EVOLUTION OF THE UK     CHANNEL       March 2012
THE EVOLUTION OF THE UK CHANNEL                                                                                  SUMMARY1....
THE EVOLUTION OF THE UK CHANNEL5. A Channel Perspective                                                                   ...
THE EVOLUTION OF THE UK CHANNEL1. Introduction©Copyright - NetMediaEurope                                                 ...
THE EVOLUTION OF THE UK CHANNEL1.1 OverviewAll the current theories and market signals point unanimously out that the clou...
THE EVOLUTION OF THE UK CHANNEL                                       Sample structure                                    ...
THE EVOLUTION OF THE UK CHANNEL1.3 NetMediaEurope (publisher of Channelbiz.co.uk)NetMediaEurope is the publisher of TechWe...
THE EVOLUTION OF THE UK CHANNEL2. Key Queries©Copyright - NetMediaEurope                                                  ...
THE EVOLUTION OF THE UK CHANNEL2.1 How does the IT procurement evolve with the adoption of    cloud computing?Our results ...
THE EVOLUTION OF THE UK CHANNEL2.3 Are new channel competitors dangerous for legacy players?New channel players such as ma...
THE EVOLUTION OF THE UK CHANNELlonger engagements. Thus, smaller budget businesses can make use of morecomplex solutions a...
THE EVOLUTION OF THE UK CHANNEL3. Mid-term Trends and Challenges©Copyright - NetMediaEurope                               ...
THE EVOLUTION OF THE UK CHANNELThis table illustrates in a synthetic manner the main challenges channel players will havet...
THE EVOLUTION OF THE UK CHANNEL3.1 Strategic consolidation will take place in the channelFurther mergers and acquisitions ...
THE EVOLUTION OF THE UK CHANNELTelecom carriers will certainly have their word to say in today’s cloud business,meaning ex...
THE EVOLUTION OF THE UK CHANNEL3.6 VARs become technology enablers or…Traditional VARs are also threatened by the rise of ...
THE EVOLUTION OF THE UK CHANNEL4. An End-user Perspective©Copyright - NetMediaEurope                                      ...
THE EVOLUTION OF THE UK CHANNEL4.1 Vendors Selection SourcesThe two main sources for creating a vendors’ shortlist tailore...
THE EVOLUTION OF THE UK CHANNEL4.2 Vendors Selection via Social MediaEven if social media is not perceived as a direct inf...
THE EVOLUTION OF THE UK CHANNEL4.3 Mid-term Trends regarding the use of Social Media for    Business PurposesOur mid-term ...
THE EVOLUTION OF THE UK CHANNEL4.4 The IT Procurement ProcessA great majority of ITDMs tend to increasingly make use of th...
THE EVOLUTION OF THE UK CHANNEL4.5 The IT Products Procurement ChannelThe IT procurement model is visibly going through so...
THE EVOLUTION OF THE UK CHANNEL4.6 The IT Software Services Procurement ChannelThe software related solutions dynamics als...
THE EVOLUTION OF THE UK CHANNEL4.7 SaaS Adoption RatesAccording to our findings, 39% of British organisations are currentl...
THE EVOLUTION OF THE UK CHANNEL4.8 IaaS Adoption RatesLess popular than SaaS, IaaS is adopted in average by one out of fiv...
THE EVOLUTION OF THE UK CHANNEL5. A Channel Perspective©Copyright - NetMediaEurope                                        ...
THE EVOLUTION OF THE UK CHANNEL5.1 Mid-term Business ChallengesStaying competitive and well prepared in order to meet cust...
THE EVOLUTION OF THE UK CHANNEL5.2 Mid-term Business DriversAs expected, mobile technologies and cloud adoption in a mobil...
THE EVOLUTION OF THE UK CHANNEL5.3 Collaboration with VendorsEnhanced marketing collaboration leads to an increase in term...
THE EVOLUTION OF THE UK CHANNEL5.4 Perception of the Cloud ComputingThere is an overall positive approach towards the clou...
THE EVOLUTION OF THE UK CHANNEL5.5 Top Cloud OpportunitiesThe main cloud opportunities are visibly profit oriented.New par...
THE EVOLUTION OF THE UK CHANNEL5.6 Top Cloud ThreatsBy enabling end-users to offload infrastructure and maintenance, the c...
THE EVOLUTION OF THE UK CHANNEL5.7 What to Expect from Vendors and Distributors with Regards    the CloudExpectations are ...
THE EVOLUTION OF THE UK CHANNEL5.8 Cloud Channel PlayersIncreased cloud adoption makes traditional players and new niche o...
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The Evolution of the UK Channel (Full Research)

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All the current theories and market signals point unanimously out that the cloud is one of the factors to completely shake up the market behaviour and totally transform the IT industry. The cloud adoption is going mainstream as it is about to tackle the core of the organisations. Its adoption has reached a considerable enough proportion so that it cannot be ignored anymore by any of the ecosystem players.

