Techaisle Blog

Channel Momentum

As some IT companies continue to consolidate and others split up, Dell is promising its channel partners consistency, stability and increased profitability. And it is showing:

• Dell Channel revenue now represents more than 40 percent of overall Dell commercial revenue and its channel business is growing faster than the overall market


• Channel revenue growth is up double digits in 10 of Dell’s top 11 countries year-over-year


• Dell solutions are now available through three of top Distributors - Ingram, TechData and Synnex - and where Dell is experiencing growth in excess of 50 percent

To keep the channel momentum intact, Dell is pledging US$125 million in enhanced incentives to help channel partners bid and close new customer acquisitions and also deploy towards retention deals with existing customers.

As always, not willing to take any hype on face value Techaisle took to the streets to really talk with Dell SMB channel partners and especially those who have partnered with both Dell and HP. Over the course of last three weeks, Techaisle conducted over 25 depth interviews with SMB channel partners. The discussions clearly revealed that the partners have started to look at Dell rather seriously. As one of them said, “Dell has changed its approach and outlook towards channel partners after it went private. They monitor and coordinate with their partners just like any other OEM. They have changed their ways in how they strategize and have created their training plans to cater to our needs and are succeeding by actively collaborating.”

Another partner, based in Texas and focused on SMBs was more direct, “Dell hasn’t been looking at channel partners as a key to gain market share unlike OEMs like HP. A few months back only about a 30 percent of sales were driven by the channel partners and the rest was a result of Dell’s direct sales efforts. The reason is that Dell itself had a large sales team managing sales accounts. However, after Dell went private they have mended their ways in how they look at us. They have kept the key sales accounts with themselves and the rest have been distributed amongst the channel partners for further management and revenue generation which is a good step as it inculcates trust and sense of real partnership.”

Impressive Numerics

At one of my sit-down meetings, Cheryl Cook, VP, Global Channels and Alliances shared some impressive statistics:

• Dell has 167,000 channel partners out of which 4,255 are Preferred and Premium partners.


• Nearly 700 channel partners chose to become premier or preferred partners of Dell in 2014, a testament to channel commitment


• Training uptake, (a top requirement of channel partners as per Techaisle SMB Channel study), was up by 54 percent in 1H’14. But more importantly, training on software solutions increased by 102 percent.


• Over 82,000 deal registrations were processed, up 8 percent YoY and software (security, device management, data protection, systems management) deal registration was up by 32 percent


• Rebates processed was also up by 23 percent during the same time frame


• 4400 new customers were acquired through channels, transacted 10,000 new orders out of which 1200 were for storage and 1600 for software

Although she deftly skipped my question on how many named accounts have been formally handed over to channel partners she reiterated that Dell is continuing to maintain its compensation accelerator program which is yielding good results. Recently, a little over 200,000 greenfield accounts have been posted on the Partner Portal.

Investment in Training, Support, Lead generation, Consultative partnerships

Most channel partners that Techaisle spoke with agreed that Dell has been concentrating on technical training sessions and regularly assessing partners’ performance with a clear objective of empowering them with required product knowledge to be able to pitch to the right set of SMB customers in the best possible way. Unlike the immediate past, account managers from Dell have suddenly become approachable. Some partners went to the extent of telling Techaisle “we specifically like the pre-sales and sales trainings that Dell has designed for Channel Partners. At times I feel that their efforts in the field of training annoy us as there are multiple and repetitive requests for attending or undergoing the same set of trainings that we have already gone through. They do not yet have a system to remove these redundancies”.

Channels are also having good experiences working with Dell’s consultative approach. “Lately, we were dealing with a few SMB customers and they wanted the account managers and few other technical experts to be available on call. We worked together with Dell and closed 3 deals where the consultative partnership worked in our favor”, said an SMB channel partner based in California.

Dell is also investing in supporting the channels when they bid for complex engagements. Their pre-sales support has improved as compared to before as channels now have access to their technical resources who work along with partners’ technical teams in understanding customer requirements, existing customer infrastructure to suggest suitable solutions.

