Migration is not something that we tend to do willingly. Despite the hardships that they’ve faced, the majority of Syrians initially chose to stay and fight or to hold out and get by as best they could. The worsening situation has forced many to conclude that joining the mass migration is now their only hope. Unfortunately by the time things get this bad, many will have lost everything.
[easy-tweet tweet=”Take a look at #Migration from #VAR to #MSP with @BillMew” user=”comparethecloud”]
The hardships and devastation in Syria may be on a different scale to that in the tech industry and in the IT channel in particular, but we’re seeing similar patterns of behaviour and a reluctance to migrate, whatever the hardships faced.
Many Value Added Resellers (VARs) have made a good living from resale, integration, installation and upgrades for many years and are doing well from the wave of companies moving to the cloud at present. In almost all of these areas, however, there are worse times ahead. Resale is already in decline, integration is becoming all about APIs, upgrades are managed remotely in the cloud and the move to the cloud is nothing but a one off transition.
Resale is already in decline, integration is becoming all about APIs
Most of us have seen these trends coming for some time now and vendors have been doing all they can to help their VARs make the transition to becoming MSPs, while at the same time trying to recruit new MSPs to replace the elements of their channel that won’t survive the migration.
For some time now vendors such as IBM (whose annual channel event the PartnerWorld Leadership Conference (PWLC) we attended last week) have been providing assistance with varying levels of training, strategy guidance and financial support to help VARs make this transition.
We have discussed the challenges of going from a transactional to an annuity-oriented structure and of spanning the chasm in between in many blogs on this site and I don’t propose to delve into the intricacies again in this blog other than to emphasise how hard the transition can be.
[easy-tweet tweet=”The problem remains the lack of urgency among many in the #channel says @BillMew” user=”comparethecloud”]
The problem remains the lack of urgency among many in the channel. Some have made the transition, but many are either finding it too daunting or have made just hesitant progress in building new cloud-based annuity revenue streams. If not careful they risk finding that the current transactional revenue streams that they will need to fund the transition, will start to fall off more dramatically, long before the new revenue streams are in a position to carry the weight. They risk being left with nothing.
A further problem is that the move from VAR to MSP is just the first step on the path that many will need to make. Having called on its channel to make the VAR to MSP transition for the last five years or so, IBM announced at this year’s PWLC that it was restructuring its channel programme to focus on the next step that its channel is going to need to make. Unfortunately becoming an MSP and changing your business from a transactional to an annuity-oriented structure won’t be enough on its own to guarantee long-term survival. IBM’s partners are also being asked to focus on a set of competencies that will enable them to differentiate themselves in a market that is increasingly awash with competing MSPs.
Many IBM partners have done all they can to comply with the company’s call to transform their practices in line with IBM’s strategy – away from its traditional business towards its new priorities – Cloud, Mobile, Security and Cognitive (which includes big data and analytics). While IBM’s revenues as a whole have declined in recent quarters, its channel revenues have risen, but many partners are still finding the pain of transition greater than the benefits. At PWLC Marc Dupaquier (@marcdupa) heralded the advent of the era of cognitive computing and the maturation of IBM’s Watson platform as their opportunity for growth, before presenting them with an outline of a revamped PartnerWorld program. Key among the changes is a set of competencies being introduced by IBM that will provide certification and support for MSPs that specialise in particular niches – such as industry segments.
[easy-tweet tweet=”At #IBMPWLC @Marcdupa heralded the advent of the era of #cognitive and the maturation of #Watson”]
Historically VARs have grown opportunistically taking whatever business they can from whatever quarter it came. Consequently many VARS have a mixed bag of clients from a number of different sectors and industries. They are naturally loathed to give up any of these clients.
The reality is that differentiation in future will increasingly depend on specialisation. For example imagine an MSP that specialises in dealing with legal firms, that understands the legal value chain, that is familiar with all the main legal software packages, that has experience in managing and integrating them, that has specialised process models and methodologies, that has sales staff and consultants with IP in this area and maybe even have developed its own software modules to integrate with or between other legal packages and platforms. A specialist of this kind should not only be able to win business from a generalist rival, but should also be able to charge a premium, while at the same time reducing its costs (as its solutions are largely replicable between clients).
The reality is that differentiation in future will increasingly depend on specialisation
Most ISVs are already in a position where they are specialised in a segment (either an industry one or otherwise). As MSPs align themselves in this way and as they seek to automate elements of the IP into apps, templates or modules they will gradually become more ISV-like.
The next part of the channel migration is therefore from MSP to ISV, which we’ll explore in the next part of this blog.