Additionally, the IT procurement process is also evolving, driven by the rise of social media and a channel mutation towards E-markets. The current transition period is more than favourable to conduct a research and get to know how these trends impact both the entire channel ecosystem.

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The Evolution of the UK Channel (Full Research)

  1. 1. EVOLUTION OF THE UK CHANNEL March 2012
  2. 2. THE EVOLUTION OF THE UK CHANNEL SUMMARY1. Introduction 3 1.1 Overview 4 1.2 Research Methodology 4 1.3 NetMediaEurope (publisher of Channelbiz.co.uk) 62. Key Queries 7 2.1 How does the IT procurement evolve with the adoption of cloud computing? 8 2.2 Is there a connexion between IT procurement and social media? 8 2.3 Are new channel competitors dangerous for legacy players? 9 2.4 What is the channel’s perception with regards the cloud? 9 2.5 What does the channel still expect from vendors and distributors? 103. Mid-term Trends and Challenges 11 3.1 Strategic consolidation will take place in the channel 13 3.2 Traditional and non-traditional channel players evolve furthermore to meet market’s needs 13 3.3 Non-traditional channel players become key drivers 13 3.4 E-tailers emerge in the cloud business 14 3.5 Pure resellers grow into VARs or… 14 3.6 VARs become technology enablers or… 154. An End-users Perspective 16 4.1 Vendors Selection Sources 17 4.2 Vendors Selection via Social Media 18 4.3 Mid-term Trends regarding the use of Social Media for Business Purposes 19 4.4 The IT Procurement Process 20 4.5 The IT Products Procurement Channel 21 4.6 The IT Software Services Procurement Channel 22 4.7 SaaS Adoption Rates 23 4.8 IaaS Adoption Rates 24©Copyright - NetMediaEurope 1All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  3. 3. THE EVOLUTION OF THE UK CHANNEL5. A Channel Perspective 25 5.1 Mid-term Business Challenges 26 5.2 Mid-term Business Drivers 27 5.3 Collaboration with Vendors 28 5.4 Perception of the Cloud Computing 29 5.5 Top Cloud Opportunities 30 5.6 Top Cloud Threats 31 5.7 What to Expect from Vendors and Distributors with Regards the Cloud 32 5.8 Cloud Channel Players 33 LIST OF CHARTS AND TABLESTable 1 : Global and specific challenges for the channel players .................................12Chart 2 : Main sources for vendors’ shortlist creation ................................................17Chart 3 : Social media categories used for IT procurement ........................................18Chart 4 : Use of Social media for business purposes .................................................19Chart 5 : The IT procurement process .....................................................................20Chart 6 : The IT Products procurement channel ........................................................21Chart 7 : The IT software related services procurement channel .................................22Chart 8 : SaaS Adoption Rates ...............................................................................23Chart 9 : IaaS Adoption Rates ................................................................................24Chart 10 : Mid-term business challenges .................................................................26Chart 11 : Mid-term business drivers ......................................................................27Chart 12 : Collaboration with vendors .....................................................................28Chart 13 : Perception of the Cloud ..........................................................................29Chart 14 : Top cloud opportunities ..........................................................................30Chart 15 : Top cloud threats ..................................................................................31Chart 16 : What to expect from vendors and distributors with regards the cloud ..........32Chart 17 : Cloud channel players ............................................................................33©Copyright - NetMediaEurope 2All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  4. 4. THE EVOLUTION OF THE UK CHANNEL1. Introduction©Copyright - NetMediaEurope 3All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  5. 5. THE EVOLUTION OF THE UK CHANNEL1.1 OverviewAll the current theories and market signals point unanimously out that the cloud is one ofthe factors to completely shake up the market behaviour and totally transform the ITindustry. The cloud adoption is going mainstream as it is about to tackle the core of theorganisations. Its adoption has reached a considerable enough proportion so that itcannot be ignored anymore by any of the ecosystem players.Additionally, the IT procurement process is also evolving, driven by the rise of socialmedia and a channel mutation towards E-markets. The current transition period is morethan favourable to conduct a research and get to know how these trends impact both theentire channel ecosystem.1.2 Research MethodologyOur research was performed in three phases:  a quantitative survey addressed to the channel  a quantitative survey addressed to the IT decision makers  an interview set of some key market players, all channel levels Sample structure Coverage Channel End-users Country UK UK Number of interviews 80 100 CEO, MD, GM, Contacts CIO, CTO, IT DM Business DM VARs, Pure resellers, Managed service Company profiles All sectors providers, System integrators, Hosters… Company size All All©Copyright - NetMediaEurope 4All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  6. 6. THE EVOLUTION OF THE UK CHANNEL Sample structure (Channel) Company size Main business model Sample structure (End-users) Company size Business areaAll results were carefully collected in order to obtain a comprehensive vision of the bigpicture within the UK channel ecosystem. We have interrogated 80 major channelplayers, 100 ITDMs and completed them with around 20 highly qualified interviewsperformed on major IT players (vendors, distributors, VARs, integrators, serviceproviders, end-users). All samples have been proven to be consistent in terms ofinformation content.Different analytical perspectives are combined in our approach to highlight the maincategories of this study, as well as the most important variations to be noticed on a shortor medium term basis. We have put the entire ecosystem under spotlight in order to givea broader perspective to our analysis.