIA 4th Annual State of Channel: Base: n=350 IT channel firms
5. Top Challenges Experienced with Business Transformation
Note: rank order listings are useful for summary purposes, but should NOT be interpreted quantitatively.
For example, the first-ranked item is not necessarily 8 times more important than the eighth-ranked item.
1. Cash flow and other financing challenges
2. Customer education
3. Balancing existing business operational needs with new business
4. Hiring skilled staff to accommodate new lines of business
5. Need for new kinds of technical training
6. Need for sales and marketing training and repositioning
7. Need to learn new financial metrics and accounting schemes
8. Lack of business transformation roadmap
Source: CompTIA 4th Annual State of Channel: Base: n=350 IT channel firms
6. Takeaway #1
Cloud is forcing fundamental
change – but take stock before
moving too fast.
Copyright (c) 2014 CompTIA Properties, LLC. All Rights Reserved. | CompTIA.org
8. Year-over-Year Cloud Traction Positive for Channel
Cloud vs. Established
Products/Services Revenue Growth
26%
22%
50%
19% 21%
58%
Established
growing faster
Growing at
same rate
Cloud growing
faster
Cloud vs. Established
Products/Services Profit Margins
21%
30%
49%
11%
24%
64%
Established
higher
Roughly the
same
Cloud higher
Source: CompTIA’s 5th Annual Trends in Cloud Computing | Base: 400 channel firms with cloud offerings
9. Challenges Deemed “Very Significant” by Channel on Rise
45%
44%
44%
46%
57%
56%
52%
52%
50%
49%
43%
56%
54%
59%
Determining appropriate business model
Balancing needs of legacy business and
cloud sales
Initial costs (infrastructure etc.)
Cash flow/financial considerations
Deciding which vendors to work with
Developing cloud expertise (technical and
sales)
Optimizing markering and sales messaging
for cloud
2014
2013
Source: CompTIA’s 5th Annual Trends in Cloud Computing | Base: 400 channel firms with cloud offerings
10. Steps Taken to Mitigate Cloud Transition Challenges
Note: rank order listings are useful for summary purposes, but should NOT be interpreted quantitatively.
For example, the first-ranked item is not necessarily 7 times more important than the seventh-ranked item.
1. Invested in technical, sales and business training
2. Transitioned just a portion of business to cloud; scale later
3. Used third-party data center provided rather than build own NOC
4. Accessed vendor-provided training
5. Hired new sales reps to sell cloud services
6. Partnered with other solution providers to combine skill sets
7. Pursued additional credit/capital
Roughly half of respondents turned to a third-party data center provider for
cloud in 2014, up from 31% last year.
Source: CompTIA’s 5th Annual Trends in Cloud Computing | Base: 400 channel firms with cloud offerings
11. Takeaway #2
Make sure to understand the
implications of business model
change.
Copyright (c) 2014 CompTIA Properties, LLC. All Rights Reserved. | CompTIA.org
13. Sales & Marketing Skills Still Lag Technical Expertise
Self-assessment of sales &
marketing effectiveness of channel
29% 48%
21%
3%
Highly effective
Moderately effective
Hit or miss
Ineffective
MSPs are far more critical of
the channel’s sales and marketing
acumen than solution providers.
Just 6% of them deemed
channel efforts ‘highly effective’
vs. 31% of solution providers
who responded favorably. Twice as
many MSPs characterized these
operations as ‘hit or miss.’
Source: CompTIA 4th Annual State of Channel: Base: n=350 IT channel firms
14. Impact of the Adoption of New Business Models, Such as
Managed Services and Cloud Services, on Sales Structure
12%
6%
27%
28%
20%
Increasing the complexity dramatically
Increasing the complexity somewhat
Simplifying the complexity somewhat
Simplifying the complexity dramatically
No impact
Source: CompTIA 4th Annual State of Channel: Base: n=350 IT channel firms
15. Main Sales Activities Taken by Channel Firms
Note: rank order listings are useful for summary purposes, but should NOT be interpreted quantitatively.
