The Evolution of IT Distribution

Transcription

The Evolution of IT Distribution
Do We Need IT Distribution in a Cloud Consumption Model?
February 19, 2014
Darren Bibby
VP, Channels and Alliances Research
QUIZ TIME!
What is white, fluffy, quite popular, and weighs
almost nothing?
© IDC Visit us at IDC.com and follow us on Twitter: @IDC
2
The
Marshmallow
Test
 Stanford 1970,
Walter Mischel
 Repeated around the
world
 Studies on Delayed
Gratification with
children (4-6 yrs)
4
The Deal:
 1 Marshmallow now
 Or 2 if you wait
 2/3 of kids ate the
Marshmallow
5
The Follow-up:
 ~18 years later
 Children who waited
had better life
outcomes
 SAT Scores,
Education, BMI
6
So what does
this mean for the
IT channel?
7
What’s The Problem?
8
The Cloud / MSP Trough
Revenue
Shift +
Investment
Revenue
Past
Today
Future
Cloud Partner Economics
“Selling cloud and managed services
is a new business model.
If you move too quickly to a recurring
revenue stream model, you will be
greeted with cash flow challenges.
If you move too slow, you’re out of the
game.
It’s all about timing,”
Edison Peres, Cisco’s senior vice
president, Worldwide Channels.
June 2013
10
Cloud Changes
The Selling Relationship
Stock
Sell
Use
The Third Platform?
M
C
S
M
A
C
M
S
A
M
S
C
How is The Third Platform Evolving?
Source: IDC
Shift from servers to services
 IDC predicts that service providers will account
for over 27% of total server shipments by 2016
 A brand new Hyperscale Market has emerged
14
Shift from On-Prem to Cloud Software
 Roughly 85% of net new commercial apps will
be developed specifically for cloud in 2014
 Over 92% of companies surveyed said they had
plans to shift their IT budget towards Public
Cloud
Source: IDC’s CloudTrack Survey, 2012
15
The Cloud Consumption Model
Represents a Huge Shift
IDC Predictions:
CIOs and CFOs will
move to “zero capital”
and transform the IT
financial model
70% of CIOs will
embrace a “cloud
first” strategy in 2016
By 2016, it is predicted that nearly 25% of all
software revenue will be subscription based.
Key Stakeholders
What does each stakeholder want?
17
Key Stakeholders
Software Vendor
Partner
Customer
18
Key Stakeholders
Software Vendor
Partner
Vendors want to…
• Achieve scale and reach
• Maintain a customer
relationship
• Maintain partner
relationships
• Transition to a new
Customerconsumption model
• Maintain operational
efficiency
• Optimize profit margins
19
Key Stakeholders
Software Vendor
Partners…
• Want to own the customer
relationship
• Want to own the billing
relationship
• Want to ensure their
cashflow is positive
• Many partners aren’t sure
Customer
about the Cloud – it may
not be as profitable
Partner
20
Key Stakeholders
Software Vendor
Partner
Customers…
• Want to keep things simple
• Want to buy from one company (or
limited companies)
• Want a trusted advisor
• Want Solutions
Customer
21
Initial Strategies on Cloud Offerings
Offer a monthly subscription, but direct
• Possibly with an advisor fee
Offer an annual, renewable contract
• More easily “resellable”
Offer a monthly subscription, indirect
22
Partner – Common Billing Scenario
“Here's a problem with Mail right now. I'll give you
an example.
You can really get three bills for a customer from
three different organizations at Vendor.
23
So you sell them Mail. And let's say they want
data level protection on top of that for the mail.
Well the traditional mail stuff doesn't have DLP
it just has anti-spam anti-virus.
So now I have to sell Product X and the
Product Y stuff.
24
So now Vendor's sending them a bill for Mail.
I'm sending them a bill for Product X and Y.
Now they want archiving for their mail. Well
that's a third party Vendor integration.
So now there's three bills going to the
customer for one solution.
25
If you give me resale, I can put all that on my
paper. White label it and send the customer one
bill.
That's a big deal. And there's more and more of
that stuff coming from Vendor.
The commission model is going to break down
really quick.”
26
Partner – Forced Into Unnatural Acts
“Okay. There’s no other way but for my
customer to buy the Cloud app directly.
This isn’t a great customer experience.
I’ll buy this Cloud App on my credit card on
a monthly basis.
And charge my customer for it. And add
some support.
On one bill!”
27
The Argument Against
IT Distribution in a Cloud
Consumption Model
28
Distributor Core Functions – Traditional
Credit and Financing
Logistics
Integration / Configuration
Training and Enablement
Partner Management
Marketing Sales
Tech Support
29
“There’s Nothing to Distribute”
 If Distribution was historically known as a
“Warehouse and a Bank”….
 …One of those things is not necessary anymore
 It’s a service and not a physical product
30
 Cloud Services are Inherently Direct
• The service is delivered directly from the vendor to
the customer / end-user
• It is out of a partner’s hands to control the service
