Is This the New Normal for Technology Vendors?

Embracing the new norm

Twelve months ago, nobody would have confidently predicted that 2020 would turn out to be the year that it has become. Not only has it forced a profound change in how we work and communicate, but it has also forced us to embrace a new commercial and economic reality based on the only certainty we have right now – uncertainty. And for Channel participants alike, this uncertainty presents an opportunity to embrace a new norm ourselves.  

At times like these, our focus goes in 3 separate directions – our clients, our up-stream suppliers (vendors) and the government of our respective countries. We look to each of these three parties to provide us guidance on the path ahead and triangulate what they tell us and offer us so that we choose the path most likely to prove successful and ensure our collective survival.

Whilst government policy has, rightly, focussed on navigating the extraordinary economic forces that are battering our economy, the response from our clients has been predictably cautious – projects deferred or cancelled, new expenditure tightly controlled and a “wait and see” approach becomes the norm. The stimulus to save jobs and the economy from the government and caution at the client end – difficult forces to balance.

Interestingly the technology vendor response has been predictable as they look to recruit more partners, make distributors work harder, retain margins and eliminate discounting. Offering modified commercial models to support partners and their customers, to close out what deals are available – change to survive, which seems to be the mantra of so many.

September 2020, Michael Dell announced that the entire business would look to deliver its products and services via a “consumption model.” This is where everything is sold and consumed on a predictable “monthly monthly” basis – essentially becoming a massive Managed Services Provider & Cloud provider play – evolve to survive and thrive is the mantra.

To truly deliver on that “consumption model”, Dell and all of the other technology vendors have got the break the reporting models of the past. Such as headline revenues, headline profits, growth % - that they report to the various capital markets every quarter and start to report annuity revenues as a separate, yet discreet, reporting line – not too difficult to achieve.

However, this drive to consumption from the major technology vendors presents its unique challenges downstream to Distributors and Channel partners in particular. The lifeblood of the technology industry, these organisations are at the forefront of any economic or customer recovery in spending. And much of what they are experiencing gives us some signs of the way in which we can all look to embrace the new normal in the technology channel.

We can almost derive a list of 5 things we need to do in order to navigate these troubling times:

1. Embrace the monthly monthly revenue model – Delivers not just predictability of service to our customers and presents us with the obvious need to manage our clients very diligently, but enables us to have predictability and more certainty of income, which ensures business survival.

2. Optimise costs – "Optimise” is the business-speak term for managing costs very tightly – if it isn’t lead or revenue or margin generating, then don’t do it. If you don’t need it at the core of what you do, then insource it.

3. Plan for continued uncertainty – Nobody has a concrete view of when we will return to a sense normality or certainty. Nobody. So the best way we can plan is to plan with what we know..uncertainty !

4. Focus on doing what you do well, and partner where you don’t – Gone are the days when organisations try to do it all themselves. We must be smart in partnering with organisations that offer things better and cheaper than we can do it ourselves, in the same way, that Formula 1 teams partner for things from engines to tyres and beyond. Partner for profit has to be the mantra.

5. Cross-sell and up-sell existing clients to drive revenues – If we are to embrace the new “monthly monthly’, then we must embrace the fact that existing customers are the lifeblood of what we do. We need to not only retain them, service them appropriately and listen to their needs, but take every opportunity we can, to cross-sell them additional products and services that make sense for them and deliver revenues and profits for us.

Fundamentally, 2020 has forced so much of the world to embrace new ways of living, working and just surviving, that it naturally makes sense that Channel Partners have to consider their response to those massive forces of change and change themselves. Of course, change is worrying and comes with its own complications, but isn’t change better than extinction? The answer is obvious, really...