May 2010 Archives

Vodafone's efforts to build an IT channel have floundered so it appears to be going for the next best option - to acquire its own networking integrator.

In the past month the telco behemoth has been liked with several firms including the reseller operation at Daisy Communications and DiData.

Fixed and mobile communications are converging and Vodafone is trying to buy up some fixed line competency.

Its historic involvement with the channel has been chequered; it employed Mark Whitby - now Seagate's European president- to develop global channel programmes for IT resellers but things never really took off.

"Vodafone put some money into the channel but it didn't see the returns on a short term basis and gave up," said one reseller source.

Activating contracts was considered long winded and complicated and many laughed when Vodafone reduced the process steps to nine, not three or four.

The sales model is another issue for IT resellers; giving away hardware with the tariffs was and to a large extent still is alien to IT firms, costly finance experts are required to help with this.

Any deal over a certain number of seats is also taken direct so resellers said they found it difficult to compete with the network operators and were confined to sell in the SME market.

Blackberry and O2 are certainly making strides to overcome these issues and are placing a lot of investment in the IT channel to help resellers build up specific teams but even these companies offer commission only on new business.

"You need two operators to make money," said one channel source.

With a growing number of notebooks and netbooks sold with connectivity, the channel is slowly responding. Sadly for Vodafone, as things stand now it will not be in line to benefit when those sales agents truly get to grips with the model.

Drop me a line, on the QT, off-record, very much hush hush.

paul.kunert@rbi.co.uk

The mantra of New Labour in the early years was education, education, education, now because of the uncontrolled spending habits of the previous Government, the current one has been forced into making cuts, cuts, cuts.

This week the new generation started swinging the axe and the IT industry started to get some details about the planned savings; £1.7bn from delaying or stopping contracts and a £95m reduction in IT spending.

It will also look to cut wastage, £600m to be specific, by unwinding quangos and as any education reseller will know, the plug was pulled on BECTA leaving an advanced tender process in doubt.

The new ICT Services framework kicks off in August but question marks hang over its future given this week's decision.

One education house has already spent 60 man days responding to the 125 page Pre-Qualification Questionnaire (PQQ) and anticipates that the cost of responding to the Invitation To Tender will cost in the region of £100,000.

The costly procurement process has prevented some SMEs from targeting Government business and has the potential to put others in real financial danger.

If the Tories are serious - as they previously pledged - about handing 25% of public sector contracts to SMEs, the coalition Government needs to seriously re-think the tender process for ICT contracts.

Drop me a line, on the QT, off-record, very much hush hush.

paul.kunert@rbi.co.uk

The channel is digesting - and will be for the next month - the ramifications of the Government's decision to axe BECTA but after the dust settles, will the industry really be worse off or did the quango justify its existence?

The procurement body was set up in 1998 - one year after Labour got into power - and has become one of the first victims of the coalition Government's attempts to cut costs; a BECTA free Britain is expected to be £80m better off this fiscal year.

Of course BECTA has come out fighting following the news, with chief executive Stephen Crowne defending its output.

"Our procurement arrangements save the schools and colleges many times more than BECTA costs to run," he said on its website.

The problem for Mr Crowne is that his £220,000 a year wage bill and the circa £112m budget that BECTA enjoyed on an annual basis is symptomatic of the excessive spending patterns that now need to be curtailed by our Oxbridge friends in power.

BECTA was founded to manage the procurement of technology in schools and seek out costs savings by developing frameworks with bigger economies of scale but did the savings justify its own budget?

BECTA employed 240 staff and 120 contractors. It spent £1.5bn via its procurement agreements since 2002 and reckons it rung out £55m worth of cost savings for schools, local authorities in the past year.

Despite this, I suspect the £100m plus budget could be better used on the front line.

The discontinuation of BECTA may cause a short sharp intake of breath from resellers that are involved in the bidding for this forthcoming ICT services framework but even if they did make it onto the supplier list, there was no guarantee of business.

Using the framework agreement is not compulsory for schools and BECTA had no power to enforce them so it may have been a good idea that was poorly executed.

With a raft of positions in BECTA that were due to be filled, it looks like resellers were not the only ones that didn't get a sniff of the planned cuts.

So it's bye-bye BECTA, but the next question is what does the future hold in store for BSF or indeed the Home Access scheme?

Drop me a line, on the QT, off-record, very much hush hush.

Welcome to Reseller Radar, a blog that aims to inform, provoke and raise a wry smile. After more than a decade spent at MicroScope analysing the channel, it is clear that reseller market is at an inflection point.

The role of the traditional reseller has been under close scrutiny for years but the recession has acted as a catalyst for change in terms of the way that customers want technology delivered and the method of paying for it.

The ubiquitous cloud has engulfed the IT industry and while some resellers have embraced it and have or are pushing through the requisite changes to their business model, others are scared to death of it.

Microsoft this week ran the first of many reseller workshops to give them a better understanding of how the Business Productivity Online Standard Suite (BPOS) will impact their business.

The fear factor of the fundamental shift from chunky upfront revenues paid at the start of the project to making the same money over the lifetime of a contract is a tangible challenge.

It changes the entire dynamics of a business with costly field sales teams and if you have not re-engineered your business to take out cost to deal with the issue it will be painful.

Of course Microsoft is not suggesting resellers move wholesale to sell apps hosted in the cloud, after all most customers are slowly migrating applications to the cloud and maintaining some on-premise software.

Under BPOS, resellers can expect 18% of the value of the contract to be paid upfront by Microsoft and 6% per month of the monthly fees but then there is obviously a raft of support contracts, management fees and customisation work.

The concept of the cloud has resonated with customers looking to cut down on capital expenditure in favour of op-ex, and is more flexible, allowing firms to expand and contract service requirements as their business changes.

Just as important is the changing relationship with the customer; resellers that do a good job in advising the client on cloud can potentially embed themselves with that business for the long term, shutting out the competition.

There is a good reason to maintain dialogue with the customers to become a trusted advisor and technology advocate, not just a product salesman; building proof of concept and showing the impact on the customers' p&l accounts.

Bizarrely the cloud may also help smaller resellers overcome concerns that larger businesses or public sector organisations may have previously held - in BPOS Microsoft invoices the client so the client is buying the services from Microsoft.

This may give the customer piece of mind yet the reseller remains the intermediary that moves the customer from a legacy estate to a services-based IT model.

In its next financial year, Microsoft is expected to add CRM, Office and even System Centre Manager to BPOS, meaning that the functionality will expand. Announcements are expected at this year WW partner conference.

The question is, will you be knocking on customers' doors with a cloudy, hackneyed sales pitch about products or will you build a clear longer term strategic relationship with them?

Drop me a line, on the QT, off-record, very much hush hush.

paul.kunert@rbi.co.uk