(uptime, etc.)
31
 Cloud Services are Inherently Direct
• There is inevitably more of a relationship between the
vendor and end user than with a perpetual license,
on-premise software
• The vendor MUST ensure the relationship continues
32
 The advisor model (commissions, fees) has
been the default model for SaaS
 Most similar to the insurance model or the
carrier resale model.
• The agent (synonymous with what we call partner)
gets an ongoing fee for the sale.
33
Alternatives to Selling Through
Distribution
Distribution
Or…
 Sell direct
 Sell direct with referral /
advisor fee model
 Re-sell through partners
without distribution (1-tier)
 Marketplace (eg.
AppExchange, SAP Store)
 Cloud Services Brokerage
(eg. JamCracker)
34
The Direct Sales / Advisor Model
Has Seen Success in the Cloud
 Salesforce.com
• One year renewals
 Microsoft began with advisor model
with Office 365
• Advisor model remains
• Open license resale
• One year renewals
 Adobe is leaning more direct with
Creative Cloud
• More of a subscription than Cloud
• Going more direct
35
The Resale Model w/o Distribution
Has Also Seen Success in the Cloud
 Google Apps
• Partners can resell
• Over 6000 partners
 Enterprise ERP Applications
36
The Argument For
IT Distribution in a Cloud
Consumption Model
37
Distributor Core Functions – Cloud
Logistics 2.0?
Aggregation
Order Management / Billing
Integration / Configuration
Training and Enablement
Partner Management
Marketing Sales
Tech Support
38
Momentum and Stability
 $130B in member sales
WW, And growing
 187 countries
 2 million VAR calls
 40 thousand end-user calls
 Over 4000 certification
trainings
(Source: GTDC)
39
Momentum and Stability
 Steady gross margins
 Reduced SG&A expense
 Heavily diversified
• Spread across many IT
markets
(Source: GTDC)
40
IT Industry History
41
42
“SAP had carefully nurtured
relationships within the Big Five
consulting firms…”
“When companies were deciding whether
and how they were going to implement an
ERP system, they rarely started off by
talking directly to the software
vendors.”
“… It made choosing SAP a no-brainer.
Jeff Henley says, “We totally screwed
up partnering by building this big
consulting group. We totally pissed off
our partners.””
Page 116, “Softwar, An Intimate Portrait of Larry
Ellison and Oracle”, Matthew Symonds, 2004
43
44
In 2012,
Distributors handled
300 million software licenses
45
Efficiency and Scale
“The reason distributors can be relevant in a
cloud world is that they are cruelly efficient
I pity anyone who tries to compete with the
efficiency of an IT distributor. They are the
most ruthless as far as operational
efficiency.”
Jim Estill,
Former CEO,
Synnex Canada
Current Venture Capitalist
Canrock Ventures
46
 Dealing with the “Difficult Things”:
•
•
•
•
•
•
•
•
Credit checks
Collections
Dealing with credit cards, expiries
Partner management (the long tail of
partners)
Sales
Marketing
Enablement
More…
47
 Several stories of software
vendors returning to
distribution
 Ingram Micro: “Vendors just
keep coming back to us”
48
Access to a Large Community of
Reseller Partners, and their Customers
49
 Historically a key value-add of
Distribution
 Distributors extended $12B of
channel credit in 2012 (GTDC)
 Even more important in the Cloud
• VARs need to transition their business
model, and cashflow
• Physical logistics go away
50
One Stop Shop / Multi Vendor World
 Customer AND Partner want one-stop
 A partner can deal with one disti to get all the
apps in a solution. Vs. going to one disti for one,
one vendor for another, etc. etc.
Unified Billing
 Cloud tools can help to
solve a key problem for
customers and partners
around billing
52
Vendor A
Vendor B
Vendor C
Vendor D
Vendor E
Email
Web Security
Antivirus
Storage Software
Cloud Storage
Monthly bill
Monthly bill
Monthly bill
Quarterly bill
Monthly bill
Per mailbox
Per server
Per user
Per server
Per Terabyte
1st of the month
8th of the month
15th of the month
22nd of the month
30th of the month
Unified
Billing
System
Distributor
Partner
Customer
Partner
Customer
Partner
Customer
Customer
Invoice
Email
Web Security
Antivirus
Storage Software
Cloud Storage
SUPPORT
$400
$300
$200
$150
$250
$400
$1700/month
Due December 15th
Customer
Vendor A
Vendor B
Vendor C
Vendor D
Vendor E
Email
Web Security
Antivirus
Storage Software
Cloud Storage
Monthly bill
Monthly bill
Monthly bill
Quarterly bill
Monthly bill
Per mailbox
Per server
Per user
Per server
Per Terabyte
1st of the month
8th of the month
15th of the month
22nd of the month
30th of the month
Unified
Billing
System
Distributor
Partner
Customer
Partner
Customer
Partner
Customer
Customer
Invoice
Email
Web Security
Antivirus
Storage Software
Cloud Storage
SUPPORT
$400
$300
$200
$150
$250
$400
$1700/month
Due December 15th
Customer
Distributor Cloud Tools
 TechData StreamOne
• ~40 vendors, ~200 offerings
 Ingram Micro Cloud
• ~50 vendors, ~150 solutions




