As we pass the 10 year milestone as Channel Dynamics, we couldn’t help but reflect on how our industry has evolved over the last decade. Technology may advance every year (faster in some years than others) but it’s only when we stop and look at it over a period of time that we realise how much our businesses have adapted and grown. Stopping and reflecting also allows us to recall those companies that didn’t adapt and as a result are no longer with us.
To think that a phone in 2004 sported a camera that could barely take a decent photo (the selfie phenomenon was yet to come!) let alone be able to access files, use voice recognition to answer email, surf the web, get the weather or find a location on a map and print it wirelessly! The way our industry operates, the way we do business, and the way we live our lives – it feels like nothing has changed and everything has changed. Join us now as we take a look at the last 10 years and the impact it’s had on our industry and on our lives.
We’ve certainly seen a maturity in our industry over the last decade. While partners may complain about poor practices from vendors, and vice versa, we’d have to say the level of partnership between organisations is certainly better than it was. When we started, vendors seemed to think the answer to more sales was more resellers. Partner recruitment was seen as an end rather than a means, and Channel Management was all about who had the biggest expense account.
Today we see vendors who are culling their partner ranks because they can’t support them all, and looking at ways to increase profitability. This is not to say they are all successful at it, but at least there is an intent now, where previously, partner profitability was an afterthought. Vendors are also introducing more sophisticated monitoring, competency classifications as a means of differentiation, ROI metrics on all activities, greater rigour around deal registration and more structured Rules of Engagement.
In 2004, the industry had not completely recovered from the heyday of a few years prior due to the massive spending around the “Y2K” problem. But that year was the start of the Virtualisation phenomenon (VMware also celebrates its 10th birthday in Australia this year).
PC’s or more correctly “end user computing” have come a long way since 2004. For those that can remember, a PC was probably a Compaq or a Gateway, with a CD drive, a 3.5” floppy drive, 40Gb HDD and 512K RAM sitting underneath a big heavy 17” CRT monitor. Don’t forget the OS, it would have been Windows XP Professional.
How things have changed. Just walk into a retailer such as JB Hi Fi or a Harvey Norman and have a look at the plethora of computing options such as Smartphones, Phablets, Tablets, Ultrabooks, laptops, oh and you may find a desktop. Either an “all in one”, or a serious high end and overclocked gaming “weapon”!
We now consume and use technology in a completely different and connected way, with new trends such as “wearables” which are of course now a part of the Internet of Things, that were not even thought of or practical until only a couple of years ago. And we can’t wait to see how 3D Printing will revolutionise manufacturing.
How could we write an article about the changes in the industry without taking a moment to talk about THE CLOUD. I feel like I’m cheating here mentioning The Cloud in a 10 year review when the idea dates back to the 50’s under the guise of “time-sharing”, “remote job entry”, and later the short-lived “ASP model”. But whereas the biggest impact of the Cloud over the last 5 years has been its dominance in the press, the impact on business over the next few years will be profound.
In 2004, LinkedIn had only just been launched the previous year and Facebook had just been founded. Twitter didn’t even exist and would not be launched for another 2 years. I still remember getting my first LinkedIn “Because you are a person I trust…” email and thinking it was Spam. But today I would struggle to think of a rep who doesn’t first check the LinkedIn profile of the person they’re meeting.
The way we communicate, the way we recruit, and the way we make decisions has changed because of Social Media. Today it’s more important to get your online profile right than it is to get your resume in shape. We would rather believe what a complete stranger says about a product in an online review rather than trust what the vendor tells us. Events can now be organised without an email being sent. We’ve worked out how to communicate in 140 chars or less, and popularity (in the form of “Likes”) seems to be the new measure of credibility. Both vendors and partners have had to adapt to a world where the customer already knows (or thinks they do) what they want before they call with an enquiry.
Mergers and Acquisitions
The year we started was the year that VERITAS and Symantec announced plans to merge. At the time $13.5 billion was the largest ever software industry merger. Over the ensuing years, we’ve seen the rate (and values) of mergers and acquisitions increase dramatically. For me, the most memorable ones are HP purchasing EDS and 3Com, Oracle acquiring Sun Microsystems, Lenovo acquiring IBM’s PC (and later, Server) business and Dell (Michael) buying back Dell (the company).
Locally, we’ve seen some major acquisitions that completely changed the face of distribution in this country – Ingram/Tech Pacific, itX/ChannelWorx, Westcon/LAN Systems, Avnet/itX, and most recently, Dicker Data/Express Data. We’ve also seen some new entrants that weren’t around 10 years ago – Distribution Central and NewLease – add a whole new dimension to what it takes to succeed as a distributor.
We could probably fill up this entire article trying to list all the start-ups, mergers, acquisitions, and collapses in the channel over the 10 years. Companies that would proudly refer to themselves as “Resellers” 10 years ago (because “Dealer” had gone out of vogue) now deride the term, preferring “Partner”, “VAR”, “Integrator”, “Service Provider” or a slew of other terms.
Companies that used to give away services to sell the product, now give away the product to sell services. We see a massive impetus from companies trying to create a recurring revenue model. For some that will mean enormous success, and for others, the strain on cash flow may see those companies disappear.
But interestingly, we would argue the role of the channel hasn’t changed in 10 years. That’s because in our view, the role of the channel is not to simply resell product and make a margin – its role is to fill the gap between what the vendor makes and what the customer wants. No one vendor can do everything, and the more complex the customer’s requirements, the bigger that gap is. What’s more the partners who understand that are the ones who will help us to celebrate our 20 Year Anniversary.