4 Takeaways on State of IT Channel

Carolyn AprilSr. Director, Industry AnalysisCompTIA

4 Key Takeaways on IT Channel Today

Copyright (c) 2014 CompTIA Properties, LLC. All Rights Reserved. | CompTIA.org

The Big Picture in Channel Change

Low degree Moderate degree

High degree

17%

59%

24%24%

55%

22%

2012 2014

Self Assessment Business Transformation

CompTIA MPS Trustmark Value Proposition1. Validation of MPS expertise to customers

2. Mechanism to evaluate internal MPS

operations / follow best practices

3. Differentiator

Low degree Moderate degree

High degree

15%

72%

13%

20%

49%

31%

15%

48%

37%

Small channel firm

Medium channel firm

Large channel firm

Current State of Transformation by Size

Source: CompTIA 4th Annual State of Channel: Base: n=350 IT channel firms

How Far Along the Path to Business Transformation?

Primary Catalysts for Channel Business Transformation

Defensive move against obsolescence

Margins on product sales declining

Vendors pushing us to change

New financial models are more lucrative

Desire to move to a recurring revenue model

Customer demand for different services and IT delivery models

Cloud computing pushing us in new directions

23%

23%

27%

32%

35%

36%

41%

In 2010, just 37% of channel firms sold cloud solutions; today, nearly all do in some form.


Top Challenges Experienced with Business Transformation

1. Cash flow and other financing challenges

2. Customer education

3. Balancing existing business operational needs with new business

4. Hiring skilled staff to accommodate new lines of business

5. Need for new kinds of technical training

6. Need for sales and marketing training and repositioning

7. Need to learn new financial metrics and accounting schemes

8. Lack of business transformation roadmap

Note: rank order listings are useful for summary purposes, but should NOT be interpreted quantitatively. For example, the first-ranked item is not necessarily 8 times more important than the eighth-ranked item.



Takeaway #1Cloud is forcing fundamental

change – but take stock before moving too fast.

Cloud Computing and Channel Today

Year-over-Year Cloud Traction Positive for Channel

Cloud vs. Established Products/Services Revenue Growth

Estab-lished

growing faster

Growing at same rate

Cloud growing

faster

26%22%

50%

19% 21%

58%

Cloud vs. Established Products/Services Profit Margins

Established higher

Roughly the same

Cloud higher

21%

30%

49%

11%

24%

64%

Source: CompTIA’s 5th Annual Trends in Cloud Computing | Base: 400 channel firms with cloud offerings

Challenges Deemed “Very Significant” by Channel on Rise

Optimizing markering and sales messaging for cloud

Developing cloud expertise (technical and sales)

Deciding which vendors to work with

Cash flow/financial considerations

Initial costs (infrastructure etc.)

Balancing needs of legacy business and cloud sales

Determining appropriate business model

49%

50%

43%

46%

44%

44%

45%

54%

56%

52%

52%

56%

57%

59%


20132014

Steps Taken to Mitigate Cloud Transition Challenges

1. Invested in technical, sales and business training

2. Transitioned just a portion of business to cloud; scale later

3. Used third-party data center provided rather than build own NOC

4. Accessed vendor-provided training

5. Hired new sales reps to sell cloud services

6. Partnered with other solution providers to combine skill sets

7. Pursued additional credit/capital

Note: rank order listings are useful for summary purposes, but should NOT be interpreted quantitatively. For example, the first-ranked item is not necessarily 7 times more important than the seventh-ranked item.


Roughly half of respondents turned to a third-party data center provider for cloud in 2014, up from 31% last year.


Takeaway #2Make sure to understand the

implications of business model change.

Sales & Marketing Changing Times

29% 48%

21%3%

Highly effectiveModerately effectiveHit or missIneffective

Self-assessment of sales & marketing effectiveness of channel


MSPs are far more critical of

the channel’s sales and marketing

acumen than solution providers. Just 6% of them deemed

channel efforts ‘highly effective’ vs. 31% of solution providers

who responded favorably. Twice as

many MSPs characterized these

operations as ‘hit or miss.’

