Can the Kiwi channel ride the second cloud wave?
- 27 October, 2017 08:15
As organisations of all shapes and sizes consider cloud as a viable go-to-market strategy in New Zealand, partners are evolving alongside, attempting to keep pace amid frantic channel change.
Partners today must also cut loose from the competition, yet like customers, challenges remain.
But what’s the strategy? Because in terms of product awareness, product interest, product evaluation, product trial and product adoption - have the five stages of cloud acceptance already been negotiated?
“Cloud has levelled the playing field to a degree in New Zealand, but the hype is still well ahead of adoption,” Datacom general manager of cloud services Chong Looi observed. “Enterprise is struggling in that they are utilising the benefits of cloud, but challenges still remain around legacy technologies and monetisation.”
Whether it be public, private or hybrid, implementations continue to increase in 2017 as end-users seek to take advantage of the cloud’s economies of scale to build core applications.
But as cloud becomes default, a default cloud channel strategy still ceases to exist.
“Customers are seeking advice and guidance from the industry as to how to reach the next level in cloud,” DXC Technology New Zealand CTO John Godfrey said. “And it’s coming from different places with business units and development teams rapidly adopting new services and solutions.
“As a result, hybrid conversations are happening more frequently across the market.”
As the demand for agility and flexibility grows, organisations are shifting towards hybrid models, in a bid to leverage the best of both worlds in the context of cloud.
“If you cast your mind back five years ago, the market said cloud was the answer, so what’s the question,” Hewlett Packard Enterprise director of channels and SMB Cedric Edwards added. “The industry thought that infrastructure on site would be dead and that everything would be in the cloud.
"But as we evolve in New Zealand, which is significantly ahead of Australia or the rest of Asia, we see that balance returning.”
Consequently, Edwards advised that hybrid is the play for partners across the country, with customers remaining split between new and more traditional ways of consuming technology.
“Public cloud is wonderful thing for customers until they receive the first bill,” Edwards added. “Many mid-market customers dipped their toe in the water of cloud and now they are coming back.
“Likewise, many small businesses in New Zealand adopted cloud not for cloud sake, but because they could pay per month.
“So, if you provide that option on-premise also, they will go for that option. The world is hybrid from small to large organisations, with the conversation now moving into how we manage workloads.”
For partners operating in a hybrid environment however, challenges remain around customer deployment, with people and processes arising as sizeable barriers to future adoption.
“Hybrid is most definitely the play but in terms of why cloud is failing in some areas, it’s because the industry forgets about the people,” Dimension Data digital practice lead Steve Wotten said. “When a business goes hybrid, they must change the way they work and the way they think, which means it’s crucial that partners include the entire team from the outset.
“The key is to take your customer on a journey because otherwise, you’ll get resistance. The most difficult part of delivering a hybrid project is bringing the people together who will eventually support and operate the environment.”
Challenges around cloud adoption also come in the form of connectivity, with New Zealand as a nation exposed to issues around uptime and outages.
“Customers want to know what will happen if their internet connection goes down, especially when everything is in the cloud,” Sandfield Associates IT engineer Shane Harris added. “What happens to the business?
“If a business has moved all their information to the cloud, what happens if they lose their data? There’s a lot of factors to consider and it’s not always that straightforward.
“It’s about partners ensuring that customers have the right connections in place, backed up by proper redundancy and disaster recovery solutions, then they can offer advice around cloud services and workloads.”
Across the small to medium business (SMB) sector in New Zealand, Harris said a lack of education still exists with regards to cloud, as business owners struggle to understand the monetary and technological benefits.
“Many customers know the buzzwords but don’t know how they function,” Belton IT Nexus engineer Brad Collins acknowledged. “As an industry, we struggle with terminology and customers have the idea that everything must be in the cloud, but sometimes it doesn’t make sense.
“Education is still a huge challenge impacting channel partners today.”
As a result, partner engagement in the cloud is dictated by the size of the customer being served.
“We’re seeing a difference between the size of the user,” StorageCraft master engineer Karl Thomson added. “We’re 100 per cent channel and through SMBs, it’s still very much a trusted advisor play and the customer doesn’t know that they are using StorageCraft technology.
“They are simply consuming something that is month by month, so partners can provision a service and they don’t care because the customer is getting an outcome.
