Focus on the future

The headline trends for next year are already well established, perhaps around three major themes of security and business continuity; collaboration and Unified Communications; and doing more with less through virtualisation and server consolidation. The main difference in 2008 is that all this will be carried out against a backdrop of a worsening skills shortage and tightening budgets as the Reserve Bank continues to attempt to reign in an exuberant economy.

IDC recently announced its forecast for ICT budgets in the new year and while they are far from falling in such a strong economy, the researcher did describe them as “stalling”. IDC said IT budgets for the current year will grow by a less-than-the-inflation-rate of 3.2 percent over 2006 budgets, giving the impression the 2008 budgets might be even tighter.

Still that meant there was $39.3 billion up for grabs in 2007 and at least that in 2008. Making sure your business gets its share of that kitty is (as always) the challenge going forward.

Many of the trends play straight into the hands of resellers. Organisations seeking to meet the needs of a still buoyant business climate with a budget that is diminishing in real terms will likely turn to the channel looking for just the solutions it is preparing to sell.

Virtualisation, consolidation, IP communications and collaboration all serve to drive costs lower and efficiency higher while new approaches to delivering solutions will ultimately lower the entry cost to those solutions to the benefit of end-user organisations.

Increasingly both users and vendors will turn to the channel in this climate. As IT vendors seek profits from new markets they are changing the way they partner and while this will mean the channel is asked to commit more to the relationship, in exchange vendors are showing a greater willingness to invest in them.

For several years now large vendors have cast an envious gaze over ever smaller organisations and have begun tailoring solutions for SMBs in a trend that has made the channel an increasingly critical part of their strategy.

In a recent analysis of channel programs, Gartner analyst Tiffani Bova discovered that vendors are altering their relationship with their partners in ways that will begin to fundamentally disrupt the existing industry landscape. The news may not be good for all, but for those who survive this new direction, which Bova predicts will take three to five years to play out, the rewards will be significant.

Vendors are looking to generate a greater Return On Partnering (ROP) as they try to sure up their future revenues and penetrate the hard-to-reach small enterprises with increasingly sophisticated solutions.

Based on these needs, Gartner noted that some channel programs have begun to change emphasis. “Some vendors are farther along in their development path, while others are still playing catch-up to program shifts that happened a few years ago,” said Bova. “Either way, the constant here is change – change that ultimately will alter the relationship between the channel and vendor partners (and vice versa)”.

From asset to access

CRN talked to VP and distinguished analyst at Gartner Research, Craig Baty, about Bova’s report and other trends ahead. Baty, Gartner’s global lead analyst for IT marketing, business and channel strategies, pointed to an overall trend which will affect everyone in the ICT industries. Rather than buying technology, end-user organisations are focusing on acquiring “access rather than assets” he said. It is “less about owning” technology and more about getting to use it.

“It is an overall trend that affects everyone and it is causing disruptions in the market,” Baty said. “As IT providers move from the sale of products toward the provision of service there is a convergence of players with hardware, software and services companies merging,” he said.

Large vendors are on a buying spree to acquire pieces of their particular puzzle so they can provide all the vertical aspects of service delivery. “That will accelerate,” he said. “In the future there will be larger players, but less of them.” And they will deal with fewer partners as we shall see.

An example of this trend is the move toward offshoring. Indian, Latin American and even Chinese companies will continue to grow larger and more influential as end-users look to lower costs and the skill shortage continues to bite. Indian call centre operators and application developers will continue their growth. But Baty noted even they face challenges; skill shortages and pressures to accelerate growth will see large Indian systems integrators offshore their own work. Already seeking to lower their own costs, these burgeoning companies have begun sending project managers to China to gain access to even cheaper engineering talent in a way that is creating a “global delivery model” said Baty. Like all companies in the sector, they are trying to move up the value chain to where services and content are the product, he noted.