In addition to training and support Dell is making a series of investments to help channel partners by:

• Making available 5X demo gear to facilitate proof-of-concept


• Increasing number of Solution centers for partners to showcase Dell end-to-end solutions to their customers (granted not many SMB channel partners will take advantage)


• Improving areas of financing such as extending credit and payment terms thereby assisting channel partners in better managing their cash flows. The terms announced are 75 days interest-free financing on all Dell purchases for an introductory period of 180 days

Are conflicts a thing of the past? Channels are cautiously optimistic

Dell seems to be diligently working towards building trust within its channel partners. Dell and its partners have had a love-hate relationship due to conflicts with Dell’s strong direct sales force across all divisions. In fact, with the progress made, channels are wishing that Dell limits its investment in its internal sales teams as it would in all probability bring back the channels to “square one”.

The channel partner community reminded us of unpleasant past experiences of “Dell snatching customers from their partners and dealing with them directly”. But they quickly added, “We haven’t come across such a scenario (lately) and would never want to face a situation like that”.

Another partner said, “Dell has always been known for their direct business and has ramped up their efforts in the indirect sales through channels around a year ago. Earlier, we never knew if a deal which is routed through us will be closed keeping us in loop (with our margins intact) or Dell may go ahead and deal with the customer directly. Now, this has completely changed and Dell itself directs the customers to go through us”.

An HP and Dell partner was eager to get his point across regarding lead generation saying that Dell is managing a nice balance while sharing potential customer details with only one partner. HP is not following this approach triggering conflicts.

End-to-End Solutions message is resonating

Dell is steadfastly focused on its end-to-end solutions strategy and channels are paying attention. “Dell offers support in implementing end-to-end solutions. They work with us in consultation to determine the best product and solutions based on SMB customer requirements. Account Manager from Dell works with us closely when we deal with such deployments. We get all the technical help required, if skills are not available with us. Dell offers us access to experts (both on calls and physically, when required) from functional areas when we deal with SMBs for deployment of end-to-end solutions”.

Channels are finding that not only end-to-end solution deals give them extra margins but also makes it easier to deal with Dell, namely, channels get a better attention from Dell. Techaisle feels that if selective attention becomes the norm then many Dell SMB channel partners may flounder.

A mid-west Dell SMB channel partner was very vocal when we spoke with him. “Dell is important while we engage in end-to-end deals with our customers. Dell’s role starts from pre-sales to the deployment of such engagements. They offer the required marketing set-up for the products and solutions. If we have to take care of these things on our own, I think our margins will squeeze and it will be difficult to sustain our business”.

Having a full portfolio of offerings also allows “non-end-to-end solution channel partners” to sell adjacent technologies. For example, “we have clubbed and sold Dell hardware with Cisco, NetApp and IBM storage management and security solutions”.

Then there are other channel partners who try and build solutions with a product from Dell as the center-point. “Based on customer requirements we will see if there is a Dell product suited to meet the needs. If yes, we pitch for it and if there isn’t a product suited, we may bundle it up with other solutions and design an end-to-end solution for our customer. If the customer wants to go with a specific product and Dell doesn’t have promising product in the area; in these cases we will bundle it up with other product and present it as an end-to-end solution to our customers”.

Lingering Channel Challenges

To my question on what should channel partners be expecting next from Dell, Cheryl Cook quickly points out her focus on strategic pillars of mobility, security and Big Data with big push on converged infrastructure and innovative storage solutions.  She counters me with a question on VMware EVO:RAIL and its “fantastic” suitability for the SMB market segment.

Channels are listening and echoing that the fastest selling Dell solutions are Rack and Blade servers. But they feel that Dell has not yet been able to position its Force10 and SonicWall offerings effectively and channels are losing to Cisco or HP.

As conflict is disappearing, trust is settling in, channels have a new gripe. When a customer floats an RFP to a number of partners, Dell seizes the responsibility to directly speak with the customer, decides which partner is in the best position to offer most favorable terms and informs other partners to step aside and not waste their time on a deal which may not land with them at all. This annoys the channel partners as they would like a fair opportunity to win the deal and gain a customer by cutting down on own their margins.

