Services are vital

Darren Baguley

Networking has been a staple product for resellers and systems integrators ever since the advent of Ethernet as the dominant standard in the 1980s.

After a period of gradual evolution, recent developments in technology are putting the network back, front and centre in the minds of customers and resellers.

Voice over IP (VoIP) or Internet telephony, wireless and storage plus Unified Communications (UC), as well as related technologies such as web and video conferencing, are all promising to be hot areas for resellers and SIs over the next several years according to Bjarne Munch, principal research analyst for Gartner.

“Some of the absolute key things that we see happening in the networking market and generally in our forecasting are network IT services and network managed services with strong growth over the next few years because of the complexity being introduced by wireless, VoIP, UC, application networking etc. It is no longer just voice running on the network, it’s all the other applications and we see enterprises having a lot more focus on ensuring acceptable performance in optimal business critical applications.”

While managed network services in the WAN environment have been growing in popularity for some years, the growing complexity of the LAN environment – VoIP, UC, video, wireless – will see managed LAN environments become more popular as well, said Munch.

“Some customers and SIs are trying managed services because the solutions that need to be established are not always as easy as the vendors would like their customers to believe.”

Similarly, software integration services and application networking are shaping up to be big new areas.

“[Software integration and application networking are] not easy, they’re generally areas that even the larger enterprises lack skills in. VoIP is hard work to integrate and as a result more and more SIs are offering managed solutions and we believe that this situation will be even further complicated by Unified Communications.”

Maurice Famularo, marketing director for D-Link, agrees that services are a big growth area and he goes even further, arguing that for the reseller servicing the SMB/SME sector especially, margins on hardware have been so squeezed that services are the only area where a reseller or SI can make any money.

“Margins are being squeezed very badly at the moment, with retailers being able to sell certain products and online stores. People are doing their research and realising they can get a product $40 less from an online retailer in Perth.

“So resellers are very much challenged by this and they need to look at what services they offer as far as the value they provide to the product. They need to look at other ways of adding value. The more astute resellers are looking at new opportunities and new markets such as providing expertise and services in certain areas. For example, companies are starting to investigate wireless; so a reseller with experience in wireless deployment is in a better position because they can look at the infrastructure the customer has, listen to what the customer’s requirements are and match those with a product set that will achieve the customer’s requirements.”

Agreeing with Famularo, Ryan Parker, ANZ managing director for NetGear, said that wireless, VoIP, storage and UC are all hot areas for SIs and resellers, but he also cautioned that some sectors of the market are still a long way from looking at any of this sort of technology.

“UC is certainly where the future is, but while there is a percentage of organisations in our target market of up to 200 seats that are excited about those technologies, there are sectors of the SMB which are still struggling to get up to speed with Gigabit switching, wireless, VoIP and storage.”

While companies such as architects and design studios that needed to pass around large files were early adopters of Gigabit Ethernet, Parker believes that it has got to the point where the delta between a 10/100 switch and a Gigabit switch is only a couple of hundred dollars.

“It’s become the de facto standard, it’s futureproofed and if laptops, desktops and servers are all shipping with Gigabit Ethernet, it makes sense to upgrade the rest of the network infrastructure.”

One area Parker is trying to encourage NetGear’s resellers to do more in is managed switches.

“By selling unmanaged switches, they’re doing themselves and their customers a disservice. Sure unmanaged switches work, but if the customer down the track wants to do VLANs, VoIP and POE they’ll need managed switches. So by talking to customers about managed switches it shows the reseller is thinking about the future direction of the customer’s business, is futureproofing it and it can add another stream of service revenue through strategic planning.”

3Com’s country manager for Australia and New Zealand, Grant Howe, echoes Parker.

“Security, WAN optimisation and Unified Communications are big opportunities to name a few. We also see an extremely large opportunity in the traditional switching and routing platform market. Increasing performance is being offset by increased operational cost for power and cooling. Converting aging networks to the latest generation of power-efficient switches will not only deliver performance improvements, but also can deliver an ROI in as little as 18 months through savings in electricity costs.”

Interest in wireless is also growing from the IP telephony side of things, said ShoreTel’s managing director of South-East Asia, Tony Warhurst.

“Customers are interested in the next generation of handsets that are Wi-Fi and 3G capable. There’s the capacity to put a softphone on that sort of device which lets it be used in and out of the office and when combined with UC there’s the capability to route calls to wherever you are automatically.
Power Over Ethernet (POE) to power desktop phones is also a growth area as is the convergence of Wi-Fi and DECT network and selling upgrades to the network to get organisations ready for Unified Communications.”

Everyone CRN spoke to agrees that Unified Communications is going to be a huge growth opportunity, but what exactly is it? Wikipedia defines UC as “an industry term used to describe all forms of call and multimedia/cross-media message-management functions controlled by an individual user for both business and social purposes. This potentially includes the integration of fixed and mobile voice, email, instant messaging, desktop and advanced business applications, Internet Protocol (IP)-PBX, voice over IP (VoIP), presence, voicemail, fax, audio video and web conferencing, unified messaging, unified voicemail, and whiteboarding into a single environment offering the user a more complete but simpler and more effective experience.”

While the component pieces of the puzzle have been around for some time, combining them all is a very new use of technology, but Munch believes that is currently driving growth in professional services and will continue to do so.

“Enterprises need assistance to work out how to use the technology,” he said.

“What we’re seeing is that enterprises are right now going through a phase where they are a little confused as to what UC means to them and how they can use it, how they can plan for it. So we’re seeing more growth in professional services, consultants and other advisory companies.”

This view is echoed by Nortel’s solutions marketing, Unified Communications manager, Mitch Radomir. “The biggest opportunity for resellers today – especially in the Unified Communications space – is consulting services. Most companies won’t have the budget to upgrade to Unified Communications in one go, so astute resellers have an opportunity to provide their customers with strategic consulting services to map out their existing infrastructure, analyse their business activities, and prepare a plan that details which components of the technology to deploy first for maximum business benefit.”

Nevertheless, there is a cloud to the silver lining of the approaching UC gravy train to outrageously mix metaphors.

Many small to medium resellers and SIs are going to struggle to build or acquire and maintain the high level of skills this technology will require from them, said Munch.

And then there’s the advent of new vendors such as Microsoft and Oracle into the market.

“SIs will tell you they can’t get enough experienced people. UC takes this a step further because of all the different types of products
being integrated.

“To do UC, you need to know a lot about VoIP, IM, email and video conferencing just to get the basic UC in place. To get somebody up to speed across that breadth of technology is a big ask especially where there’s a lack in some of the key areas.

When you move beyond that and start adding process capabilities, which is a completely new skill set globally, and then start talking about integrating that into various types of applications, it becomes even more complicated.

At this point it goes beyond someone who knows something about communications and you’re starting to look at how we can use this to optimise an application and a business process which is an even bigger bridge to cross.

“Other vendors are going to be coming into this space such as Microsoft, Google, Oracle and IBM and resellers are going to have to figure out which vendor they’re going to back in the future. The traditional networking vendors will face very stiff competition from Microsoft and resellers will need to develop a strategy to deal with this shakeout or they won’t make it,” he warns.