Resellers who reinvent their business model to meet the managed services requirements of SMBs will secure a long-term advantage, says Giacom COO Nathan Marke.
He also warned that traditional resellers stuck on their current pathways will likely lose out to progressive rivals unless they also tap into the channel’s historic ability to adapt.
Converging industry trends and the evolving demands of SMBs mean the future viability of traditional resale models in the channel is far from guaranteed, warned Marke. To underscore his point he spotlighted how growth is manifesting in the key technology categories. “There are opportunities everywhere across all categories, but the strong double-digit growth is in cloud software, cloud infrastructure, security and managed services,” stated Marke.
SMBs, while upping their investment in cloud and security technologies, are also choosing to buy all their technology from a local, trusted provider rather than in a fragmented way as they have in the past. “They are looking for a strategic partner to manage their entire technology estate,” commented Marke. “This is supported by recent data which shows MSPs are growing three times as fast as resellers.”
While growth in telco areas is comparatively flat there is an uptick in the channel’s market share. Currently, the channel holds 50 per cent market share in telco and 30 per cent in mobile. “There’s a significant substitutional opportunity and Giacom’s channel partners have experienced strong growth in telco of more than 10 per cent per annum,” stated Marke.
“These overall trends tell us that traditional resale models and telco services will still generate steady growth. However, if you’re looking to maximise business growth, then pursue the MSP route and incorporate more cloud and subscription services into your model.”
We’re moving from a one-off engagement model to a continuous engagement approach. MSPs that embrace this are achieving significantly higher valuations compared to traditional resellers
Marke also noted that the services market is growing at circa four per cent this year, with managed services growing at eight per cent, whereas traditional break-fix resale models are growing much slower at circa one to two per cent. “This indicates that SMBs are less interested in break-fix support and are far more interested in managed services,” added Marke. “We’re moving from a one-off engagement model to a continuous engagement approach. This is the change the channel needs to make. MSPs that embrace this are also achieving significantly higher valuations compared to traditional resellers. It’s a stark difference, and because you’re building resilient, recurring revenue streams you’re making your business much more valuable.”
The profit potential enjoyed by MSPs has been catalysed by the increasing sophistication of remote monitoring and management software, observed Marke. “Managed services are based on the principle of data flow, monitoring usage, security posture and environmental conditions,” he added.
Insight matters
“The key is to take that information and, using analytics, turn it into insight. You can then present the customer with continuous reports on their environment usage, cyber attacks that have been prevented, licence usage and optimisation, as well as cost-saving opportunities. This helps the customer to gain more value from the relationship, shifting from a tactical to a strategic partnership.”
The journey towards managed services provision poses a challenge for channel providers. However, Giacom anticipated the market with the acquisition of its cloud division and Union Street, enabling the company to develop the product portfolio, software and capabilities needed to deliver converged solutions to partners. But whether resellers in general have a strong enough understanding of the issues and market trends reshaping ICT buying preferences today is still open to question. “It can be extremely hard for resellers to gain access to the right information at the right time,” stated Marke. “Our channel community is made up of entrepreneurs brilliant at seeing opportunities and addressing them with products and services. However, this sharp focus can make it easy to miss wider trends, especially in an industry which is rapidly evolving. Taking a step back to examine the big picture is crucial – that’s a value we can add.”
Giacom shares valuable insights into UK SMB trends following its partnership with global management consulting business Analysys Mason, which keeps a close eye on SMB technology spend and usage. The firm combines primary research with traditional analytical methods and models to deliver its SMB Technology Forecaster, which provides a detailed look at the UK SMB market with information segmented by technology, business size and vertical.
Results suggest that the biggest barrier to MSP growth in the channel is skills, observed Marke. “The data indicates that reseller portfolios need to go broader and deeper to meet customer demand and expectations,” he added. “However, it’s difficult for resellers and MSPs to achieve this without hiring new people first, which is why it’s the biggest blocker to the channel growing faster. Many channel businesses address this through mergers and acquisitions, acquiring new skills that way, but not everyone can do this.”
Growth acceleration
To plug the skills gap Giacom is poised to introduce growth accelerator packages that help partners to identify the biggest cross-sell opportunities for new products within their customer base. “We look for the most significant commercial opportunities and the low hanging fruit,” explained Marke. “Then we build a business plan together on how to execute on that opportunity. We train their teams on how to sell and support the new products, build their go-to-market proposition with collateral and other marketing materials, then work with them on their customer base to execute a lead generation campaign. We also help partners to implement software tools and use our Cloud Market portal to streamline and automate operations, enabling them to scale new products and services effectively and without restraint.”
According to Marke a partner can progress from not selling a product in the first month to having active customers by month four. “It takes investment from both sides, but by adopting this collaborative approach we’re quickly overcoming this challenge and accelerating growth for partners,” he stated.
Initiatives such us Giacom’s growth accelerator packages build on, and advance, the channel’s innate ability to adapt and evolve. “Three years ago you wouldn’t have seen the significant shift from telco resellers towards managed services and becoming familiar with the world of Microsoft, cybersecurity and similar areas,” noted Marke. “The speed at which the channel is responding is incredible and highlights the adaptability of this entrepreneurial community. That said, many resellers are still uncertain about security and hesitate to engage with it, but they need to because it’s front and centre in every conversation. Resellers must competently identify cybersecurity requirements and clearly articulate how security is baked into their solutions. This is an area where the channel still needs to improve.”
MSP framework
Marke confirmed that Giacom is providing a framework for reseller business model reinvention across all categories including security, and that the company’s aim is for ‘every penny of SMB spend to go to the channel’. “The MSP model is the biggest opportunity to achieve this because SMBs want managed services,” he added. “The opportunity is in enabling resellers to transition their model to subscription-based managed services and build security skills into their business, making them more strategic for SMBs. Yet we still see many resellers stuck in their old habits. While they may be experiencing growth they are missing out on significant opportunities. Over time, they will lose market share as their customers migrate to providers that are equipped to offer modern managed services.”n