No Regrets – but could have been bolder

Looking at the last one year since taking the helm, Cheryl Cook has no visible regrets. After much coaxing and cogitating she says, “Perhaps we could have been bolder in our move” referring to speed of Dell’s organizational moves and intuitive proactive thinking. The future is bright and she and her team are committed to helping all partners – “narrow or broadline”.

 

1. Collaboration is a critical solution priority. In a list of ten solutions ranked by SMB use and planned use, “content management & collaboration solutions” is positioned as the fifth highest-ranked solution. However, the four solutions that are more highly ranked – social media, mobility, BI, and cloud – all deliver, and are expected to deliver, collaboration-related benefits. Viewed not just as a solution category but as an organizational capability, it is clear that collaboration is pervasive and critical to SMB IT buyers. This is reflected in data demonstrating that collaboration (and cloud, social media and mobility) is seen as contributing to business growth, and not strictly to cost savings. Larger SMBs are explicit in recognizing this imperative: within mid-market (100-999 employees) businesses, content management & collaboration is ranked as the second most important IT priority.

 

1. Content Management & Collaboration systems are in broad use. Collaboration has traditionally been seen as a mid/large business solution, but broad market trends, including the enormous reliance on mobility, the trend towards flexible partnerships between SMBs and between SMBs and corporate clients, and the general trend of including customers within the framework of collaboration solutions have all contributed to much broader demand for collaboration solutions.

 

1. Content Management & Collaboration solutions are file-first, not person-first. Collaboration is often seen as enabling human-to-human connections, but Techaisle’s SMB survey data shows that SMB users consider content management & collaboration around files – such as that offered by Dropbox or Box – to be the most important aspect of a collaboration solution. In today’s market, SMB content management and collaboration is a three step process. The central SMB buyer requirement for a content management & collaboration solution is the ability to share files from desktop or mobile devices, the second is to enable online interaction, and the third is to provide richer media and media escalation for person-to-person communications.

 

1. There is a strong connection between cloud, mobility and collaboration. Mobility, cloud and collaboration are all important trends in today’s IT market, and Techaisle SMB survey data indicates that they are tightly interconnected. Mobility is a key driver of collaboration demand, with 300 million WW SMB mobile workers (42 percent of workforce) looking for framework technologies enabling them to connect with suppliers, customers and each other. At the same time, collaboration is seen as a key attribute of successful cloud solutions, with more than one-third of US SMBs citing “the ability to provide or support collaboration” as a key success factor in cloud solutions.

 

1. Key business drivers for content management & collaboration solution adoption are changing. Both small and mid-sized firms have viewed creation of a central repository of information as the most important business driver for content management & collaboration investments, and both groups report that a need to build synergy across geographically-dispersed team members and a need to respond to leadership mandates are also key business drivers for content & collaboration solution adoption. However, these drivers are changing. New SMB buyers are still focused on creating central information repositories, but are more likely than existing solution users to emphasize speed of innovation and improving the ability to schedule meetings (in mid-sized firms) and the need to speed decision making and improve teamwork (in small businesses).

 

1. SMB BDMs are the key champions for content management & collaboration solutions. Techaisle research looked at the issue of internal leadership for content management & collaboration adoption from two perspectives. In both cases, BDMs, and not IT, emerged as the key force driving decisions to deploy collaboration solutions. Techaisle believes that in response, collaboration vendors need to position their wares as business solutions and not as technology systems.

 

1. Key success metrics for collaboration systems center on speed of response to customers/prospects and business decision timeliness and accuracy. Survey results show that both small and mid-sized businesses are most likely to assess the success of content management & collaboration solution initiatives in terms of improved speed of response to customers and prospects. They are also likely to consider timeliness and accuracy of business decisions as key success indicators. Techaisle urges suppliers to create marketing messages that emphasize, in clear and measurable terms, how investment in a solution will improve the timeliness of responses to customers and prospects, and to provide insight into how these solutions also enhance internal decision processes.

 

 

 

Table of Contents of the report is here: 360 on SMB & Mid-Market Content Management & Collaboration Solutions Adoption Trends Study

Techaisle’s recent SMB Cloud computing adoption survey of 1455 US SMBs shows that hybrid cloud is gaining momentum in small businesses and is becoming entrenched in the mid-market businesses. According to the survey, hybrid cloud is currently being used by 18 percent of cloud-using SMBs and will be the approach of choice for 28 percent in 2015, an increase of 56 percent. Similarly, Hybrid Cloud accounts for 32 percent of cloud using mid-market businesses today, and is expected to capture a similar proportion of new spending in 2015.