“But then as you start to migrate up towards mid-market, you see the conversation change in that the customer has already made a decision. We must be at the forefront of the outcome that they are looking for.
In terms of end-user spending, technology investments in New Zealand are expected to reach almost $11.8 billion in 2017, up 2.7 per cent from last year and ahead of the global average.
Naturally, cloud forms a key part of such investment, with businesses of all sizes continuing to assess the pros and cons of switching workloads to the skies.
“Firstly, we have businesses that want to move everything to the cloud,” Westcon-Comstor vice president of innovation Darryl Grauman added. “If you’re a new business starting out, why would you even think about infrastructure?
“Why would you go down that route when everything you need is through software-as-a-service (SaaS)? There’s no reason to be lumbered by hardware.”
In offering an alternative viewpoint, Grauman argued that SMBs nationwide are tied down by legacy investments, creating demand to move such businesses to the cloud.
“There’s businesses in New Zealand today that are working with customers to migrate them 100 per cent to the cloud at SMB level,” Grauman said.
“But on the enterprise side, it’s certainly a multi-cloud play. There’s different workloads and different solutions, and making them talk to each other is key.
“Bringing together those moving parts is crucial, which represents an important role for the channel, with DevOps very much a required skill set today.”
Delving deeper into the heart of the cloud market in New Zealand, Grauman cited application developers as central to the future success of the channel.
This however, is a channel that looks, thinks and acts differently.
“They are creating and delivering apps at a global, regional and local level,” Grauman added. “They are building on Amazon Web Services (AWS) and Microsoft Azure and this is an area of the market which requires focus.”
According to Grauman, the channel has a role to play in this space but it’s a different role to that of before.
“It’s all well and good to move a business to the cloud, but then what?” The Instillery chief product officer Jeremy Nees asked. “What can you offer beyond cloud?
“Whether it be a DevOps or development focus, there’s real value in offering another dimension to the customer in the cloud. We can quickly get disrupted, in fact, it’s very easy. Therefore, we must remain relevant.”
Echoing Nees’ comments, Veeam director of cloud and service providers APJ Asanga Wanigatunga advised that for partners playing in the cloud market, a unique value proposition must be created.
“We all have to disrupt ourselves internally otherwise we will be disrupted,” Wanigatunga added. “We’re seeing value in being able to right size the model for customers, and that’s the channel play in New Zealand today.
“There’s an opportunity for the channel to be an integral part of that. Our top performing partners have a value proposition in this multi-cloud world. Partners must address specific use cases because customers will go elsewhere otherwise.”
New world, new competition?
As New Zealand settles on a hybrid cloud approach, established players housed within the market are now being challenged by the emergence of a new breed of partner, with a shadow channel forming across the country.
Outlined at EDGE 2017 - Reseller News’ annual destination channel conference - a broad and diverse group of companies from all backgrounds are surfacing on Kiwi shores, engaging, influencing, recommending and even reselling technology to customers.
Specifically, five new competitive partner threats have emerged, taking the form of SaaS ecosystem consultants, independent software vendors (ISVs), industry-based professional services firms, born-in-the-cloud providers and start-ups.
“A whole new suite of partners are emerging across the channel,” Emerging Technology Partners director Derek Leitch observed. “There’s a real danger that our lunch could be cut if we don’t react and stay relevant.
“And that’s the motivation behind our rebrand and reinvention as a business, away from the ViFX brand.”
During the past 12 months, Leitch has witnessed a “generational shift” in the global market, with its effects subsequently trickling down into the Kiwi channel.
“We live in a cloud era and we’re seeing start-ups and specialist cloud providers aggressively enter the market,” he added. “We’re seeing this playing out today and it’s forcing partners to rethink and readjust strategies.”
As new technologies flood the market, new customers are gaining purchasing powers, procuring solutions in new ways through new types of partners.
It’s a recalibration of the channel, instigated by end-users from the bottom up, racing back up the supply chain to shake the industry to its core.
“We’re seeing change come from both ends, whether it be start-ups or large consultancy firms,” Wotten added. “Take Accenture as an example, they are playing at the top end of the market and writing digital strategies, now they are executing on that strategy.
“As a result, they’re moving down into the channel and are attacking our market share, taking customer by customer.
“Every time we enter into a customer engagement, we are being attacked by start-ups, consultancy firms and born-in-the-cloud players and as a tier-1 provider, we must ask how we reinvent ourselves to remain relevant.”