©Copyright - NetMediaEurope 5All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  7. 7. THE EVOLUTION OF THE UK CHANNEL1.3 NetMediaEurope (publisher of Channelbiz.co.uk)NetMediaEurope is the publisher of TechWeekEurope.co.uk and ChannelBiz.co.uk andrepresents one of the top IT B to B websites in the UK. The group also publishes ITspecialized websites in France, Germany, Italy and Spain and totalizes approximately 14million unique visitors per month.In addition to selling advertising, NetMediaEurope offers a wide range of solutions in theareas of lead generation, project detection, events and bespoke marketing solutions.Finally, NetMediaEurope has a research pole dedicated to the IT area. In 2011, thisdepartment has conducted surveys on over 5,000 business and IT decision makers inEurope.NetMediaEurope has currently one hundred employees and collaborators.©Copyright - NetMediaEurope 6All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  8. 8. THE EVOLUTION OF THE UK CHANNEL2. Key Queries©Copyright - NetMediaEurope 7All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  9. 9. THE EVOLUTION OF THE UK CHANNEL2.1 How does the IT procurement evolve with the adoption of cloud computing?Our results are set to confirm that positive growth in terms of cloud adoption willcause important changes in the IT procurement process, as demand and supply gohand in hand to meet the market’s needs.In the newcomers’ category, E-tailers gain eight points on a mid-term basis (up to 43%)with their involvement in the B to B IT products procurement process. E-tailers havemanaged to penetrate the B to B business with the rise of consumerisation and becauseof their historical stock manipulation related capacities. However, Amazon has started toperform well in the cloud area too, because of its IaaS and PaaS specific offerings.At the same time, resellers and VARs are being relegated towards more traditionalproducts and solutions. Their contribution becomes less important in the current marketcontext. Nonetheless, the traditional software services procurement process points to anincreasing orientation towards VARs and resellers. Dynamics show a progressiveinvolvement of these channel players in the procurement process on a mid-term basis, asopposed to vendors. VARs have historically gained expertise in project management,training, software customization and data conversion. But the challenge is to come in theSaaS era, where less technical and more vertical business expertise is required on themarket.2.2 Is there a connexion between IT procurement and social media?According to our findings, only 14% of ITDMs use social media for vendorshortlisting. That means that social media is not perceived as a direct sales orpurchase influencer, at least not consciously.Social media is used on a large scale by all decision makers, to indirectly guide theirpurchases or for other decision making. Indeed, only 18% of ITDMs don’t use socialmedia as a source of information for IT procurement. Among these non-users, halfplan to use social media within the next three years. As for those using it, more than twothirds think they will increasingly use social media on a mid-term basis.But the use of social media does not have to be reduced to the likes of Facebookand LinkedIn, as social media is way more than that. IT blogs, forums and other ITcommunity websites are used on a large scale when it comes to profiling IT vendors (halfof ITDMs said they use it). This points to an assumption that opinions are stronglyshared among the IT leaders community and they can easily influence each other intheir purchase decision. Therefore, a relevant influencer sales or purchase strategy doesnot have to be limited to the likes of LinkedIn and Co, as social media is way more thanthat.©Copyright - NetMediaEurope 8All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  10. 10. THE EVOLUTION OF THE UK CHANNEL2.3 Are new channel competitors dangerous for legacy players?New channel players such as managed service providers and application hostersare already two steps ahead of traditional players. 60% of the channel perceivesthem as being more suitable to selling cloud services. This comes as no surprise, as theyhave already adopted a recurring revenue service oriented market model and the cloud isonly a natural development of their skills.The second tier channel is very diverse these days. New entrants and traditionalplayers cohabit today within dual strategic market behaviour. Our study shows thatsome of the traditional players can more easily adapt to the SaaS, IaaS or PaaS than theothers. A change in the business model towards the cloud also implies major investmentsin infrastructure that not everyone can afford. Small players for example would have tocreate alliances with bigger players such as VARs, integrators, vendors or distributors inorder to add their own value-added to SaaS solutions.Value added business in the cloud era is a key differentiator for today’s traditionalmarket players. System integrators, managed service providers, hosters and softwaredevelopers are already two steps ahead of the traditional market players in terms ofcloud adoption. Moreover, their competencies are vital to the channel ecosystem. Thecloud players’ hierarchy proves that the cloud market is mainly fed by infrastructureconsumers and IT service providers.2.4 What is the channel’s perception towards the cloud?Channel players are unanimous about the importance of their competitiveness in thechannel. 