Two new reports from CONTEXT and Datto highlight the opportunities and challenges facing UK resellers and managed services providers. Across these two pages, Adam Simon and Mark Banfield highlight key findings from their respective reports
Adam Simon, Global Managing Director for CONTEXT, explains what the company’s 2018 ChannelWatch report says about the relationship between resellers and distributors and vendors.
Where are IT resellers investing? What are they looking for from distributors and vendors? How are they preparing for the future? These are just some of the questions answered by the CONTEXT ChannelWatch report.
Combining information from CONTEXT’s annual reseller survey with reseller metrics and sales/price tracking across thousands of respondents in 13 European countries, this year’s report highlights exciting but uncertain times for the channel.
Strong and stable?
The good news is that the reseller landscape in the UK & Ireland and Europe in general is pretty stable. Although the total number of resellers dipped slightly in most countries, including the UK, average purchases per reseller rose from €104,000 in Q1 2017 to €111,000 in Q1 2018. In the UK, things were even better, with average purchases per reseller increasing from €194,000 to €207,000, the highest in the region.
Where are things taking off? Well, resellers we spoke to were most keen on introducing smart home, IoT and 3D printers. The smart home is already garnering a lot of interest, with average purchases per reseller reaching PC industry levels of €39,000 per reseller in the UK & Germany. There’s also a huge reseller opportunity in integrated systems, where average purchases per reseller jumped in the UK from €242,000 in Q1 2017 to €281,000 in Q1 2018.
However, there are some concerning signs. While positive sentiment about the next 12 months is increasing in countries like Spain, France and Italy, and falling only slightly in Germany and Poland, UK net reseller confidence of 16% is the lowest in Europe by a significant margin, with only 36% expecting their business to perform better in the coming year and 20% thinking it will get worse.
Hygiene vs value add
One of the most important relationships in the channel is that between reseller and distributor. The latter will be keen to know what their partners value most. In the UK it’s all about pricing (33%), customer services (30%) and product availability (26%). This is different from the European average, which puts more focus on the B2B customer portal (43%).
When asked what they missed most from their main distributor’s offering, the most popular elements were pricing (32%) and delivery costs (30%), illustrating just how much resellers value core ‘hygiene’ factors.
This begs the question, how much are distributors prepared to invest and how much are resellers prepared to pay for value-added services like technical support and training? In the UK at least, there is an openness to training by distributors, with respondents in the UK more likely than those in other regions to view distributor training in sales, IoT, IaaS, DaaS, PaaS and managed print services as useful.
It’s also true that resellers need to be experts not only in different technologies but also in verticals. In the UK, the biggest growth opportunities were flagged as education (16%), retail (15%) and manufacturing (15%).
The vendor angle
Price (57%), product quality (53%) and product range (36%) are key factors for UK resellers when choosing vendors to add to their portfolio. In the UK, marketing programmes were a smaller motivator (24%), but this was still significantly higher than the four other major economies (France, Spain, Italy, Germany) where this factor only weighed in at 15%.
Value-added support and training were also important and figure more strongly as reasons for adopting a brand than for dropping one. Hence the importance of working on the value-added side to differentiate yourself as a brand in order to be adopted in the first instance by a reseller.
The cloud dilemma
While UK resellers have shown their enthusiasm for digital transformation, embracing the smart home, IoT and other technology categories, the cloud remains an issue for some. In the UK, 55% responded that they had not sold any cloud services in the past six months. This is more than in 2017 and representative of a trend across much of Europe.
Overall, ‘as a service offerings’ were thought to provide fewer opportunities for growth than traditional core strengths in ‘proximity’. Both maintenance and support (49%) and installation/technical assistance (39%) scored more highly than SaaS (23%), DaaS (20%) and WaaS (27%) in this regard.
So why are resellers still afraid of dipping their toes into the cloud? Security remains the biggest barrier (32%), followed by legal restrictions (28%) and a lack of knowledge or understanding about the product’s advantages (23%). It’s important for distributors and vendors to remember that these barriers aren’t insurmountable. By reaching out as trusted partners they can educate the market and show the true value of cloud services.
In addition, as SaaS becomes more and more commoditised, with thin margins, the revenue opportunity for resellers increasingly lies in the add-on services, support and cross-selling that accompany cloud solutions, especially hybrid cloud solutions that are often the most appropriate approach for businesses. If resellers are to survive digital transformation they will need to get good at providing the value-add and capitalising on the often complex hardware and service needs of hybrid cloud solutions.