Perhaps one could argue that the market has forever been in a state of flux, yet in 2017, there’s never been so many balls up in the air.
Never has the channel had to contend with so many moving parts simultaneously, as cloud redefines the role of buyers, providers, distributors and manufacturers of technology.
Change does not translate to carnage for traditional resellers however, with the channel cliff edge still a safe distance away.
“Today there’s over 20 different suppliers serving a customer and nobody is taking responsibility,” Open Systems Specialists general manager of digital services Grant Olliff added. “But 20 years ago, the system integrator took responsibility.
“We’re seeing development teams moving to cloud, building a solution and spending a lot of money, and then the next room the same, the same thing is happening.”
Because despite the rise of new players in the market, the channel still has a crucial role to play, ensuring that maturity is injected back into the system.
“We’re in the wave of insourcing and customers knowing what they are doing again,” Enterprise IT CEO Stuart Speers added. “The things we undid years ago around multiple disparate systems that don’t talk to each other, are coming back again.
“Whatever they are, those seven or eight applications still need to talk to each other.”
According to Speers, partners that see a gap in the market and capitalise through the creation of a new offering, remain challenged to keep pace with titans of the industry such as AWS.
“You skill up but when you go to the customer, you find that AWS has released a new free tool that does most of what you’ve done,” he said. “Vendors don’t communicate this with key partners which is part of this secret squirrel approach, but it remains a challenge for the channel.
“Start-ups are flooding the market and standing up new technologies and shiny new solutions, but operationally, they are lacking which is a huge pain point for partners in the cloud.”
Change ahead for vendors
Back up the supply chain, vendors are also on the hunt for new partners and capabilities, as cloud adds extra layers of technological complexity to customer deals.
“Businesses are continually changing and cloud brings a risk for traditional technologies,” Thomson added. “A customer might have had data onsite and then moved it to the cloud, but that doesn’t mean they have the same protection as before.
“As a result, we’re looking for partners capable of operating in those circles and articulating the value of deploying an effective disaster recovery solution as-a-service.”
Likewise, Wanigatunga acknowledged that the Veeam ecosystem is also continually evolving, reflecting a hybrid market now dominated by data.
“We’re seeing the profile of our partners change,” Wanigatunga observed. “Data is the new currency and we’re finding our channel is different because of this.
“We used to predominantly sell to infrastructure partners but we’re now working with partners capable of solving different business problems for customers.”
Specific to Hewlett Packard Enterprise, Edwards said the tech giant is actively chasing ISVs and new technology providers across New Zealand, as the vendor shifts towards specialised market offerings.
“We’re no longer an organisation that is all things to all people,” he said. “Through our M&A activity we’re very much becoming more specialised and focused in terms of how we go to market.”
Yet despite clear industry acknowledgment that customers, partners and technologies are changing, the channel remains grounded by archaic vendor programs that seldom reflect market realities.
“Vendors have a traditional way of rewarding and encouraging partners in the channel,” Edwards explained. “But start-ups and these new types of partners have a completely different view of the world - do they even want to be rewarded?
“We have a whole group of new organisations that want to work with us as a vendor but they equally want to retain their independence and be agnostic in terms of recommending technology. Therefore, they don’t want any type of rewards structure.”
Such a stance creates challenges around ensuring partners are adequately trained and enabled on specific vendor technologies, with traditional methods of enablement struggling to resonate among new partners.
“But this is crucial for start-ups,” Speers added. “The sales people are usually the owners and they usually get into a mess when they hire extra sales staff.
“That is when they realise how important vendor programs are in terms of motivating internal staff.”
According to Wotten, vendor programs reflect the current state of the Kiwi market on a “case by case basis”, with different technologies and engagements meriting different types of reward structures.
“If it’s a hardware deal, it’s more traditional because that’s the way of the market,” he said. “But I’ve yet to see an effective rewards scheme that focuses on selling cloud.
“There’re a few in the market but not like the traditional business which is clear in that if you sell X amount of tin, you receive Y amount as a reward.”
Coupled with internal compensation plans, service agreements and co-selling approaches, vendors are frantically scrambling to introduce modern programs capable of straddling both traditional and emerging partners.
Currently however, the majority appear to be missing the mark in terms of partner engagement.
