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