72% consider it one of the top mid-term business challenges, together withdeveloping new skills (42%) and controlling costs (40%).Cloud computing is a good alternative to the companies’ liquidities as spending isstaggered on a monthly basis and you pay what you have consumed (or “pay as yougo”). A lot of small businesses which could not afford complex infrastructure or softwaredue to pricing now can use the cloud as a good occasion to access what was inaccessibleuntil now. They can be now at the same technological level with their bigger fellows.There is an overall positive approach towards the cloud and its direct impact on thechannel business model (as two thirds of the channel perceives it as an opportunity).Second tier channel players tend to develop close relationships with cloud technologypartners, as part of their perpetual search for new revenue opportunities. But not allchannel players are impacted by the evolution in the cloud. Those pure resellers are arare species set either to disappear, or to radically change their market model.Depending on the cloud offerings and usage, the cloud market model could represent amore convenient alternative for the client, but at the same time it can become laboriousfor the channel. But what is more interesting is that both “pros and cons” are morebusiness and profit oriented rather than technology oriented. Our research alsoreveals that recurring revenue (with 47% of positive responses) and additional revenue(with 34% of positive responses) are two of the top cloud opportunities. Moreover, thismore affordable (at first sight) financing model leads to greater business stability and©Copyright - NetMediaEurope 9All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  11. 11. THE EVOLUTION OF THE UK CHANNELlonger engagements. Thus, smaller budget businesses can make use of morecomplex solutions and further optimize their IT processes.Offering a large palette of solutions implies making good use of third parties’ knowledge.And most of all, having its own infrastructure, to be able to host applications or handlemanaged services is a big plus. When it comes to cloud players perceiving cloudcomputing as a threat, their two main reasons are related to high infrastructure costs(45%) and competition from managed service providers and application hosters (36%).New partnership alternatives arise from this necessity to reselling cloud solutions withinthe channel and thus benefit from the specialists’ expertise. They are set to compete andendanger the position of those not being able to handle managed services, applications,hosted servers, storage security related specific solutions; thus the necessity of makinguse of third parties’ knowledge in order to offer a larger palette of solutions. And most ofall, those third parties are able to offer an infrastructure that goes with it. Almost half ofthe channel players consider high infrastructure costs as the main danger regardingcloud adoption.Cloud related revenues are a double edged sword. Even if the main reason of thesecond tier is profit oriented, the cloud is not synonymous with higher margins, as ourstudy shows that only 8% perceive a direct connection between cloud and high margins).This is one of the channel “cons” regarding cloud solutions. A huge margin shrink whentotally switching to a cloud business model does not represent an incentive for a reseller,on the contrary.2.5 What does the channel still expect from vendors and distributors?Marketing cooperation (61%), sales leads (48%) and more training on solutions (45%)top the list of channel expectations. The value added cloud strategy is based on mutualbusiness satisfaction. Deeper cooperation between vendors and the channel playersleads to better opportunities for both sides, as well as better market performances. Theeffect is meant to be a synergistic one in terms of business.Second tier channel players also expect training from vendors for their value addedsolutions. Thus they can better help customers getting the most of their IT allocatedbudgets whilst channel partners provide their experience and a real value add to theecosystem, with or without third parties’ contributions. They remain a valuable source toeducate and guide end-users in their cloud adoption. Solution robustness and vendor’sreputation are also important for their market relationship.Vendors and distributors are permanently challenged by the health of their second tiercommunity, as deeper partnering always gets better results. And in a cloud basedmarket model, a long lasting market relationship is essential to permanently improve thecloud offerings. Both vendors and distributors are challenged to align their business to(at least) a hybrid market model and stay relevant to the market’s needs. Second tierexpectations are rather similar from vendors as well as distributors, and slightly moreimportant when it comes to vendors. Facilitating providers understand how to align theirservice offerings, skills and prices allows partners to better promote cloud basedsolutions. In-depth training, partner programs and new accreditations are set to furtherincite selling cloud solutions.©Copyright - NetMediaEurope 10All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  12. 12. THE EVOLUTION OF THE UK CHANNEL3. Mid-term Trends and Challenges©Copyright - NetMediaEurope 11All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  13. 13. THE EVOLUTION OF THE UK CHANNELThis table illustrates in a synthetic manner the main challenges channel players will haveto deal with in the near future in order to stay competitive and improve their businessefficiency.The changing economic landscape and the explosion of cloud adoption are pushingplayers to reorient their business, gain extra skills and take over all the cloudbusiness that is possible to take. Table 1 : Global and specific challenges for the channel players Global challenges Specific challengesSucceed in building relevant influencer For Manufacturersstrategies in correlation with the  Rationalization of IT spending viaincreased role of social media virtualization and cloudwithin the IT procurement process  Reorientation of the offer due to an increasing demand from the untraditional channel (SaaS / IaaS providers) and a decreasing demand from end-users as they tend to further outsource their infrastructure For software vendors Invest in a reliable and secure infrastructure (on premises or in partnership)Acquire deeper expertise by creating For Distributorsa brand new market strategy involving Find new sources of revenues to counteractbusiness decision makers and not only the increase of dematerializationITDMs (due to the rise of cloudcomputing) For VARs and Resellers Many of them still lack cloud related skills; They have to hire cloud specialists and invest in certificationMove from traditional billing to a pay For Pure Resellersas you go financial model (related to They are endangered by their shrinkingcloud computing) margins and the lack of value added business©Copyright - NetMediaEurope 12All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  14. 