How consolidation is pushing alliances between channel rivals

Not long ago, VARs could depend on product sales to drive revenue. Now, those opportunities are rapidly shrinking, leading to some interesting partnerships between IT and the telecoms sector.

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How consolidation is pushing alliances between channel rivals Manda Banda, editor, Channel Middle East
By  Manda Banda Published  August 13, 2018

Consolidation in the data centre space has gone from an expectation to a reality. Just think of the wheeling and dealing that’s gone on in the space in the last couple of years, like Extreme Networks snapping up both Avaya’s networking division and Brocade’s IP Networking division and in the process significantly strengthening its market position and ability to drive smaller competitors out of business.

In the regional channel, not that long ago, value-added resellers (VARs) were dead serious about staying VARs and building on resale, and telco-focused agents had a sweet deal procuring network connectivity solutions for customers. The two offerings were strictly siloed, and the IT and telco channels existed in an uneasy truce, each needing the other to enable their businesses but not necessarily working together to create solutions.

But the commoditised server resale market is dying for VARs as the trend moves away from cheap and easy hardware to higher-end servers with more features, not to mention the rise of cloud solutions.

The regional IT market has been talking and advocating for a long time in the channel about the need for traditional VARs to move into recurring revenue models, but the pivot away from the hardware and software resale revenue model that many built their businesses on has been a tough pill to swallow and many are still struggling to make this transition.

For a long time, traditional legacy software is what had been the golden egg for a lot of VARs, because they were able to sell the software and make margin. Sell the hardware and make margin. They were also able to sell the services and do the install and make margin.

In fact, a few years ago, VARs could depend on data centre sales to drive revenue, and telco agents had a comfy niche in networking. But in today’s channel, those opportunities are rapidly shrinking, leading to some interesting partnerships between IT and the telecoms sector.

Convergence will intrinsically lend itself to VARs and telco agents stepping on one another’s toes as they both compete for the managed services golden egg, and both models are struggling to find their path forward.

Now, the market is starting to see what were called telco agents try and do data centre and traditional IT enterprise projects. On the other hand, VARs are starting to look into the monthly reoccurring world, and have started to work with the likes of Etisalat, du STC or Zain.

But this trend is opening partners’ eyes to the benefits of working together.

The strategy for addressing the challenge that consolidation is presenting to partners is no different than with any other business. The market is there, and the revenue is waiting to be pulled in.

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