For example, the first-ranked item is not necessarily 8 times more important than the ninth-ranked item.
1. Routine visits/interactions with existing customers to upsell
2. Marketing/business development to identify/attract leads
3. Sales proposals presented to customers
4. Outside sales rep face-to-face visits with potential new customers
5. Use of social media to attract new customers
6. Contractual terms discussed for services, including SLAs
7. Inside sales cold-calling of qualified leads
8. Purchasing outside database/customer list
Source: CompTIA 4th Annual State of Channel: Base: n=350 IT channel firms
16. Rating Various Activities as Part of Sales Model Transition
15%
12%
18%
17%
12%
10%
18%
10%
49%
45%
50%
44%
47%
46%
49%
35%
38%
38%
48%
41%
42%
41%
36%
41%
Retraining existing sales reps to engage in services-based
selling vs. product/project sales
Hiring new sales staff to accommodate new lines of
business
Realigning sales compensation models for reps
Adjusting to different sales cycle durations
Learning to sell to non-IT and line-of-business end
customer buyers
Effectively rebranding/messaging as a services
provider
Performing demand generation/lead generation for
new customers
Creating incentives to drive sales to new business
areas
Major factor Minor factor Not a factor
Source: CompTIA 4th Annual State of Channel: Base: n=350 IT channel firms
17. Actions Taken to Sell to Non-IT LOB Executive
25%
23%
19%
40%
36%
34%
32%
Source: CompTIA 4th Annual State of Channel: Base: n=350 IT channel firms
Sales training to enable reps to sell to non-IT
executives
Use of social media to target non-IT executives
Redesign marketing collateral with more of an end-user
focus
Focus less on HW/SW specs and more on total
solutions
Hire new sales reps with experience in vertical
industries
Maintain dual approach for business and IT execs
to meet both needs
Incentives for staff to further engage with business
execs
49% of
solution
providers
plan this
step vs. 28%
of MSPs
18. Takeaway #3
Learning to sell consultatively
with a business solution or gain in
mind is paramount.
Copyright (c) 2014 CompTIA Properties, LLC. All Rights Reserved. | CompTIA.org
20. Staffing Activity for Channel Firm Sales & Marketing
24%
25%
22%
26%
34%
39%
28%
51%
44%
36%
48%
23%
Added new marketing reps
Eliminated sales reps based on
business model change
Hired reps outside the IT industry
Added new sales reps
Major activity Minor activity No activity
Source: CompTIA 4th Annual State of Channel: Base: n=350 IT channel firms
21. Social Media Usage and Marketing Plans for Future
Planned Changes in Marketing Strategy
42% Use of social media
34% Increased use of white labeling
32% Webinars, blogs, etc.
23% Hire of marketing professionals
20% No longer leading with vendor brand
or vendor certification skills to attract
customers
19% None of the above
Source: CompTIA 4th Annual State of Channel: Base: n=96 IT channel firms which are using social media
Plans to Increase/Decrease
Social Media Usage
35%
38%
2% 25%
Increase its usage significantly
Increase usage somewhat
Maintain same usage
NET Decrease
22. Takeaway #4
Cloud and other industry changes
make YOUR brand the premium to
lead with.
Copyright (c) 2014 CompTIA Properties, LLC. All Rights Reserved. | CompTIA.org
23. In Conclusion: Steps to Think About
Point #1: Re-train and/or hire sales reps to sell
consultatively and to focus on services and business
outcomes for the customer.
Point #2: Learn to sell to the non-IT line of
business buyer, who increasingly has a seat at
the table in making technology purchases.
Point #3: Retool internal sales processes, sales
team structures and compensation
plans/incentives to fit a recurring revenue model.
Point #4: Up you game around marketing
and self-branding, including the use of social
media to acquire new business.