Synnex CloudSolve
Arrow ArrowSphere
Avnet Cloud Ready
Others…
55
Distributor Cloud Tools
 Storefronts, similar to Amazon.com
 Unified Billing
 For monthly, recurring offerings
• Cloud or Cloud-Inspired sold annually is typically
treated like a software license
 APIs are incredibly important
 Cloud tools will create a stickiness with partners
 This could cause consolidation of regional or
smaller distributors who haven’t built the tools
 These tools are a continuing work in progress
56
Is an Annual Cloud Contract
Good Enough?
57
The Hybrid Model is Strong:
Cloud and On-Premise Together
By 2020,
about 80%
of the world’s 2,000 largest companies
will still have
greater than 50% of their IT onsite
Supply Chain Economics
 Can vendors afford to use Distribution?
59
Typical Software Vendor Profit Pool:
Revenue and Gross Profit Profile
Gross
Margin
70%
60%
50%
40%
30%
SOFTWARE





Symantec
Oracle
Salesforce.com
Microsoft
SAP
82.65%
80.49%
75.08%
72.40%
69.33%
SERVICES
20%
10%
Breakeven
Profit Pool modeled
(Source ycharts.com)
20%
40%
60%
Distribution of Revenue
80%
100%
Typical IT Distributor Profit Pool:
Gross
Margin
70%
60%
Marketing
Services,
Financing,
Other Services
50%
40%
30%
20%
Back End Rebates and
Other Incentives
Front End Resale Margin
10%
Breakeven
Profit Pool modeled
20%
40%
60%
80%
100%
 Dealing with the “Difficult Things”:
•
•
•
•
•
•
•
•
Credit checks
Collections
Dealing with credit cards, expiries
Partner management (the long tail of
partners)
Sales
Marketing
Enablement
More…
62
Comparative Profit Pool:
Gross
Margin
70%
SOFTWARE
60%
50%
40%
30%
20%
DISTRIBUTION
10%
Breakeven
Profit Pool modeled
20%
40%
60%
80%
100%
Essential Guidance
64
65
66
Will we see a
new Distributor?




Amazon?
Digital River?
Jamcracker
Someone else?
67
Enablement is Perhaps
the Biggest Challenge
 No matter what tools and
sales processes are in
place…
 Can your partners make
the transition?
 Who’s responsibility is it
to help them?
• Partner
• Vendor
• Distributor
68
Thank You
Darren Bibby
VP, Channels and Alliances Research

The Evolution of IT Distribution

Transcription

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