At times like this the ICT industry needs leadership: Collaborative relationships are replacing transactional business, new technologies are on the up and interactions with customers are taking on a whole new dynamic - small wonder comms channel leaders espoused the need to drive change during this year's Margin in Voice and Data event (Oulton Hall, June 5th).
ICT leaders working in both end user and reseller environments are today subject to two separate eruptions. One is the proliferation of new comms technologies and the other is how these innovations are sourced and purchased by customers. More seriously, it seems, it is the buyers who are most proactive and responsive to the need for change. They are becoming more knowledgeable about what's available and far more educated about their choices. Not surprisingly, resellers who baulk at the prospect of marrying their strategies and propositions more closely to the evolving requirements of end users play a risky game with little reference to actual demand. It will come as no surprise to learn that speakers at this year's Margin in Voice and Data event put their fingers on the pulse of these trends.
The long awaited 'new era' in comms no longer beckons, we have entered the next phase and the key principle of self determination has become a big issue for many resellers who find themselves couched comfortably within their comfort zones. "There has been a sea change over the past four years but people are still doing the same things," said Mark Curtis-Wood, Head of Networks at Nimans in a keynote address to delegates.
Curtis-Wood conducted a wrist watch swapping exercise among the delegates to illustrate how making changes can feel strange at first but over time wearing a watch on the second choice wrist becomes second nature. While swapping wrists was the order of the day, sitting on hands is simply not an option. "We're seeing a tipping point," added Curtis-Wood. "Nimans has a good window on the world and we have witnessed a big rise in IP end point sales. It's time to change."
Shipments from the loading bays at Nimans tell their own story and should strike a chord. Customers are surely dancing to a different tune and Pete Tomlinson, Sales and Marketing Director at Eclipse, urged resellers to chime with the growing chorus of demand for cloud solutions. "Customers are now comfortable buying solutions rather than products," he stated in a keynote address. "It's not about kit and instruction manuals. Users trust the technology.
"The majority of our customers now use at least one cloud service. Some use four. It's no longer a question of 'if', it's now a question of 'what, how and when?'. Such 'pace of change' questions have helped to bring about a tipping point, and with connectivity no longer being a barrier to adoption, combined with the significant uptake of SIP, all of this is having a big impact on SMEs."
Tomlinson's observations so far were just a warm up. "Customers know the IT stack," he added. "You cannot aggregate the solution because users understand the co-interdependency of each component. We all need to broaden our knowledge. As an industry we are often criticised for being too techie, but knowledgeable customers are more frustrated by talk of meaningless 'by the book' business benefits. We need to commit to using plain language otherwise we are in danger of the pendulum swinging from tech-talk to the vacuous and meaningless."
Despite the compulsory need for a route map to cloud territory Curtis-Wood pointed out that a sweeping cloud revolution will be kept at bay for the foreseeable future. "Cloud is not taking over the world but it is having a significant impact," he said. "PBX and ISDN sales will continue, but nonetheless we cannot stand still. Resellers have to look at counteracting the erosion of traditional services."
A potent reminder of new threats to traditional market shares is the growing band of mobile and IT VARs moving into the comms space. For these newcomers voice is purely an app in the margin stack. "As we move into more intelligent voice it's critical to get into mobility and connectivity," noted Curtis-Wood.
Tomlinson added: "All of these changes have an impact on customer relationships. We have to become part of people's habits rather than reside in the background anonymously. Make your organisation consciously part of the daily habits of users. It is also vital for resellers to know their value. They shouldn't be scared of monetising that value because customers are willing to pay for time and expertise."
The quest for expertise has become a driving force behind new industry relationships, collaborations and acquisitions, the nature of which would have been unthinkable just a short while ago. For example, Microsoft's acquisition of the Nokia Devices and Services business. Such acquisitions focus on capability rather than scale, a trait that characterises the growing number of channel collaborations.
"There is a perception that the only way to win is to beat the competition, but now there is an opportunity to collaborate with rivals and address a wider market," added Curtis-Wood. "We can't be specialists in everything. Collaboration and co-existence means having skin in the game together and sharing the risks and rewards. This is a true win-win position."
He cited Nimans' collaboration with Unify as a case in point. The relationship is no longer transactional, it is based on close collaboration and shared strategies. The same is true of the distributor's new GreenSky hosted proposition. "We decided where our skills were - logistics, distribution and sourcing products - and collaborated with GCI for the hosted platform and BT Wholesale for connectivity," explained Curtis-Wood. "We are currently in discussion with eight organisations that until recently we saw as rivals. But it's time to evolve, choose our partners carefully and engage."
The daily calls for static comms and IT resellers to change direction are based on sound reasoning, and could therefore force some into a straightjacket when they realise that they can no longer ignore the writing on the wall. For them, an exit may be the only option. For others, their future may well boil down to a point of view: Do they want to be part of the new world or not? Whatever the scenario, sooner or later a decision needs to be made about the future of the business. And with the industry ripe for consolidation, Margin in Voice and Data introduced a second stream of content that explored some of the issues associated with exit strategies and acquisitions.
In an address to delegates, James Palmer, CEO of Nine Group, said: "At some point you need to decide your plan, identify your buyer and determine your strategy. Companies acquire for capability or cost out. We bought Club because we wanted more capability. It had infrastructure, wholesale portals and a billing platform. We operate in a fragmented market, so sales strategies should be focused on local and/or niche markets. Don't be all things to all men because it makes things complicated for the buyer. Keep it simple and assume your buyer is an idiot. Rationalise SLAs and tariffs, and stick to the equivalent of Gold, Silver and Bronze."
Following Palmer's deftly handled presentation delegates were much wiser about some of the key aspects of selling a business. We understand how the process is likely to end, but what else do we need to know about getting from here to there? In a revealing address to delegates, Adam Zoldan, co-founder of Knight Corporate Finance, also served up useful insights into the world of exiting. Knight CF has been in operation for five years and has handled 50-plus deals. Zoldan traced the way companies should prepare for exit and he put a spotlight on some of the pitfalls that lose resellers room for manoeuvre because of bad exit planning.
"Planning is all about strengths, financials, profit, payback and cash flows," he stated. "Markets also buy into the management team. Key influencers on value include consistent reconcilable details and KPIs. There's a large pool of buyers who are well funded and confident in the market, and finding the right buyer is ultimately about relationships and creating a good perception."
This year's MiVAD event was evidence that ICT resellers have some way to go in terms of their evolution. But nobody today is immune to change, and even organisations such as Nimans and Eclipse are treading unfamiliar roads. As pathfinders they will pave the way for resellers in an environment where increasing collaboration will be key to survival and profitability.