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Evolve or die: what pressure are resellers under?

There is a renewed interest in B2C sales, particularly computers, but the focus is on high-end quality sales, not volume. (Woraphong Suphutayothin).

Resellers and solution providers are often the smaller fish in the technology pond. With tides changing from hardware to services, are they keeping up?

 

This article started with a straightforward hypothesis: every incumbent business in the technology industry is changing. For some, the change is relatively easy. OEMs were among the first to make the shift, mainly because they realised how emerging cloud models were going to hurt their established businesses. Many distributors have also started to shift to replace the lost margins from fewer large hardware deals. Foremost, customers have been urged to change and sample the benefits of the new technology order.

What about resellers in the frontline of the technology process? While larger solution providers found their feet around cloud and service models, the general message to resellers in the past 18 months has been to evolve or die, adapt to a new business model or your business will go extinct.

 

Silicon Valley-types will glibly call this pivoting, as if it’s as easy as changing a tyre. But what is the real situation? How do resellers view this change and the pressure it brings to them?

Is such a change difficult and expensive? Yes to both, says Colin Thornton, MD of Turrito Networks and founder of Dial a Nerd: “We have had to change roles significantly and quickly, but skill changes are slower and ongoing. It’s no longer possible in either business, especially for engineers, to be a specialist in any particular area. WAN engineers, previously skilled with routing and MPLS topologies, now need to understand the myriad SD-WAN options and how they affect security and VoIP quality. LAN engineers who used to work primarily on Exchange servers now need to understand the entire Microsoft 365 stack of products and how to configure, implement and support.”

Pressure to evolve

This is a familiar story across the world. Resellers have been expanding away from hardware and what is commonly seen as commodity products such as software. Conventional products are still relevant and make up roughly a third of reseller business. But much of that momentum is driven by Windows 10.

COLIN THORNTON, MD of Turrito Networks COLIN THORNTON, MD of Turrito Networks

In reality, the market has narrowed for many different products. A smaller group of resellers and service providers today is making a profit from selling items such as printers and personal computers. The same can be said for hard drives and the bric-a-brac of the computer world. There's a renewed interest in B2C sales, particularly computers, but the focus is on high-end quality sales, not volume.

Retail outlets are absorbing much of this business. Appliance retailers have expanded their reach into technology products, and online retailers are appealing to niche audiences. Earlier, it was mentioned that customers were urged to change. That is only partially accurate. They were urged at first, but once the virtues of new technology became apparent, it turned into a rush. This shift has been a defining moment for many in the provider frontlines.

“It was a combination of vendors and customers as well as the changing sphere of the technological landscape,” says Prischal Bahgoo, project and cyber security manager at ViC IT. “Our quick adoption to industry changes – like SaaS, cloud migration and the ever increasing security risks – has definitely made us change our focus to ensure we are more competitive. Increased competition in a volatile economy was also a key factor.”

Service offerings have come to dominate the market. The number of resellers in the global market that don't offer cloud has nearly halved between 2018 and 2019, from 41% to 26%. Services are now a dominant revenue generator for resellers in some of the biggest technology markets – up to 80% in some cases.

Locally, the trends can also be seen. Turrito, for example, was once heavily focused on WAN services. But as those commoditised, it shifted to LAN services with consulting and SaaS wings. Dial a Nerd was still thriving on hardware support and sales until a few years ago. Yet once that audience started moving to online retailers, it has renewed its consulting and support offerings, and expanded into SaaS.

Almost everyone in the reseller frontline has felt the need to change, coming from both the OEMs and customers, says Thornton.

“By putting yourself in the customers’ shoes, you’re able to see why they should be more demanding and cost-sensitive, and this isn’t unreasonable. The market is changing, and everyone in the chain needs to change with it.”

This has put a lot of pressure on resellers to evolve, even though many of them are small businesses. How has this pressure been received?

PRISCHAL BAHGOO, ViC IT PRISCHAL BAHGOO, ViC IT
“Pressure is inevitable; however, at some point, the pressure increases tenfold,” Bahgoo says. “As a small business, we are constantly trying to balance our deliverables to customers while pursuing new opportunities. Prioritisation is key to retain our focus and ensure that we balance the myriad daily activities. A colleague once commented that I need to take a break and rejuvenate. My response was simple, ‘I am rejuvenated after I close the next deal’.”

Helping the frontline

The confidence expressed by businesses such as these is impressive, though perhaps not unexpected. Running a business requires a strong constitution and a keen eye for opportunity. Companies that cry over spilt milk are only falling behind. The reseller market has a resilient spirit it doesn’t get praised for often enough.

 

Still, a good head on your shoulders will only take you so far. To win, you need friends. This returns us to the original hypothesis: are resellers and solution providers being helped to evolve or are they in the deep end as customers and OEMs demand change?

It’s hard to get an accurate sense of this, although two activities in the market give some solace. OEMs have been aggressive about restructuring and promoting partner programmes. Some distributors are evolving into fixers that operate between the OEMs and resellers, particularly to support resellers with marketing, skills and wooing new customers. So there are opportunities for resellers to ease the pressure.

“We do receive support from the vendor and distribution partners,” says Bahgoo.

“Support ranges from administrative assistance such as processing rebates to offering training platforms. Some vendors openly offer many different platforms to allow us as resellers to grow by means of training, virtual demonstrations, customer feedback and knowledge-sharing among other resellers. Some partners assist with payment terms, discounts, faster order fulfilment and lead generation.”

Thornton agrees, adding that some international vendors have been pushing SaaS and associated consulting for a long time and have very mature go-to-market and education campaigns: “They often have well-designed portals, which allow us to manage their products, download marketing and sales content and apply for rebates.”

The laggards appear to be distributors. While some have been shifting how they generate business, many are still not adding value beyond their core activities such as volume hardware sales. Ironically, it’s this part of the channel – and not the resellers – that seems to struggle the most with catching up. Of course, on an individual level, many resellers are also experiencing evolution problems. Still, at a broad view, they have been very proactive.

The opportunity for distributors is to step up their support for their partners. Some suggestions made include faster turnaround times for quotations, and more in-depth knowledge of licensing models for product sets. Resellers also want assistance for smaller companies for exchange rate fluctuations in a volatile economy.

“To remain compelling, distributors have to add value over and above price decreases: co-marketing, go-to-market strategies, training and more,” says Thornton.

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