Point #5: Don’t ignore the cloud, but be smart and
know your business operations today to plan for
tomorrow
Source: CompTIA
24. About CompTIA Market Research
CompTIA is a member of the Marketing Research Association and abides by
its guidelines for survey best practices and research ethics. CompTIA is
responsible for all content contained in this report.
CompTIA research is one way in which the association re-invests resources in
the IT channel. As the voice of the IT industry, CompTIA has hundreds of
tools, market intelligence reports and business training programs to help IT
channel organizations grow through education, certification, advocacy and
philanthropy. The full version of this report and other CompTIA research
reports are available at no cost to CompTIA members to help them develop
and hone their business plans.
Visit www.comptia.org or contact research@comptia.org for more
information.
Source: CompTIA Market Research
Editor's Notes
SPEAKER’S NOTES:
Today’s IT channel continues to undergo a transition along with the rest of the industry, triggered by changes in the ways that customers buy IT goods and services, new types of competition and the forward march of themes such as cloud computing and mobility. In effect, the channel has had to step up its game, morphing in some cases from a straight reseller of products – particularly hardware – to a multifaceted provider of services and solutions.
Far from complete, the business transformation process means different things for different kinds of channel firms. And the change itself can take years moving at a slow, steady pace, as is evident in CompTIA’s recent State of the Channel study that found a slower rate of transition by the channel from last year. Some firms will wholesale shift their business model to managed services or cloud; others will embrace the hybrid model, adding a services component alongside a product-based revenue stream. And still others, primarily veteran firms whose owners are nearing retirement, will maintain status quo with what they currently do today.
A net three quarters of channel firms report at least some degree of business transformation going on in their organizations, with cloud computing being pegged as the primary catalyst behind business model changes that include overhauls to sales and marketing operations.
Year on year, firms that identified as undergoing either a moderate or high degree of business transformation dropped slightly from 2013, while the number of companies that reported a low degree of business transformation actually went up to 23% compared with just 17% last year. One possible explanation for the slight backtrack may lie in the fact that transitioning to a new business model, technical portfolio or vertical industry specialty is hard. Some companies initially gung-ho may have reined in – but not abandoned -- their ambitious transformation plans after a year of difficulty.
SPEAKERS NOTES:
Cloud itself is subtext to many of the other business transformation drivers. For example, customer demand for different delivery models for IT, a primary change agent, can be directly related to the emergence of the cloud computing business model. Cloud offers an alternative, and fairly attractive, way to provide technology services to the end customer beyond selling them the speeds and feeds of an IT product. Think of the widespread use of SaaS applications such as Google Docs or cloud-based storage and other compute infrastructure from the likes of Amazon.
The changing customer and new IT buyer also play a huge role in the need to transform – and by extension sell and market differently. Respondents cited the need to learn to sell to non-IT line of business customers as the No. 1 ‘major factor’ driving them to conduct at least a degree of overhaul to their sales and marketing efforts. Forty-four percent of respondents cited this as a primary catalyst, a finding consistent across all company sizes.
SPEAKERS NOTES:
As noted earlier, business transformation isn’t child’s play. Even the most committed channel firms face a number of challenges as they transition. They range from the more obvious financial considerations, such as resource allocation and cash flow for new ventures, to some serious concerns around both technical and business training.
Cloud is good!
Compared with non-cloud business offerings by channel firms, cloud solutions and services are growing faster in terms of revenue and delivering higher profit margins. And while that was also the case in 2013 based on the self-assessment of study respondents, the number reporting such positives for cloud activities jumped this year. This year, two thirds of respondents reported higher profit margins on cloud business than non-cloud, up from half last year. The revenue growth rate for cloud vs. non-cloud solutions also shot up eight percentage points from 2013.
Challenges remain in adopting cloud. The list remains largely unchanged from years past: determining the correct business model, balancing cloud vs. non-cloud businesses, initial costs, sales restructuring and the like. But the number of respondents distinguishing these challenges as “very significant” rose by an average of about 10 percentage points across all items. It seems more time with cloud has revealed its complications.