The survey data also reveals that use of “hybrid-only” cloud is expected to increase by 87 percent, the proportion of SMBs using a combination of private and hybrid is expected to grow by over 100 percent and use of all three of public/private/hybrid cloud is expected to increase by an even higher percent.

Even SMBs that are pursuing Public or Private Clouds are ripe for Hybrid cloud in the future. In small businesses, survey shows that 50 percent of those planning new cloud initiatives in 2015 are looking to implement private cloud – in effect, using internal infrastructure to deliver on-demand services. However, these small businesses will most likely hit the limit of their internal resources and bridge to external cloud when they do so.

Techaisle survey data further shows that trust in public cloud is leaping within mid-market businesses with 44 percent anticipating use of public cloud in 2015 - up from 27 percent currently – typically for workloads including customer service, hosted VoIP, collaboration, marketing automation and business intelligence. These mid-market businesses are also looking to improve integration and manageability by connecting Public cloud workloads with internal systems creating an inevitable move to Hybrid cloud.

Small businesses (1-99 employees)

42 percent of small businesses are currently using only private cloud, less than 20 percent are using only public cloud and a small percent of small businesses are using only a hybrid approach connecting public and private clouds. This means that their cloud usage journey to date has consisted of using internal resources to deliver on-demand services.

Survey data also reveals that many small businesses are using more than one cloud approach. 15 percent are using both public and private cloud for discrete purposes and not configured as part of a single delivery infrastructure. Relatively small proportions of small businesses are using private and hybrid or public and hybrid. Segmentation of survey data reveals that small businesses using all three of public, private and hybrid clouds have an average of 43 employees and four locations making them noticeably larger than other small businesses.

Mid-market businesses (100-999 employees)

Techaisle SMB cloud survey also shows that less than 40 percent of cloud-using mid-market businesses rely on a single delivery approach for cloud. 25 percent use only private cloud and one-third use two different delivery approaches, with the most common being a combination of private and hybrid cloud or private/public cloud. 30 percent of cloud-using mid-market firms surveyed report that they have currently deployed all three of public, private and hybrid cloud. Unlike small businesses, these mid-market businesses are smaller is size than those using a single delivery method but they tend to have a higher number of locations.

Final Techaisle Take

Survey data suggests that selection of a Public vs. Private vs. Hybrid Cloud strategy is not a “religious issue” and that SMBs are selecting the best approach for their requirements and they change approaches in response to changing business needs. The decision to use one two or three cloud delivery models is also a result of IT finding that the best way to use cloud across a wider range of business requirements is to deploy a wider range of clouds. Although Hybrid Cloud is gaining momentum within SMBs, cloud suppliers should carefully consider the use cases for whichever of public, private and/or hybrid they are promoting, and to stress the ways in which the approach is optimal for the business requirement. SMBs are committing to workloads first before Public or Private or Hybrid.

Detailed data and analysis is available in report: 360 on SMB & Mid-Market Cloud Computing Adoption Trends

In the early days, the key question wasn’t “when?” but “what?” Looking back at 2011.

Four years ago, Techaisle’s 2011 SMB Cloud Adoption report began with a discussion of cloud awareness within the SMB community. Results showed that while SMBs were reasonably familiar with the terms “private cloud” and “public cloud” (recognized by 84% and 74%, respectively, of SMB respondents), “XaaS” had not yet entered the SMBs’ lexicon: less than 25%  were familiar with the term “hybrid cloud”, and IaaS and PaaS were also not commonly understood.

Discussions of reasons for adoption and barriers to cloud adoption also illustrate how much the cloud market has evolved over the past four years. In 2011, SMBs cited “simplified access through a browser from any location” as the second-most important reason to adopt cloud; in today’s multi-screen, mobile world, requirements have progressed much further, with an application interface layer capable of responding to different displays, a practical necessity for many business systems. Similarly, features like “eliminating the need to upgrade individual users” and “getting new features automatically” have become expected attributes of cloud, as attention progresses to issues like building agility and obtaining new capabilities. The data did highlight one issue that has remained constant from 2011 to 2014 though: as was the case with Techaisle’s most recent 2014 SMB cloud survey, the 2011 results emphasized a desire to increase IT staff’s efficiency as a key reason to embrace cloud.

