Are too many cooks spoiling the channel broth?

THROUGH LISTENING to the channel we became aware that while technical and commercial decision makers within the end-user organisation are often working to the same objectives, differing agendas can sometimes dilute the CIO’s vision, compromising the delivery of true end-to-end solutions.

Our thinking was validated by Ovum analysts and through hosting a round-table debate with respected industry representatives we sought further validation of this position.

Naturally, a key driver was to inform our strategic planning processes and, in turn, support our commercial ambitions by realising a more concerted push across the systems integrator community. But moreover we wanted to ignite an industry debate that would allow us to collectively come to some meaningful conclusions regarding the often misunderstood and undervalued role of the integrator and the part end-user expectation plays in determining channel performance.
Now, through end-user research with Ovum we hope to align the partner and customer perspective to gain a much richer understanding of the nuances impacting on channel choices. Importantly, our aim is to cut through the demand and supply-side complexities to present SIs with a clearer picture of how to best protect their revenue streams against a backdrop of increased competition, leaner budgets and disruptive market influences.
The research findings will be published in the September issue of DCS UK. We’ll be holding a second round-table to discuss the
results and a detailed write-up will follow in the October issue.
An in-depth industry report bringing the research and round-table insights together will also be available for download. In the meantime, we’d welcome your view point. Are too many cooks spoiling the channel broth?

To let us know what you think, or to register your interest in
receiving a copy of the report, contact me on
alex.tempest@talktalkbusiness.co.uk or tweet @ajtempest

Yours sincerely,
Alex Tempest

The future of the communications channel

Today’s innovative communications services provide enterprises the opportunity to dramatically improve their processes, procedures and even business models. Are they ready to grasp this opportunity and is the Channel in a fit state to help deliver those ‘game changing’ services? DCS hosted a roundtable event, sponsored by TalkTalk Business, where Channel representatives discussed the evolving communications demands of the enterprise and how the supply side was changing to meet these needs.

Attendees
Roundtable participants: (from left to right)
John Chapman, IT Reality, Moderator
Joseph Langford, Product Manager, Capita
Chris Gabriel, VP of Solutions Management, Logicalis
Campbell Williams, Group Strategy and Marketing Director,

Six Degrees Group
Innes Grant, Operations Director, Avanade
Paul Reeve, Divisional Manager, Utopia Technology
Dominic Hughes, Head of Partners, TalkTalk Business
Philip Alsop, Editor, DCS

Communications services – changing demands
All of the roundtable participants recognised that their organisations were having to evolve in terms of the services and technologies they are able to offer potential customers. For one participant, IP telephony is becoming a natural extension of the desktop, so the company has transitioned into telco services from being a pure network/desktop provider. In the case of another, there’s becoming a clear distinction between internal and external networks, with internal networks procured in the traditional way, but external networks being driven by customer experience. Everyone expects instant access to the network when they enter a building, and CIOs are struggling to meet such expectations. But networks are becoming ‘sexy’ again – seen as key to delivering the BYOD and managed service model that, it seems, end users crave.

And they seem happy to let the Channel provide more and more of this network ‘experience’. One participant cited the example of one of their biggest customers, who stated that they’d never outsource their network – buying wires-only from a telco and putting the network together themselves – returning two years later to ask for a quote for their managed network and data centre. All participants seemed in agreement that many end users are now looking for a complete network management service – they discuss applications issues and solutions, but are uninterested in the network delivery – expecting it to be a part of the package and ‘just to work’.

One note of caution for the Channel – while end users demand flexibility and scalability from their network provider, the telcos and network vendors are still committing the Channel to long term, fixed contracts, with inflexible SLAs. There’s understanding as to why this is the case, but it’s out of sequence with the world of dynamic IT.

Who’s driving the market?
There’s little doubt that end users are responsible for the changing communications market – driven by employees’ requirements for flexible working, but it’s not immediately obvious that the network supply side is yet able to provide the corresponding flexible bandwidth to support the peaks and troughs in application demand. Plenty of providers are still wrestling with the issue of whether the network can still be sold as an asset in its own right, or if it’s just a part of the overall solution. At the same time, there is some doubt as to whether end users fully understand what’s involved in supplying a fully flexible network – companies like the idea of having enough network capacity for simultaneous analytics, collaboration and, say, video conferencing capability, but they do not respect the cost of such bandwidth. End users like the theory of anytime, anywhere network access, but there was a suggestion from some participants that there customers are not willing to pay for it just yet.

Others believe that there is a significant opportunity for the Channel – to manage flexibility, variability and scalability; to provide service management, integration and security – the customer will happily pay for this.

Procurement procedures
Ironically, while employees might want full network flexibility, those in charge of the business actually want predictability when it comes to network costs. So the Channel needs to come up with a pricing policy that gives the FD the predictability he or she needs, while providing the flexible network services required for the business.

Which leads on to the thorny issue of procurement. “Procurement departments understand the cost of everything and the value of nothing” is a neat summary of the participants’ united view on this topic! In other words, the procurement department is happy to spend to incorporate a new employee or application, but not on the service to optimise network delivery or user experience.

However, there’s some evidence that the procurement department is becoming more savvy as network embedded services are becoming a hot topic. CIOs and the procurement folks want to know what comes embedded in the network, so network purchasing is moving away from ‘just a bandwidth discussion’, to more of a ‘price inclusive’ negotiation.