SPEAKERS NOTES:
Sales and marketing expertise has grown even more important as most in the channel are feeling the impact of cloud, mobility and other market game-changers. These forces have placed a direct hit on the business models, skill sets and routes to market currently familiar to legions of solution providers, MSPs and others. At the same time, companies are grappling with changing customer-buying habits, new types of competition and new partnerships. Going forward, how a company brands itself, generates leads, structures its sales force and appeals to business-focused customers will dictate future success.
Historically, however, sales and marketing are two areas where the IT channel has lagged. Even the most bullish of solution providers will acknowledge that these can be weak spots. There are some obvious reasons for this: For one, the vast majority of solution providers start channel businesses because they love IT and technology, not typically because they love the art and science of selling and branding. And most aligned closely for years with the identity and branding of the vendors and manufacturers whose wares they resold. This gave them access to critical sales and marketing assistance but did not push them to cultivate these skills in-house. This has left many firms without strong branding of their own and the ability to sell against it. This creates a particular disadvantage in an industry that is rapidly becoming less product- and vendor-brand focused and cloud computing models dramatically ramp demand for services-based sales and consulting skills.
SPEAKERS NOTES:
More than a third of respondents said their sales and marketing operations are slated for “major change” over the next two years. They attribute the revamp efforts as means to accommodate the industry’s shift to the cloud and business models such as managed services Both require a different type of sales strategy and approach. Another 45% of respondents expect to at least drive minor change to these essential revenue-driving functions, while just 2 in 10 say no change will be needed (nor presumably made).
SPEAKERS NOTES:
Regardless of the level of sales and marketing savvy or continued reliance on vendor resources, the reality is that channel firms rely most often on their own company efforts to generate revenue opportunities. Half of respondents said that revenue generation derived from the efforts of their own team, while another 21% credited vendors with an assist, 17% identified the role that distributors play, and finally 14% that said revenue opportunities opened up because of partnerships with other channel firms.
The smallest channel firms attribute nearly all of their revenue-generating opportunities to their own team’s legwork, reporting that between 76% and 100% of potential sales are uncovered via that route.. The very smallest channel firms tend to work locally with other small end user customers. These smallest firms also are not typically participating at a high level in vendor partner programs or with distribution, where they would have access to a raft of sales and market development benefit.
Likewise, veteran channel companies with more than 10-plus years in business also reported the vast majority of their revenue potential results from their own sales and marketing activities. One reason why: Older businesses are more likely to have longstanding customer relationships they can count on as a continuing revenue stream, whether recurring or transactional. There is a familiarity factor in play. Case in point, 48% of firms in business more than decade said part of their routine sales process involved regular in-person visits with existing customers for the purpose of upselling them on new products and/or services. That compares with just 29% of channel companies on the younger end of the spectrum (in business four years or less.)
SPEAKERS NOTES:
The key takeaway is that change is coming for many channel firms and with that, several major elements of the channel sales and marketing operations will need a second-look. They include:
Learning to sell to the non-IT line of business buyer, who increasingly has a seat at the table in making technology purchases.
Training or hiring sales reps to sell consultatively and to focus on services and business outcomes for the customer.
Retooling internal sales processes, sales team structures and compensation plans/incentives.
Upping the game around marketing and self-branding, including the use of social media to acquire new business.
SPEAKERS NOTES:
One of the more interesting trends is the number of channel firms that are hiring sales reps from outside the IT industry. A net two-thirds of all channel firms did so in the last year, including 37% of the largest in size. This dynamic is proving that a technology background is not de rigueur for sales rep success in this industry today.
.
SPEAKERS NOTES:
Social media plans are going to escalate in the next year in the channel, with more than a third predicting significant increase next year in its usage as a marketing tool to reach customers, drum up new business and otherwise promote themselves.
A net 47% of channel firms said the addition of new business models would increase the complexity of sales and marketing structures to some degree.
