As cloud services continue to dominate enterprise IT, the perceived value of hardware has changed. Hardware margins have dropped, and cyclical solution upgrades and license renewals have made way for regularly updated subscription services.
Customers like the pay as you go (PAYG) payment schemes from cloud service providers like AWS, GCP and Azure – if you use a little, you pay a little, if you use a lot, you pay a lot. Also appealing is cloud elasticity, the ability to scale up as needed and as important, the chance to scale down or completely‘de-commission’ systems if necessary. Any IT function can now be transformed into a service for consumption.
The traditional IT suppliers have responded to this by making their offerings‘cloud like’ providing PAYG, along with some elasticity. They provide hardware on-premise with all its security, performance, and data sovereignty benefits. Thereby combining the attractive characteristics of cloud and on-premise to deliver the best of both worlds in a hybrid cloud solution.
Examples of this include HPE GreenLake, Lenovo TruScale, Cisco+ and Dell Technologies Apex as a service offerings (XaaS). HPE announced a commitment to offer its entire portfolio as a service as it continues to expand XaaS offerings to meet customer demand and is now effectively a services company.
Video explaining HPE GreenLake
From a channel partner’s perspective, the established sequential route to market of vendor-to-distributor-to-channel partner-to-end customer has become blurred. Vendor offerings no longer rely on pushing hardware / SKUs through the channel like they used to because of changing customer demand, margin pressure and recent supply chain issues. Vendors are actively evolving their channel networks into solution sellers – whilst adjusting to the XaaS model.
Clearly customers are fuelling these changes by actively seeking the XaaS payment model. According to Gartner Anything-as-a-Service (XaaS) is gaining popularity across government organizations. Equally, private sector customers demand faster time to value, speed-to-market and the ability to innovate quickly which this model provides.
Xaas stands for anything as a service or everything as a service.
Vendors must act
It’s clear the conversation around IT purchasing has changed and vendors that collaborate with channel partners need to adapt their channel programs to support their partner ecosystems. Customer discussions are not around the infrastructure anymore, but around the challenges it solves, and the business benefits it offers. In addition, the customer is no longer strictly the IT department. Now, the purchasing process often starts with line of business first, not IT leaders. Again, the lines between a technology conversation and a business improvement conversation have blurred. This re-emphasises the fact there is less scope for channel partners to just shift units. Now, channel partners need to add unique skills, services, and consultancy around solutions to stand out from the competition.
For vendors to truly realise the cost benefits of working with channel partners (through reduced marketing and distribution costs, as well as minimising the risk of direct investment in new markets), they will need to empower their channel partners with innovative approaches. Establishing regular communication and collaboration with channel partners to ensure consistency and that marketing efforts are aligned with business goals is key.
As channel partners look to offer more value, it means the vendors must do more to support them make this transition. It means they need to think creatively about how to recruit, educate, enable, and incentivise their channel partners – and how it all fits in with modern B2B markets in the era of Anything-as-a-Service.
Find out how TBT Marketing’s future focused approach can help you create a dynamic and profitable channel partner network.
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