“Vendors are talking to the service provider community in New Zealand but the conversation has to change,” Looi added. “When they are engaging with the channel, they don’t think about what the partner needs to do to monetise the deal and make it work for them.
“It’s very much about the vendor, but what about our invoice and billing for example? The approach has to shift away from vendors just focusing on what they need to do.”
In looking back, there was a time in the New Zealand channel when partners wore vendor logos as a badge of honour.
Partner websites were flooded with pages of shiny logos. Whether it be a silver competency in this, or a gold accreditation in that, the channel was crammed with providers offering the kitchen sink in terms of technological expertise.
Today however, the climate is different.
“Each logo used to represent a different part of our capability but now we’re much more specialised,” Olliff said. “The market is more maturity and favours specialisation, partners no longer want to be all things to all people.
“As a result, we’re constantly re-evaluating the role of vendors in our offerings. Sometimes new partnerships with vendors must be made.
“I don’t think there isn’t a vendor out there in the market that isn’t trying to adapt - every vendor is trying to find the right way of working with the customer and the channel. In some cases, it’s just different horses for different courses.”
On the topic of selection, Godfrey said providers are motivated by delivering an outcome for the customer, irrespective of the vendor technology on the table.
“Ultimately it comes down to what the customer wants,” he said. “Whether that be the board of directors, the CEO, CTO or CIO, cloud is driving a different conversation.
“But we’re still living in a legacy world which means technology selection must be carefully measured.”
As each year passes, distribution in New Zealand continues to be defined by the latest buzzword dominating channel chatter.
Through the insertion of one small prefix - think digital or cloud - the go-to-market strategies of the central cog in the supply chain once again fails under observation.
For the distribution game is changing, moving in lockstep with vendors and partners to transition to solution-based selling, recurring revenue and the delivery of digital and cloud offerings.
Naturally, this is an ongoing transition that shifts distributors from a legacy tactical role to a much more strategic one.
“Our business has evolved from having no expertise in cloud, to now providing full capabilities across a range of platforms,” Exeed managing director Justin Tye said.
“We initially had resellers asking to how to consume the technology and we didn’t have the means to answer that question in the early days.
“But today we’ve landed with on-premise, off-premise, hybrid, public and private offerings, forming a whole raft of options for partners to consume.”
Speaking through the eyes of distribution, Tye said the move has resulted in a round of changes internally for the business, such as the remodelling of sales team and systems.
“We’ve also spent a lot of time educating our channel and helping partners understand how they can compete with the big players in the cloud,” he added. “We’ve invested heavily in IT expertise that didn’t traditionally exist in hardware distribution.
“Our role is helping businesses cross the divide and understand the benefits of cloud, which can be challenging.”
Irrespective of public, private or hybrid, a cloud world calls for a cloud channel strategy, with distributors central to the creation of high-margin services for partners to take to market, stepping away from mere logistics and box shipping.
Today, a distributor is defined by its ability to demonstrate expertise across cloud, mobility and security, alongside vertical market specialisation, enterprise credentials and a knack for acquiring emerging vendors
“What does a distributor do?” Grauman asked. “Our legacy was managing to get a piece of hardware from the US or China, ship it through customs and into our warehouse, sort out the financial aspect and get it onto the doorstep of a customer in New Zealand.
“Through doing that we earned our right to take a piece of margin, and the market was as simple as that.”
But in cloud, Grauman acknowledged that distributors must earn the right to take margin.
“The only way to achieve this is through suppling our platforms, which in our case is BlueSky,” he explained. “Whether it be financial analytics, security, SaaS or data synchronisation, we have services which give us the right to exist in the channel.
“Our platforms are multi-cloud so when partners come on-board, the more platforms they consume, they more they are rewarded. The deeper they go with us, the more they win.”
From a channel perspective, Grauman cautioned that the resellers of the past are not the partners of the future, with a shift underway at a national level.
“We can see that shift,” he said. “Insolvencies are happening more and more because resellers haven’t been able to convert their businesses fast enough.
“Okay, so you’ve migrated somebody to Office 365, what are you going to do next?
“New Zealand is lacking the ability to take IP and export it to the world. Through our platform, we can take Kiwi developed innovation to the world. It’s time to change or find something else to do.”
This roundtable was sponsored by Hewlett Packard Enterprise, StorageCraft, Veeam and Westcon-Comstor.