The economic crunch definitely also has an impact on the channel. So what kind of trends are we looking at in the channel in Asia this year? According to Neil McMurchy, research director, IT Indirect Channels & Programs, Gartner Inc. there will be a few:
- There will be some rationalization and contraction of the number of channel partners in the region. In some cases marginally profitable channels businesses will not survive; in other cases this will give rise to acquisition opportunities for those channel businesses which are well-funded. This is not an APAC specific issue but the very rapid growth of channels in the region over the last few years means that there are probably a higher proportion of marginal channel businesses in APAC
- Vendors will come to really appreciate those partners who have existing strong customer relationships in place; in a low or no growth market ,new opportunities will be tougher to find and more keenly contested so it will be critical for vendors to support partners in maintaining and growing existing customers since those customers will represent the easiest selling opportunities
- SaaS will come of age for the APAC channel this year. End-users are seeking lower cost of entry for new technologies, and are looking to move their IT costs from fixed to variable – SaaS and similar acquisition and delivery models (ADAM) meet this need. Channel partners need to understand how this trend will impact their business
McMurchy explains how these trends are different from those in 2008, “Compared to the beginning of 2008, the current situation has shifted from buyers fairly indiscriminately buying technology to an environment where cost constraint predominates and where the short term value of the technology has to be very credible. Channels and vendors are going to have to work a whole lot harder to prove the real business value of their offerings.”
With the current economic gloom and doom, will any new trends appear in 2009? McMurchy points to two: Firstly, the concept of Value added distribution will be tested more thoroughly in APAC this year. There are a number of self-styled VADs in the region whose “value” over and above volume distributors is questionable and will be increasingly challenged by both vendors and resellers. Secondly, he adds that there will be an intense focus on channel sales enablement beyond simple product training. “Given that IT buying power has shifted strongly back to the business away from IT, then the capability of channel partners to articulate the real business value of a technology offering into language that is compelling for business users is critical; in APAC generally, the channels (and some vendors) ability to do that is poor and needs to dramatically improve,” he elaborates.
There is no doubt at all that 2009 will be a year of challenges for all, the channel included. In particular, McMurchy feels that the two top challenges this year for partners and vendors alike are:
- Proving the value of their offering and its ability to impact the business of their customers and provide relatively short term benefits
- Cash flow and credit
Elaborating on the ‘cash flow and credit point’, McMurchy says, “Cash and credit availability will impact both channel partners and their customers. Bear in mind that the vast majority of APAC channel partners are private companies and often poorly capitalized; likewise many of their customers, particularly in the SMB segments have a similar profile so skills around managing businesses in that environment will be at a premium, as will any vendor programs that can assist partners in this area. Most APAC channel partners are themselves SMBs.”
So is it particular types of partners that will feel the heat of the crisis? McMurchy shares, “If your value proposition is that you’re a Value partner then you’re going to need to prove that value in the eyes of your customer but deliver in a way that maintains your profitability.” He continues, “Its not the type of partner so much as the quality of their existing customer relationships; if you have a bunch of people who buy stuff from you but you have no value beyond simply providing that product or service then you’re in trouble. Also, if you keep going to market talking about feature/function/specifications then you’re in trouble.”
By Shanti Anne Morais
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