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Today we live in a volatile and unpredictable world with cost of living and inflationary challenges, supply chain disruption, geo-political issues, and skills shortages. The traditional ways of doing business are changing at pace, as are technology requirements, and this is only set to keep on accelerating. The channel, like most businesses, is seeing new ways of working with new technologies: the cloud, software as a service (SaaS), and annuity models which have changed the way we think and run our businesses.
Why value delivered is more important than it’s ever been
The increased uncertainty in the market sets the scene for 2023 but wherever there is change there is opportunity; the value delivered to the customer is more important than it has ever been. Those operating in the channel should always be looking to add value, driven by the importance of services over a product’s lifecycle. Transforming how an organisation does business, to produce better business intelligence, gives them the data they need to be able to add extra value to their clients. Competition will increase in 2023, but if we show where we can deliver strong ROI, the conversation becomes less around price and more about value.
The significant opportunities around annuity business, automation, digitizing the business, migrating to the cloud, API integration, sharing of data, and possibly most importantly around business intelligence and data analytics, present the largest openings. The channel is having to manage revised vendor partner programs centred more on software annuity income. Different vendors have their own approach to managing a product lifecycle, yet the channel must satisfy all of them whilst running their own methods.
Annuity businesses are highly profitable
We may feel forced into having to change but managing your customers’ solutions lifecycle is great business practice. Annuity businesses are highly profitable, but crucially only if you can retain and expand clients while adding new ones. There is nothing new here, except today’s customers are looking more at value and flexibility where they can switch services on and off. The need to manage this through a lifecycle practice is critical. Partners that don’t address this challenge and are slow to move to this new approach run the risk of being overwhelmed by larger competitors.
It can be confusing, and the channel will need to embrace digital business models in a coherent, robust, integrated, nimble, fast, secure, and automated way. The channel will also need to continue to deal with multiple vendor programs, different portals, reduced availability of market expertise in partner programs and retention of expertise, all of which can be an inhibitor to taking advantage of the financial opportunities offered by the vendor partner programs through discounts, rebates and incentives. The partners that can address this, understanding the right products and services for the market and the true profitability of deals, will be the winners. Identifying not only the margin on the Bill of Materials but also the incentives, rebates and margin from attached services will help partners understand their true profitability.
Tracking and understanding certifications
My final challenge, looking at the year ahead is around people. Knowing what skills you have will help you drive and deliver your business strategy. There are around 500 vendors working with the UK channel with a combined total of 8,000 certifications. Tracking and understanding what certifications you have will be a key driver in 2023.
All this combined with understanding your customer’s business, knowing where they want to improve, and being able to help them get there will deliver success in a challenging environment. Likewise, channel partners often don’t have the time and expertise to really drill down into the vendor programs. Senior management often don’t understand the scale of rewards they can get from the incentive programs and what return they get from investing in new processes and practices. Therefore, it is far more cost effective to work with a third party who has real knowledge and expertise that the channel partner will never be able to match.
Working with a strategic partner to unlock value
Here at Vortex 6, the team is working on unlocking value from vendor incentive programs every minute of the day. This is a real challenge for partners as the programs move and evolve so quickly and as incentives and rebates move away from hardware sales, reducing income for those who won’t adapt. Equally, partners find it hard to tally both the upfront and ongoing investment with how profitable the program is likely to be for them. But they must, because partners who don’t understand the full profitability of a deal will fall behind.
Put simply, expertise in these programs is in short supply. They are far more complex than they were previously, and we often find that even if a partner employs someone to do the work, they are inevitably poached when they reach a certain level of expertise, so partners need to find a way of maintaining continuity. This is where working with third-party organizations who have this expertise and can deliver that strategic value from incentive programs is going to become more important than ever.
A year of opportunity
The media love to focus on the negatives and like nothing better than reporting recessions. The UK’s economy is predicted to shrink by 0.4% next year. Yet that means 99.6% of the world’s 6th largest economy will still be functioning. In October, the economy grew by 0.3% against all forecasts; gloomy predictions rarely eventuate to the level expected.
There are undoubtedly going to be challenges in 2023, but if the channel adapts and innovates to address the ever evolving opportunities that their clients have then there is no reason to be pessimistic. Revenues and profits can continue to grow if you adapt, remain relevant and partner with expertise that will help you get to where you’re going faster.