Charles Dickens tells us, in the opening lines of “A Tale of Two Cities” that “it was the best of times, it was the worst of times …”. He was comparing England and France in the years before the French Revolution, but could have been talking about the South African IT channel in 2017.
ICT resellers are only too aware that we are living through what could quite possibly be the worst of times for our industry. What they might not realise is that all the bad news we’re experiencing could be the spark that lights up the best of times.
Growth is negative, budgets are flat or going backwards, and spending has all but dried up – to the extent that end user companies are having to look to rapid digitalisation to weather the current upheavals. And that’s a massive new opportunity for the ICT industry, where trusted partners could secure their own futures by helping their customers to save theirs’.
The economy is constrained, business confidence is near rock-bottom and spending from the biggest ICT buyer has all but dried up.
These are among the stark realities that the ICT industry is facing as it stares down what is panning out to be arguably its worst year ever.
But, despite the bad news and poor sales, the future is actually quite bright for ICT – as long as the players get their acts together, turn their businesses around and get behind digital transformation as a way of rescuing the economy.
Jacques Malherbe, managing executive of Axiz Advanced Technologies and chief technology officer of Axiz, points out that the economic environment is placing huge stresses on ICT industry players.
“Just look at the news: consumer confidence is down, there’s political uncertainty, and it seems as it buyers are frozen like deer in the headlights.”
The result is being seen in both public and private sectors, where low confidence levels are driving revenues down even further.
“The confidence levels are as bad as – possibly even worse than – the worst levels in the 1980s,” Malherbe says.
“And, to add insult to injury, we are in a technical recession too.”
But the South African ICT sector is pretty resilient, he adds.
“There are a few things we know from experience: this industry takes a hit, then gets up and goes on.”
Some encouragement can come from the fact that international upsets have helped to keep the rand a bit stronger than it really deserves.
“Currencies in the US and UK are depressed, so we see the rand taking strength from the fact that the dollar and pound are down.”
There are also opportunities for companies to improve their processes so that as much of their revenue as possible falls to the bottom line.
“In a depressed economy like ours, everyone has to look at how they can strip out costs, become more efficient and increase value to their customers,” Malherbe says.
The only way to do this, he adds, is to become digital. “We have done what we can in the analogue world. Now we have to use digital tools to see how we can improve profitability.”
Companies can employ these digital tools in a variety of ways, Malherbe adds. “This can include reaching customers and inciting them to buy; or optimising processes to make them more efficient.
“Overall, we and our customers have to push back on costs, and maximise profits. We can only do this by making things more efficient and, to do that, we have to use the new tools.”
The IT channel is feeling the squeeze as IT departments have their budgets effectively cut year after year. But there are many other opportunities resellers could be addressing to more than make up the shortfall.
“We are seeing the emergence of the inside-out end user enterprise, where the buying habits have changed,” Malherbe says. “What’s changed in the end user space is what they are applying technology to – and suddenly the CIO or IT manager is not the prime driver of technology procurement anymore.
“Today, HR is looking after HR systems and buying HR applications that suit their business. Finance and marketing and all the other lines of business are doing the same.
“This means that, while the IT spend out of the IT department is slowing, the number of IT buyers out in the broader enterprise has actually increased substantially.”
As a result, resellers find that their relationship – typically with the IT department – is diluted – but there are many new opportunities if they can shift their businesses to address them.
“So it’s not so much a business model change, but we have to have business people who are able to present solutions to other business people.
“The traditional return on investment (ROI) technology decision made by the IT manager is being replaced by business units making strategic, tactical and operational decisions on technology.”
This move to digital transformation opens a door for resellers, allowing them to move into new areas of the business, and bring technology to bear in solving real-world business problems.
“It’s enabling our resellers to have more valuable conversations with their customers.”
Distributors find themselves in a similar position of having to articulate the business value of technology rather than the traditional speeds and feeds.
“So our sales and marketing people are having to develop expertise in holding business conversations.”
The global trend to digital transformation is affecting every company in every industry or vertical market, Malherbe says – and it’s great news for the IT industry.
“There is no turning back – the world is going to become digitalised,” he says. “So, as an industry, we are in a good position.
“We are confident that if understand that, and understand how to take our technology to market, and create those ecosystems – including product, price, hardware and software clustered into business value propositions – the market is ready to buy them.”
To take advantage of these new opportunities, resellers have to recognise them and ensure their companies are geared up to address the new market realities.
Key to this is the ability to partner and integrate solutions, Malherbe says.
“A value proposition is exponentially enhanced when there are symbiotic relationships.”
In the new world of digital transformation, the innovation of the challengers is quickly outstripping the innovation of the incumbents – and part of the reason for this is that smaller, more agile systems are being employed.
“We are living the narrative of the container world, where there are no more monolithic applications but APIs (application programming interfaces) and microservices that can be strung together to create a solution.
“CIOs are no longer sold on one particular solution. They are looking for a hyperconverged environment with an easy-to-use management layer that lets them add services as they’re needed.”
These are the opportunities that resellers need to grasp if they are to survive and thrive in a digital world, Malherbe says.
“Right now the industry is totally in transition, as Mode One and Mode Two models run together.”
Mode One, he says, is about selling hardware, offering configuration services and doing maintenance. Mode Two is about helping end user customers to achieve their digital transformation objectives.
“There is a lot of complexity that comes with digital transformation,” Malherbe adds. “All the big vendors understand that the lack of depth of skill is blocking that transformation from happening.
“We are solving that problem by providing engineerless technology with an overlay of data analytics, automation and predictive analytics that makes digitalisation easier to achieve.
“So the reseller has to figure out where he plays. He has to provide a different value.”
Easy to say, maybe, but this kind of change is not easy to do.
“In Mode Two, the reseller has to figure out how to make his customer’s business better,” Malherbe explains. “Then he has to blend together the needs and capabilities brought to bear by him, by us and by the customer – and put them all together in a value proposition.
“So the conversation is business technical, not just technical.”
Will we see a casualties in the IT industry on the road to digital transformation? “Unequivocally yes,” Malherbe states. “I think we will see a couple of distributors as well as resellers collapsing.”