14. THE EVOLUTION OF THE UK CHANNEL3.1 Strategic consolidation will take place in the channelFurther mergers and acquisitions will take place at all channel levels in order to furtherevolve towards the cloud. Vendors are being challenged to answer to an increasingdemand to rationalize spending into virtualization. Furthermore, they are determined toinnovate towards the cloud to raise their business value in this area. They ally with cloudproviders, well placed to complete their cloud skills. IBM is completing its 70 companiesacquisitions with cloud based software DemandTec and cloud and on-premise analyticssoftware leading company Emptoris as we speak, in a permanent search to reinforce itspositioning as a global value added solution provider.The channel is following the same trend. Large managed service providers andsystem integrators will also further consolidate. The likes of Eurodata Systems (awell-known systems integrator) have joined forces with the Trinity Group, an IT servicescompany to develop additional value added cloud related skills.Distributors are also part of the phenomenon as they want to add further value to theirbusiness. The rise of dematerialization pushes them further towards alternative revenuesources. Ingram’s acquisition of Computacenter Distribution (CCD), a managed serviceprovider and system integrator, is a good example and allows them to deliver on-premisevirtualization and cloud based solutions.3.2 Traditional and non-traditional channel players evolve furthermore to meet market’s needsOur study reveals that a great majority (72%) of the second tier channel players arechallenged by their market competitiveness. The objective has always been the same:being able to answer the market’s needs is more than ever important whilst the marketis being directed towards bespoke solutions. This new market model adoption isgiving birth to a transition phase into a hybrid strategy, where traditional and non-traditional companies coexist.A broader list of channel partners will make an appearance as the cloud computingmarket place continues to grow. At the same time, vendors are struggling to developeven more advanced partnership programs to attract them towards mutual marketbenefits.3.3 Non-traditional channel players become key driversThe likes of application hosters and managed service providers gain weight in thechannel, as they are the most suitable and well placed in providing the most appropriatecloud solutions. In parallel, other business models will have their word to say in the cloudbusiness.As for system integrators, they are also well placed thanks to their skills indevelopment and integration, and their capacity to invest in a cloud infrastructure. Theyhave the possibility to offer a wide range of cloud services, including private IaaS andSaaS. They can also become key partners for software vendors in need of a properinfrastructure allowing them to facilitate providing their own SaaS solutions.©Copyright - NetMediaEurope 13All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  15. 15. THE EVOLUTION OF THE UK CHANNELTelecom carriers will certainly have their word to say in today’s cloud business,meaning extra services will be added to their B to B network services. That meansoffering packaged solutions together with private networks, security, data storage andother telecom services. And most importantly, telecom players can also rely on theinfrastructure that goes with it.Converged IP solution providers offer more and more unified communications as aservice via software licences, communication IP-PBX solutions, virtual PBXs, databaseservers for VPBXs, etc. Collaboration (42%), video (19%) and voice applications (13%)are very common in a SaaS version as well.3.4 E-tailers emerge in the cloud businessThe multichannel vendors’ market strategy is no longer a secret method used inorder to reach the customer by all means. The new marketing approaches are doubled byan omnichannel market presence. The democratization of IT products and solutions hasallowed some atypical cloud players such as E-tailers to emerge in the middle of aprice war; their model tends to evolve with the cloud adoption, but can they handle itentirely by themselves? How far can they go?Large e-tailers such as Amazon have started providing a public cloud infrastructurewhich could be used as a springboard by smaller software vendors willing to resell theirSaaS solutions (white labelled or not).3.5 Pure resellers grow into VARs or…Pure resellers are set to lose their market positioning as cloud accelerates its marketdiffusion. Their lack of infrastructure and skills will lead them to revise their marketmodel, while those remaining strongly products oriented are set to disappear at the sametime with constantly shrinking margins. Additionally, further consolidation is expected inthe market, mainly for financial reasons. Though their margins are decreasing, alliancesand partnerships could offer new opportunities and strengthen their financial health.Some of the resellers will switch their business models to become VARs, meaningtrusted advisors in their attempt to relate themselves to the current market model. Thus,they will adapt their process, in order to save some of their shrinking margins and tooffer tailored services and solutions.Nevertheless, the channel remains a major influencer of the market trend. Resellersmaintain close relationships with the market as their main role is to try to propose themost suitable product or solution for the client. And there is still a real necessity forinfrastructure, all you have to do is look around and try to take into account the lowadoption rate when it comes to the virtualization of workstations.At this stage, their role is more a consultative one, to make sure that the end-user haswhat he needs, contact the good partner to provide it and that it makes good use of it.And in this hybrid position, they will still get somehow incentivized. But for how long?And what will happen to resellers that continue to ignore the rise of cloud adoption andcontinue to stay traditional?