Remarkably, in larger customer organisations there’s still the very real possibility of different parts of a communications/wider IT solution being purchased by different departments. One customer required a WAN tender to be delivered to Department A, and the SAP delivery tender to Department B. Not helpful, if only because the end user might end up with two suppliers when they could have had one and, presumably, a better, combined price.

One further issue in terms of procurement is the growing trend for business units other than the IT department to want to be involved in the specification process. Web and marketing departments, for example, see their technology requirements as ‘too mission critical’ to let IT departments get hold of them. They’d prefer to outsource the web hosting environment, where scalability is part of the equation. Scalability demands for an IT department are more political and become a new procurement requirement. Additionally, the internal IT department is unlikely to guarantee SLAs in the same way that an external (Channel) provider can.

The Channel and telcos
There’s no doubt that telcos understand the changes going on in the market and that the Channel is seeking a partnership, and not just a ‘buyer of product’ relationship. But telcos see flexible networks - flexible bandwidth, flexible SLAs, flexible contracts – as a risk, and this needs to change as far as the Channel is concerned. A relationship best summarised by one of the participants as: “If the telco can be a part of the SI’s rules of engagement, it can work – but if the telco remains arrogant and stubborn, then it won’t.

So, the telco needs to adapt to help the Channel. Indeed, the suggestion is that a telco that offers ‘just connectivity’ adds no value at all, so the Channel has to go elsewhere to purchase the value. Telcos that start to offer more embedded services on the network offer the require value-add. The example of AT&T in the US was cited – this organisation is offering its Channel multiple value add services – backed up by a brand name that everyone recognises.

However, this example seems to be the exception, rather than the norm. In general, the telcos might all be aware of the fact that the Channel is having to offer SLAs right down to the application level, but they seem reluctant to assist in this process. Set against this, the creation of endless, bespoke SLAs on a customer by customer basis, is a dangerous path to tread for the Channel.

And there seems to be some debate as to what expectations customers have when things do go wrong. The one-throat-to-choke requirement still holds good – but whether or not the customer needs or wants to know which network vendor is behind a Channel solution, that seems to be less clear. What is crystal clear is that end users are getting more demanding and less patient – the network and associated services should ‘just work’ – no excuses.
New purchasing models
Leaving aside the fact that in the UK (and Western Europe generally) there’s as much time spent dealing with legacy IT as there is in driving forward new technologies and business models, the Channel detects a growing chasm between the old school IT director and the modern CIO. The IT director reports to the CFO, and focuses on budget and cost reduction; whereas the CIO reports to the CEO and has people-processes-technology at the top of the agenda. So it is that the IT director will see new technologies as a necessary evil.

In network terms, this means that new infrastructure investment is undertaken to replace legacy kit – there’s no understanding that this technology replacement process is actually an opportunity for the organisation to review holistically, to look at business processes and requirements, and to drive innovation and improvements.

The approach to technology refresh can be sector dependent as well. Sectors with traditional sales often see technology investment as a cost cutting exercise. Businesses whose revenues are driven by technology have CIOs who ask: ‘What can we do with the network?’ and who are looking for the opportunity to centralise, increase access, freedom and better customer experience.

End users expect the Channel to be proactive in pushing forward innovation and new technologies – for example, they’ve read that putting more and more IT into the Cloud is the right thing to do, but they’re not doing it very well – they need help.

It seems that a little learning is a dangerous thing in the Cloud world. Many end users seem to be attracted by the idea of multi-servicing – switching from one Cloud provider to another overnight. This ‘lift and shift’ approach is a long way from the reality of staging, testing, service assurance and the other parts of the necessary due diligence process. And the Channel has a great opportunity to help end users understand not just what is and isn’t possible when it comes to Cloud, but, just as importantly, what is and isn’t practical.

Who creates the managed services?
The Channel might be well positioned to offer end users advice on the managed services model, but just how should it be involved in the delivery mechanism?

The Channel’s dilemma is a simple one. They want to deliver managed services, but do not want to have to invest in every possible component. So, the Channel needs to partner with those that can provide these components in order to deliver end user solutions.
Yes and no! Some Channel companies seem confident enough to ‘go it alone’ when it comes to managed services, seeing the telcos as direct competitors. Others see the telcos as playing an essential role. Back to the example of AT & T in the US – they are making a huge investment in delivering and packaging embedded services. Why would a Channel company invest and build their own, if the telco can provide them?

Because, in the UK at least, the telcos are not talking to the market and, therefore, not meeting the needs of the Channel.

And this disagreement amongst the roundtable participants neatly encapsulates the end users dilemma right now: ‘If my supply chain can’t agree how best to provide managed services, how can I be expected to procure such services with any degree of confidence?’

However, all do agree that it would be good for the Channel and telcos to work together better to define, and refine, their respective areas of expertise and end user engagement.

What about the brand?
The final debate centred on the power of the brand in the consumer world and the logical assumption that, with the consumerisation of IT, and the move towards the utility IT model, those with the most powerful brand would be in the strongest position. Yes, there is a difference between business grade and consumer grade, but to the end user, familiar with the world of IT and comms long before the workplace beckons, the chances are that those brands encountered both in the high street and the office are the most powerful. As one participant put it: “Loyalty to brand at consumer level is stronger than anything you’ll find in an IT department. And employees are bypassing IT, buying in shops at consumer level, apps that they use in business.”

Good news for the roundtable sponsor, TalkTalk Business, as it seeks to make further inroads into the enterprise market, having established its network foundation in the consumer world.