If the economic situation does become more challenging over the next year both SMB and enterprise customers will likely be tightening their belts, and IT budgets won’t be immune.
However, by choosing strategic areas of technology to focus on and by properly positioning their value proposition for IT buyers, analysts say VARs and SIs can still achieve strong growth in 2008.
“There’s definitely going to be belt-tightening, certainly in a number of industries that are large consumers of IT,” says Andy Woyzbun, lead analyst with the London, Ont.-based Info-Tech Research Group.
However, while IT spending may be rolled-back in some discretionary areas, Woyzbun says spending will still continue and there is room for growth if partners make the right pitch. Areas with a required need, such as storage and related areas such as e-mail archiving and content management, or areas with a quick payback, such as server virtulization, will still go ahead. He also sees demand for unified communications/messaging, and increasing demand for bandwidth driving network equipment sales, including WAN optimization tools.
“Things that have higher risk or have a lower short-term payback are going to be very difficult to sell, especially to companies that are in a belt-tightening and survival mode,” says Woyzbun.
One area Woyzbun says will likely fall down the priority list is BI. While many companies have their CRM or ERP implementations in place, the late adopters are likely to delay adoption even further.
SaaS as a stepping stone
However, while the high up-front cost of an on-premises BI solution may be a deterrent in the current economy, Woyzbun says companies may turn to hosted software-as-a-service (SaaS) solutions to get at least partial functionality at a lower start-up cost.
“In some cases I think people are going to go with SaaS as an interim step, with the intent when things improve and the product proves its value within the company to contemplate going back in-house,” says Woyzbun.
For a partner, whether they’re selling SaaS or any other product, Woyzbun says the strategy now needs to be optimizing the short term payback for the customer. Previously, the partner might have wanted to sell a holistic solution to satisfy the customer long term and gain a big revenue bump in the beginning. That approach needs to change.
“You need to step back and say how much of this large project does the customer have an appetite for, and break some of these initiatives into smaller, more manageable chunks,” he says. “It’s changing your perspective to focusing-in on the things the customer either really, really needs, or can afford.”
Woyzbun adds if the partner ends up with a good relationship with the client by putting their business needs and budget first, when the economic climate improves they’ll be in a good position to make that larger sale.
Looking at the SMB segment, a key market for channel partners, the main business priority is still improving infrastructure says Paul Edwards, director of SMB & channels research for Toronto-based IDC Canada. There’s still a need for hardware, servers, PCs, storage and infrastructure software.
“That’s still a going concern, if you will, and (is still) a viable business for channel partners to maintain for the
future,” says Edwards.
Beyond the hardware sale
Besides the traditional nuts and bolts, however, Edwards says SMBs are also placing a priority on improving customer service, and they see that as something that IT can play a role in. That opens up a role for VARs to define how technology can help, and customize a solution to meet their business needs.
“If channel partners can go into accounts understanding the business and their flashpoints, and address solutions that can address those…that’s a key growth strategy from a channel perspective,” says Edwards. “You have to come to it from the perspective of the end customer. What is going to be the value for them?”
That’s echoed by Michael Speyer, a senior analyst with Forrester Research in Cambridge, Mass.
“They need to be able to walk in the door having a pretty good understanding of the business environment and verticals the customer is operating in, along with the consulting skills necessary to give the customer a solution that will give them business value,” says Speyer.
He says he’s seeing good up-ticks in IP telephony, converged communications and unified messaging. It’s an early stage market, but he says now is the time for partners to begin developing their expertise. Also, storage and archiving, disaster and business continuity, and server virtualization are growing.
“Storage and disaster recovery are things that shouldn’t be put off no matter what the economy is doing,” said Speyer. “With server virualization you’re selling the concept of efficiency more than anything else.”