©Copyright - NetMediaEurope 14All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  16. 16. THE EVOLUTION OF THE UK CHANNEL3.6 VARs become technology enablers or…Traditional VARs are also threatened by the rise of the new channel players as valueadded services are the main market differentiators. They have various marketchoices between creating alliances with stronger VARs, playing an intermediary rolebetween vendors and integrators (as they are still in good position to know everythingabout the market behaviour), further specialize in offering value added and managedservices or changing their business model. Or why not become brokers, meaning thatthey are able to find the appropriate cloud bundle compatible to customer needs?VARs can be easily switched to a managed services business model. It is the closest totheir business model, allowing them at the same time a cost effective service deliverymodel.VARs will also continue to play for now as intermediaries between vendors and SMBs, it’smore difficult to be directly handled by the vendor. They are also well positioned to takethe pulse of the market, as they have a good relationship with the entire ecosystem.This proves that even though not all VARs engage with technology, they can be stilluseful in building channel relationships, as they are well placed to know clients’ needs;they could become the future technology enablers.In parallel we see a financing model switch and VARs are waiting to see what vendorscan offer to compensate this new financing model. That means that less upfront costs forresellers could incite them to invest into new cloud technologies. But not all VARs arefinancially ready to invest in the cloud.©Copyright - NetMediaEurope 15All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  17. 17. THE EVOLUTION OF THE UK CHANNEL4. An End-user Perspective©Copyright - NetMediaEurope 16All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  18. 18. THE EVOLUTION OF THE UK CHANNEL4.1 Vendors Selection SourcesThe two main sources for creating a vendors’ shortlist tailored to ITDM’s requirementsare their own websites and participation in different events, seminars or shows. Vendorsappear to be the most trustworthy information sources for buyers, especially in terms ofpricing and technical specifications. 59% of ITDMs declare they frequent vendors’websites. At the same time, vendors strongly communicate via social media andencourage IT leaders to participate to their marketing and communication strategy.Not far away, IT media are also widely used for the same purpose, while directnetworking with resellers yields mixed results. This is no surprise, as the relationshipwith resellers is a pre-established one and mostly nurtured by the reseller.It may come as a surprise, but social media is not perceived as a direct source forbuilding the vendor shortlist, at least not consciously. Indeed, it is more perceived as amodern marketing or a networking tool rather than a sales one. But sales and marketingare strongly related. Chart 2 : Main sources for vendors’ shortlist creation “How do you gather information to create your shortlist of vendors for IT procurement? ” (Multiple choice)©Copyright - NetMediaEurope 17All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  19. 19. THE EVOLUTION OF THE UK CHANNEL4.2 Vendors Selection via Social MediaEven if social media is not perceived as a direct influencer of the IT procurement process,it indirectly guides decision making. To the direct correlation between sales andmarketing, we can add the fact that a great majority (82%) of ITDMs use social media asa source of information for IT technologies.IT blogs, forums and community websites are used on a large scale when it comes toprofiling IT vendors. Opinions are strongly shared within the IT leaders’ community andblogs reflect their practical experiences, both positive and negative. Communication,collaboration and experience sharing are useful for the business development process.While LinkedIn is well positioned with regards the use of social media tools, Facebookappears to be used by one out of ten ITDMs for this very purpose.Twitter and Google+ are linking dedicated vendor microsites and represent an increasinghub; they occupy an equal position in prioritizing IT vendors. All this is done via visual,shared tools and additional optimized features. Chart 3 : Social media categories used for IT procurement “What social media do you currently use for IT procurement?” (Multiple choice)©Copyright - NetMediaEurope 18All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  20. 20. THE EVOLUTION OF THE UK CHANNEL4.3 Mid-term Trends regarding the use of Social Media for Business PurposesOur mid-term trend results point out that social media will be intensively used as a B2Btool for the years to come, as it becomes a consistent source of information for the entireecosystem; cloud and mobility strongly encourage this trend.Social media remains a consistent source of information regarding the latest ITtechnologies and trends, as all IT main players are more actively present on the socialnetworks. This rise of social media also contributes to rewriting the new marketingstrategy rules for both the vendors and end-users.Among the current social media non-users, half of them plan to use it within the next 3years. Nonetheless, one out of five ITDMs are still reticent about the use of social mediafor business purposes. Chart 4 : Use of Social media for business purposes “Do you think you will increasingly use social media for IT procurement within the next 3 years?” (Unique choice)©Copyright - NetMediaEurope 19All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  21. 