Thursday, April 08, 2004
Trend: Mature Technologies to Drive Continued Channel Consolidation
As I talk to channel providers in the US and EMEA, it is clear that the storm is not over. Although the economy is improving, margins at many reseller organizations continue to struggle. Three related issues are driving this decline in profits. First, users are demanding clear links between the technology to be purchased and business issues. No longer is it taken for granted that the technology will automatically improve productivity or cut costs. Second, the solutions offered are no longer well differentiated. With Dell offering $500 SLAs for servers, even services are under significant margin pressure. Third, channel customers are losing large medium and enterprise sales to more efficient national and global players. Even small business, the presumed market for small integrators and VARs, is being aggressively targeted by large direct players.
This is all due to the natural progression of the Technology Life Cycle. As technology moves from the "growth" phase to the "mature" phase" power in the channel shifts to more efficient volume players. In Ziff Davis' March 29th eWeek, Bill Gates is quoted on his top of mind technologies: Wireless, Ultra wideband, WiMax, Mesh Networking, Voice, video and data unification, security and machine translation. While I am sure there are techies who stay up nights dreaming of this type of technology, it does little for me as a business executive and even less for me as a channel provider. Evolutionary progress in wireless, connectivity and security will not bring back yesterday's beautiful margins.
The impact on the channel will be continued consolidation. Look for small and mid size companies to be hardest hit. This market will reward only those reseller who are efficient and professional in both their operations and go-to-market approach.
Scott Karren, The Channel Pro
As I talk to channel providers in the US and EMEA, it is clear that the storm is not over. Although the economy is improving, margins at many reseller organizations continue to struggle. Three related issues are driving this decline in profits. First, users are demanding clear links between the technology to be purchased and business issues. No longer is it taken for granted that the technology will automatically improve productivity or cut costs. Second, the solutions offered are no longer well differentiated. With Dell offering $500 SLAs for servers, even services are under significant margin pressure. Third, channel customers are losing large medium and enterprise sales to more efficient national and global players. Even small business, the presumed market for small integrators and VARs, is being aggressively targeted by large direct players.
This is all due to the natural progression of the Technology Life Cycle. As technology moves from the "growth" phase to the "mature" phase" power in the channel shifts to more efficient volume players. In Ziff Davis' March 29th eWeek, Bill Gates is quoted on his top of mind technologies: Wireless, Ultra wideband, WiMax, Mesh Networking, Voice, video and data unification, security and machine translation. While I am sure there are techies who stay up nights dreaming of this type of technology, it does little for me as a business executive and even less for me as a channel provider. Evolutionary progress in wireless, connectivity and security will not bring back yesterday's beautiful margins.
The impact on the channel will be continued consolidation. Look for small and mid size companies to be hardest hit. This market will reward only those reseller who are efficient and professional in both their operations and go-to-market approach.
Scott Karren, The Channel Pro
