The new channel dynamics - Edwards - Cisco...The$new$channel$dynamics: Profiting$from$digital$disruption Alastair$Edwards Chief&Analyst,&Canalys

The new channel dynamics:Profiting from digital disruption

Alastair EdwardsChief Analyst, Canalys

Top six threats to global stability in 2016 (Economist Intelligence Unit, March 2016)

RussiaChina

What do the following have in common?

IT vendors are struggling for US$ growth

Source: Latest reported financial results for Apple, Cisco, EMC, Google (Alphabet), HP, IBM, Intel, Juniper Networks, Lenovo, Microsoft, Oracle, Salesforce.com, Samsung and SAP

9% 13% 15%24%

17% 13% 11%

-‐1%

3%

Q4 2013

Q1 2014

Q2 2014

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Market capitalization

Canalys IT Titans Index

Year-‐on-‐year growth

30%

-‐4%

2%

-‐23%

6% 2%

-‐20%

20%

-‐8%

Q4 2013

Q1 2014

Q2 2014

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Net income growth

5%2%

5% 3%

7%4%

0%2%

-‐2%Q4 2013

Q1 2014

Q2 2014

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Net revenue growth

The tide is turning against start-‐ups and unicorns

0

20

40

60

80

100

120

140

Cloud

Titans

Hot tech

Source: Yahoo Finance; ‘Cloud’ is Amazon, Salesforce, LinkedIn, Workday, Box; ‘Titans’ is Cisco, HPi, HPe, EMC, IBM; ‘Hot tech’ is FireEye, Palo Alto, Pure, Splunk

Share price performance

Cloud: a lot of change in a year…Exited the public cloud/closed down Under pressure Leaders

But many new business models are emerging in EMEA… to challenge the cloud leaders

Digital transformation: the catalyst for investmentDisruptive business models Healthcare

Electronic medical records

Online physician portalTelehealth and telemedicine

Public sector

Education Self-‐service

Policing/security

Retail

Omni-‐channel

Analytics-‐based marketing

CustomizationReal-‐time data

Digital marketplace

Banking/financial services

Mobile Online financeBiometricsDigital payments

Emerging markets

A perfect storm

Data centers Security

IoT SoftwareMobility

Networking

The channel expects to capitalize

Source: Canalys, EMEA channel expectations survey, March 2016 (148 EMEA IT channel responses)

11%

26%

43%

13%7%

11%

26%

35%

20%

8%

Increase by more than 20%

Increase between 10% and 20%

Increase by less than 10%

Remain flat Decrease

Revenue Profitability

How do you expect your revenue and profitability to perform in 2016 when compared with 2015?

Percentage of respondents

But customers are moving faster than partners

Relevance to customerNon-‐strategic

Maintain and manageResell, attach and renew,

CapEx to OpEx

Price and cost reduction-‐led

EnablePlatform for change,

SaaS, new consumption

Technical expertise and relationship-‐driven

Transform

Digitize for differentiation and disruption; app/BP-‐led

Business outcome and professional services-‐led

AgilityOptimization Innovation

Role of IT supplier/channel partner

Non-‐strategic Strategic

Every customer at a differentstage of maturity and adoptionComplexity and organizational inflexibility will be major barrier

New competitive threats:systems integrators, SPs, ISVs,

digital agencies, etcYour current ‘customers’ are not necessarily drivers of digitization

•Build verticalized salesmodels and expertise

•Understanding customer pain points is crucial

New technology drivers:apps and business processes

Tying the network anddata center opportunity todigital transformation

•Clearly define your role: over-‐stretching your reach can lead to

failure. Leverage partnerships/ecosystems

• Invest in the right portfolioand vendors, underpinned by skills: the network will define

application delivery

Digital drives a new set of dynamics

Partners must respond to changing DC demands

Hypervisors to containers

Application-‐led

Converged and hyper-‐converged

Big data/analytics

Security as critical priority

Hybrid

Competition intensifies in data center market

0200400600800

1,0001,2001,4001,6001,8002,000

HPE Cisco Dell EMC IBM Lenovo Fujitsu NetApp

VirtualizationNetwork securityApplication delivery networkingStorage networkingEthernet networkingStorageNon-‐industry standard serversIndustry standard servers

End-‐user value (US$ million)

Note: excludes revenue from OEMsSource: Canalys estimates, Data Center Analysis, March 2016

EMEA data center infrastructureQ4 2014: US$9,333 millionQ4 2015: US$9,472 million

Growth: 1.5%

Defining the right platform approach is keyDigital ‘owner/influencer’

Dev/Ops CDO Lines of business

Applications

Multiple platforms: secure,

compliant, flexible, hybrid

Cloud Mobile IoT Vertical

Public cloud On-‐premises data center

Data sovereign

cloud/hosterSaaS

This will define future roles of the channel: massive complexity for the customer, moving beyond ‘core IT’

Winners will not be the fastest – or the slowest

Expect excellent growth from our

existing business; we have no plans to

change

16%

Rapidly changingour business to take account of

industry transformation

32%

Slowly altering partsof our business as we prepare for changing customer behavior

51%

Do not see a futurein our business; we plan to sell/exit the

industry when we can

1%

Which of the following statements best represents your company strategy in 2016?

Percentage of respondents

Source: Candefero survey, 148 EMEA channel respondents, February/March 2016

Reselling on-‐premises hardware

and software

70%

Percentage of respondents who rated business models as somewhat important or highly important

Managed services become ‘most important’ model

Delivering cloud or hosted services from our owndata centers

37%

Delivering cloud or hosted services from third-‐party data centers

38%

Managed services

77%

Resellingthird-‐party cloud

services

47%


8% 13% 25%38%27%

34%

51%40%

65% 53%24% 22%

Managed services Cloud services from co-‐location DC

Cloud services from own DC Reselling third-‐party cloud services

Less profitable About the same More profitable

Profitability compared to reselling on-‐premises hardware and software

Profitability shifts to annuity models

But sustaining profitability in managed services will be challenging, in the face of relentless commoditization: differentiation is critical


Reaching new customers is critical in weak economy

Reaching new customers

71%Economic challenges

in our country

61%

Percentage of respondents who rated issue as a challenge they face

Reaching new buyerswithin existing customers

55%

Top three challenges for channel partners


Last year we told you…

Brand prominence

Sphere of influence

Disrupt the customer

Taking the next, right steps will be critical

Sell business advantage

Maintain core strengths

Define your UNIQUE, differentiated value

proposition

Security and analytics at the core

New pre-‐sales skills: vertical, application-‐led, business-‐process literate

Develop application expertise: hire developers,

learn the language

Management and integration of multiple clouds and platforms

To win, you need to start changing…

…HOW you sell

…WHO you sell to

…WHAT you sellHybrid ITCloud

Mobility

Software-‐defined infrastructure

Analytics

Security

Managed services

Professional services-‐led SLAsApplication/

workloadsBusiness outcomes

From IT supplier to strategic partner

CDO/CxO

Developer/app teams

Internal service broker

Lines of business

Cloud nativesVerticals

The new channel dynamics:Profiting from digital disruption

Alastair EdwardsChief Analyst, Canalys

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The new channel dynamics - Edwards - Cisco...The$new$channel$dynamics: Profiting$from$digital$disruption Alastair$Edwards Chief&Analyst,&Canalys