21. THE EVOLUTION OF THE UK CHANNEL4.4 The IT Procurement ProcessA great majority of ITDMs tend to increasingly make use of the channel to modelspecifications, create a vendors’ shortlist or choose a solution.IT Consultants start weighing heavily in the channel, as they are related to complex ITprojects. Medium sized companies are more synonymous with “wise investments”,specific to limited budgets, but also to an optimal evaluation and an efficient solution.Pure resellers still have weight in the channel, they are related to traditional and basic ITpurchases. Managed service providers come third on our top partners list, whether itcomes to common IT support, SaaS or other forms of managed services. Chart 5 : The IT procurement process “For your forthcoming IT projects, which of the following categories of partners do you plan to increasingly use in next 3 years to …?” (Multiple choice)©Copyright - NetMediaEurope 20All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  22. 22. THE EVOLUTION OF THE UK CHANNEL4.5 The IT Products Procurement ChannelThe IT procurement model is visibly going through some changes on a mid-term basis.The direct channel remains a main source of IT products purchase, even if on a mid-termbasis it tends to be partially replaced by alternative sources (it loses 3 points and thistrend is about to pursue).Whilst pure resellers constantly lose their privileged position, alternative channels suchas E-markets and hosting providers gain additional points on the scale of IT productsdistribution process, a sign of a clear change in the B2B consumption behaviour. Onlineshopping becomes popular among IT leaders as at the same time there is a trend todemocratisation of some IT product categories. Chart 6 : The IT Products procurement channel “How do you usually acquire your IT products?” (Multiple choice)©Copyright - NetMediaEurope 21All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  23. 23. THE EVOLUTION OF THE UK CHANNEL4.6 The IT Software Services Procurement ChannelThe software related solutions dynamics also indicate a switch from the classic purchasebehaviour to a value added based model. On a mid-term basis, consultancies and VARsare further involved in the acquisition process, opposed to vendors.The indirect distribution model together with the multichannel approach prevails on amid-term basis.Overall, more than 90% of the UK organisations acquire software solutions rather thanpure software (no services involved). Chart 7 : The IT software related services procurement channel “How do you usually acquire your IT software services?” (Multiple choice)©Copyright - NetMediaEurope 22All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  24. 24. THE EVOLUTION OF THE UK CHANNEL4.7 SaaS Adoption RatesAccording to our findings, 39% of British organisations are currently using SaaS andanother 13% plan to do the same within the next twelve months. Still, half of theorganisations are uncertain as 48% still don’t use them or plan to use them on a mid-term basis only. Physical backup is still important to them. But, on a more optimisticnote, SaaS is way more popular than was the case three years ago.Services companies, consultancies and integrators nowadays play a more important rolein the channel ecosystem. But this whole new crop of channel players in the likes ofhosters and managed service providers is privileged in today’s market approach. Thecloud is a volume business, with less upfront gains, more mid-term oriented profit andnimble players were aware and therefore rapidly embraced the recurring revenuefinancing model.The vendor is still an integral part of the SaaS ecosystem as its marketing and brandingare still direct influencers of the purchase process. Secondly, we see a current M&A trendamong system integrators and vendors/ VADs. Chart 8 : SaaS Adoption Rates “Do you currently use SaaS solutions?” “Who did you solicit first to enquire (Unique choice) about SaaS?” (Multiple choice)©Copyright - NetMediaEurope 23All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  25. 25. THE EVOLUTION OF THE UK CHANNEL4.8 IaaS Adoption RatesLess popular than SaaS, IaaS is adopted in average by one out of five organisations.The same fears related to data security and lack of standards keep companies away fromIaaS adoption. Also, switching from internal built infrastructure to IaaS takes time. Onthe other hand, IaaS could lead into changing behaviour regarding server and storagepurchase, as end-users will increasingly tend to outsource their infrastructure whileembracing the cloud.On a mid-term basis, one out of three companies will have adopted “one step further asa service” IaaS, against one out of two in the case of SaaS. Chart 9 : IaaS Adoption Rates “Do you currently use IaaS solutions?” SaaS vs. IaaS adoption rates (Unique choice)©Copyright - NetMediaEurope 24All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  26. 26. THE EVOLUTION OF THE UK CHANNEL5. A Channel Perspective©Copyright - NetMediaEurope 25All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  27. 27. THE EVOLUTION OF THE UK CHANNEL5.1 Mid-term Business ChallengesStaying competitive and well prepared in order to meet customers’ needs is the mainmid-term challenge for the channel players.Embracing current business trends is synonymous with developing skills and relatedexpertise in order to provide custom-made services and solutions.Certifications do not seem to be a core issue for the channel businesses; they are notparticularly aware or directly concerned about certifications, nor of the challenge that arecurring model could represent for their business. Chart 10 : Mid-term business challenges “What are the key challenges for your business within the next 3 years?” (Multiple choice)©Copyright - NetMediaEurope 26All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  28. 28. THE EVOLUTION OF THE UK CHANNEL5.2 Mid-term Business DriversAs expected, mobile technologies and cloud adoption in a mobility environment appearon top of the mid-term business drivers; channel partners should further embrace thesetrends.Managed services providers also gain weight, being closely related to the cloud; cloudcomputing and services related expertise offer altogether an ability to deploy complexand scalable cloud solutions.In a perfect coherence with the channel reasoning, channel players do not consider nonremunerated solutions (open source) as a trend. Chart 11 : Mid-term business drivers “What are the key drivers for your business within the next 3 years?” (Multiple choice)©Copyright - NetMediaEurope 27All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  29. 