In 2011, when asked, “What vendor actions would compel you to use cloud services?” 46% of small businesses and 38% of medium businesses replied that they would “never consider using hosted applications.” Today, of course, refusal to consider SaaS is still an option; but increasingly, it is an expensive, non-mainstream option – helping to remind us that “never” is not a good planning horizon for new technology.

Overcoming Cloud Adoption barriers of 2011

In many ways, a review of the list of barriers to cloud adoption cited by our 2011 respondents is even more helpful in illuminating increased SMB focus on cloud. In the 2011 research, respondents not using cloud were asked to specify the conditions that would prompt them to consider use of cloud services. The list of top responses is intriguing. The most frequent answer cited by 2011 respondents was “if the cost of owning the applications is significantly higher than renting them”. It can be argued that this condition has been met – that for many applications, ranging from office suites (where pricing for Office 365 is more compelling than for boxed versions of the software), to niche-specific applications where on-demand fees provide far superior economics than a combination of new hardware and licensed software, to the “fail fast” mantra used to apply cloud to emerging business opportunities (one which relies on the freedom to spin up and spin down applications quickly, without reference to the depreciation cycle associated with the underlying hardware), the economics of cloud are compelling for at least some applications.

Similarly, the second most frequently-cited condition that would prompt 2011 non-users of cloud to consider adoption – “if the application we need meets our needs completely” – is also often frequently met today, thanks to the explosion of niche-specific applications available from an ever-expanding universe of cloud application sources. Viewed in hindsight, we can see that cloud provides an ideal delivery platform (and associated business model) for addressing these conditions, which has in turn helped fuel cloud’s advance in the SMB market.

Where are we heading from here? Tracing the trajectory of SMB cloud usage

Through its relatively brief history, cloud projections have been hampered by the “hockey stick” phenomenon. Cloud is growing in multiple ways simultaneously: the number of firms using cloud is increasing, the number of individuals using cloud within these firms is increasing (e.g., as business users in different areas and IT workers find discrete uses for cloud-based systems), and the number of platforms and applications in use within each organization is increasing. These compounding growth curves drive extreme growth expectations that are difficult to digest.

Based on our most recent 2014 SMB cloud study we have constructed a “current and projected” perspective. The data serves to reinforce the belief that hybrid is emerging as the dominant cloud delivery model. Some of the hybrid growth numbers are extraordinary: use of “hybrid-only” is increasing by 87%, while the proportion of SMBs using a combination of private and hybrid is expected to grow by 122%, and use of all three of public/private/hybrid cloud is expected to increase by 130%.

However, even the figures that are less exceptional still relay an impressive underlying story. Take, for example, the “public only” group. Data shows that businesses using only public cloud will shrink by 20% within US-based SMBs. However, public cloud itself will be a growing part of SMB cloud delivery strategies and is actually poised to increase by 75% through the forecast period.

Using the same survey data based projection methodology we have created workload scenarios across sixteen different applications areas. The “full market adoption” scenario assumes that all SMBs reporting plans to adopt cloud do so whereas the “gradual adoption scenario” takes a different approach: it assumes that current cloud users will adopt each technology according to current plans, while new cloud users will adopt each technology only at current usage rates.

Data clearly shows the coming dominance of hybrid as a delivery model – which drives increased demand for both public and private cloud as well – and provides high-growth forecasts for cloud storage, data backup and cloud security at a workload level, and for vertical applications, content publishing, CRM and BI/analytics in SaaS. It can be difficult to parse through the many, extraordinary growth projections for cloud. By connecting user intentions for growth in overall cloud adoption with adoption patterns for delivery, workloads and applications, Techaisle provides its clients with the data needed to calibrate the growth needed to keep pace with or exceed the overall SMB cloud opportunity.

Related research report: SMB & Mid-Market Cloud Computing Adoption Trends