Can you be disruptive in the channel?

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SteveBailey2016Steve Bailey – Agilitas Commercial Director

The UK has lagged behind competitors when it comes to change – why this needs to stop

Disruption is often an overused word in the technology sector, but if done properly it can change a whole industry. Some of the most well-known technology start-ups are those that have been able to disrupt an already established sector; Uber, Deliveroo and AirBnB, to name but a few.

Channel services have always been developed and designed around customer requirements. However, innovation and disruption requires someone to take a risk and break the mould. UK companies are well known for being largely risk averse, so channel partners tend to be wary of disruption and don’t want to make big changes and run the risk of alienating customers.

In recent months we’ve seen the emergence of technology such as Artificial Intelligence, and the internet of things is also experiencing significant growth at the moment. Both of these technologies are expected to be important to the channel as the markets mature. Whether they’ll be disruptive is another question.

In the UK, DevOps, whereby organisations integrate IT developers within business operations in order to improve efficiency, has struggled to take off in comparison to other European markets. Research by cloud firm Claranet found that just 26 percent of UK companies have adopted DevOps approaches, compared to 28 percent in Germany, 31 percent in Spain, 38 percent in France and 44 percent in the Benelux. The research reflects a need to encourage greater innovation in IT in the UK.

As the backbone of a significant number of B2B IT sales, the channel has an important role to play. Demand for new technology will grow as we’ve seen with cloud technology and software-as-a-service, now the go-to technologies for fast growing upstarts and developing businesses. Despite tradition, the channel needs to look to disrupt to enable continued growth.

Insourcing vs. Outsourcing

Much of the traditional channel business model is focused around outsourcing. Resellers and service providers operate by providing customers with a managed solution. Turning this around to encourage insourcing could therefore provide a number of opportunities for change.

As an outsourcer, Agilitas has found customers to be particularly receptive to additional insourcing services, whereby we provide support alongside training and skills development to allow clients to manage aspects of maintenance themselves. However, this could be an opportunity for the wider channel community. Customers inevitably don’t always want to give away control of every aspect of their IT, they like to have some level of ownership. Consequently, if organisations can effectively combine revenue driving outsourcing with tools that give customers greater independence they could see significant growth. It’s a model followed by many disruptive technology start-ups. Uber for example looks to give taxi drivers the tools that would previously have been in the hands of larger management companies.

Finance

The growth in the SME channel market has been interesting to watch. SMEs are increasingly starting to require slightly different offerings from what their traditional channel providers can offer. A significant proportion of the growth in cloud software that we’ve seen over the last ten years can be attributed to SMEs looking for more agile approaches. Research by SAP and IDC revealed that 43 percent of SME IT budget increases were being spent on the cloud.

The demand comes from a need to react to customer requirements quickly and efficiently. The key selling point for SMEs is that they are more able to react to changing environments than larger competitors, so IT needs to reflect this. We’ve already seen an element of this in the software market with a pay-as-you-grow revolution. Software-as-a-service is now typically sold on a per-license subscription model, whereby buyers can increase or decrease their expenditure whenever they choose. Could this be done more in the channel, particularly with hardware? Providing greater flexibility will enable more opportunities for upselling and improve long term relationships.

In its current form, the UK channel is ripe for disruption. The challenge is getting it right and working out where to start. Disruption doesn’t have to be about creating the next Uber or Slack, it can be as simple as a new approach to doing business. Ultimately organisations will do well if they put their customers first, and this is the key argument for doing something different. Customers may want one thing and need another, and it’s the job of the industry to provide that consultancy.

The UK market has often lagged behind competitors when it comes to change. The growth of the technology sector in recent years has worked to alter this, but the market as a whole must endeavour to be more innovative, and allow disruption to make channel services and products better for customers. The channel’s success has primarily been due to its flexibility and speed to react to customer need as technology evolves. As the speed of these needs accelerate to a level never seen before, it will be IT firms who take an agile and rapid responsive approach that win the race.

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