29. THE EVOLUTION OF THE UK CHANNEL5.3 Collaboration with VendorsEnhanced marketing collaboration leads to an increase in terms of channel visibility.Second tier players want to benefit from the vendors’ communication plans and of theirmarket presence, as well as their direct marketing strategy via sales leads. The latter is avery common strategy in order to boost immediate sales and identify immediate businessopportunities via qualified prospects. An identified target audience is definitely morehandy to reach, and less expensive.Channel training helps customers getting the most of their IT allocated budgets whilstchannel partners provide their experience and a real value added to the ecosystem, withor without third parties contribution.Reducing channel conflicts is also an issue for one out of three channel players. Managinga complex ecosystem is not an easy task and can be sometimes a delicate matter for thebusiness. This is mainly due to a highly competitive business environment, as well as thevendors’ multichannel distribution approach. Chart 12 : Collaboration with vendors “What do you expect from vendors?” (Multiple choice)©Copyright - NetMediaEurope 28All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  30. 30. THE EVOLUTION OF THE UK CHANNEL5.4 Perception of the Cloud ComputingThere is an overall positive approach towards the cloud and its direct impact on thechannel business model.The second tier channel players tend to develop close relationships with cloud technologypartners, as part of their perpetual search of new revenue opportunities.One fourth of the channel is currently not impacted by the cloud. Most of them are ofcourse VARs and resellers. Chart 13 : Perception of the Cloud “How do you perceive cloud computing with regards your business?” (Unique choice)©Copyright - NetMediaEurope 29All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  31. 31. THE EVOLUTION OF THE UK CHANNEL5.5 Top Cloud OpportunitiesThe main cloud opportunities are visibly profit oriented.New partners arise from the necessity to resell cloud solutions within the channel in orderto benefit from the specialists expertise.On the other hand, the cloud is not synonymous with higher margins. This is one of thechannel “cons” regarding cloud solutions. A huge margin slip when switching to a cloudbusiness model does not represent an incentive for a reseller, on the contrary. Chart 14 : Top cloud opportunities “Why do you perceive the cloud as an opportunity?” (Multiple choice)©Copyright - NetMediaEurope 30All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  32. 32. THE EVOLUTION OF THE UK CHANNEL5.6 Top Cloud ThreatsBy enabling end-users to offload infrastructure and maintenance, the cloud passes it onto the channel ecosystem.Only a very few channel players can handle managed services, applications, hostedservers, storage security related specific solutions; thus the necessity of making use ofthird parties knowledge in order to offer a larger palette of cloud solutions. Additionally, asubsequent amount of services tend to be performed remotely.Depending on the cloud offering and usage, the pay-as-you go model can be a moreconvenient option for the client, but at the same time can become somewhat complicatedfor the channel. The financial transition to the “pay as you go” model is rather difficult atfirst in terms of immediate gains, as it replaces upfront financing with a model closer tothe leasing financial model. Chart 15 : Top cloud threats “Why do you perceive the cloud as a threat?” (Multiple choice)©Copyright - NetMediaEurope 31All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  33. 33. THE EVOLUTION OF THE UK CHANNEL5.7 What to Expect from Vendors and Distributors with Regards the CloudExpectations are rather similar from vendors as well as distributors, slightly moreimportant when it comes to vendors.Facilitating providers understand how to align their service offerings, skills and prices andallows partners to better promote cloud based solutions. Partner programmes and newaccreditations are also set to affect selling cloud solutions.For now, access to infrastructure is of less than average an expectation related toproprietary cloud offerings. But it could rapidly interest the nimblest channel players, asit could help them to avoid high investment related expenses.Chart 16 : What to expect from vendors and distributors with regards the cloud “What do you expect from vendors and distributors to provide you for your business transition to a cloud service provider model?” (Multiple choice)©Copyright - NetMediaEurope 32All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.
  34. 34. THE EVOLUTION OF THE UK CHANNEL5.8 Cloud Channel PlayersIncreased cloud adoption makes traditional players and new niche ones coexist in thisnew form of cloud related channel ecosystem. The transition phase to a cloud basedmarket model is apparent and leads to a change in the power balance within the channel.The cloud players’ hierarchy proves that the market is fed by infrastructure consumersand IT services providers. The most suitable partners for reselling cloud services are thehosters and managed service providers. Their competencies are vital within the cloudecosystem. They are followed by what we additionally call the cloud solutions builders,for their cloud infrastructure, competencies, and improved services but also to reduceinternal end-users costs.The multichannel strategy is doubled by an omni-channel model and geographicboundaries no longer exist within the cloud model. Value added demand leaves room tonimble, highly skilled cloud actors able to answer the clients’ needs. Chart 17 : Cloud channel players “What channel players are more suitable for selling cloud services?” (Multiple choice)©Copyright - NetMediaEurope 33All partial or total reproduction is forbidden without prior agreement from NetMediaEurope.

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