Sales & Marketing Skills Still Lag Technical Expertise

Impact of the Adoption of New Business Models, Such as Managed Services and Cloud Services, on Sales Structure

No impact

Simplifying the complexity dramatically

Simplifying the complexity somewhat

Increasing the complexity somewhat

Increasing the complexity dramatically

12%

6%

28%

27%

20%


1. Routine visits/interactions with existing customers to upsell

2. Marketing/business development to identify/attract leads

3. Sales proposals presented to customers

4. Outside sales rep face-to-face visits with potential new customers

5. Use of social media to attract new customers

6. Contractual terms discussed for services, including SLAs

7. Inside sales cold-calling of qualified leads

8. Purchasing outside database/customer list

Note: rank order listings are useful for summary purposes, but should NOT be interpreted quantitatively. For example, the first-ranked item is not necessarily 8 times more important than the ninth-ranked item.


Main Sales Activities Taken by Channel Firms

Rating Various Activities as Part of Sales Model Transition

Creating incentives to drive sales to new business areas

Performing demand generation/lead generation for new customers

Effectively rebranding/messaging as a services provider

Learning to sell to non-IT and line-of-business end customer buyers

Adjusting to different sales cycle durations

Realigning sales compensation models for reps

Hiring new sales staff to accommodate new lines of business

Retraining existing sales reps to engage in services-based selling vs. product/project sales

10%

12%

12%

18%

17%

18%

15%

10%

49%

46%

47%

38%

48%

45%

50%

49%

41%

42%

41%

44%

36%

38%

35%

41%

Major factor Minor factor Not a factor


Actions Taken to Sell to Non-IT LOB Executive


Incentives for staff to further engage with business execs

Maintain dual approach for business and IT execs to meet both needs

Hire new sales reps with experience in vertical industries

Focus less on HW/SW specs and more on total solutions

Redesign marketing collateral with more of an end-user focus

Use of social media to target non-IT executives

Sales training to enable reps to sell to non-IT executives

19%

23%

25%

32%

34%

36%

40%

49% of solution providers plan this step vs. 28% of MSPs


Takeaway #3Learning to sell consultatively

with a business solution or gain in mind is paramount.

Marketing: The Channel’s New Frontier

Staffing Activity for Channel Firm Sales & Marketing

Added new sales reps

Hired reps outside the IT industry

Eliminated sales reps based on business model change

Added new marketing reps

26%

34%

39%

28%

51%

44%

36%

48%

23%

22%

25%

24%

Major activity Minor activity No activity


Social Media Usage and Marketing Plans for Future

42% Use of social media

34% Increased use of white labeling

32% Webinars, blogs, etc.

23% Hire of marketing professionals20% No longer leading with vendor brand

or vendor certification skills to attract customers

19% None of the above

Planned Changes in Marketing Strategy

Source: CompTIA 4th Annual State of Channel: Base: n=96 IT channel firms which are using social media

Plans to Increase/Decrease Social Media Usage

35%

38%

25%2%

Increase its usage significantly

Increase usage somewhat

Maintain same usage

NET Decrease


Takeaway #4Cloud and other industry changes make YOUR brand the premium to

lead with.

In Conclusion: Steps to Think About

Point #1: Re-train and/or hire sales reps to sell consultatively and to focus on services and business outcomes for the customer.

Point #2: Learn to sell to the non-IT line of business buyer, who increasingly has a seat at the table in making technology purchases.

Point #3: Retool internal sales processes, sales team structures and compensation plans/incentives to fit a recurring revenue model.

Point #4: Up you game around marketing and self-branding, including the use of social media to acquire new business.

Point #5: Don’t ignore the cloud, but be smart and know your business operations today to plan for tomorrow

Source: CompTIA

About CompTIA Market Research

Source: CompTIA Market Research

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4 Takeaways on State of IT Channel

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