The mobile and online communications revolution is forcing dramatic changes across the reseller channel as customers demand independent consultancy rather than a hurried sales pitch, and margins are eroded by cloud services.
While the rapid consumerisation of smartphones, tablets and mobile capabilities has caught businesses on the hop, the delivery of virtual applications and unified communication as a service is disenfranchising partners in the channel network.
"It’s cheap as chips commoditising and there’s no margin in it. There’s very little for resellers to do other than network integration,” says Geoff Johnson, Gartner’s ANZ telecommunications research vice president.
To add value he says resellers are going to have to up-skill as consultants, become ‘the rapid interpreter’ of what’s going on, and develop new relationships with customers and suppliers to deliver professional services upfront and support at the back.
"All the big systems integrators I’m talking to are crying in their beer,” says Johnson. "If you’re a Microsoft reseller and the business shifts to the cloud, which is clearly happening in the SME market, you’re no longer going to get paid for software licences.”
The extent of the shift is reinforced by Randstad’s 2011 World of Work Report which found eight out of ten (79%) New Zealand employers believe handheld devices will make the remote workforce a reality within 10 years.
Randstad New Zealand director Paul Robinson says the demand for flexibility and the ability to work anywhere at any time, has increased the speed at which ‘office mobility’ is emerging.
He says this powerful force will reshape the way we work in much the same way as the internet and email have revolutionised the workplace. And while businesses have quickly embraced tablets and smartphones, Robinson says this is only the tip of the iceberg.
So far only a few IT type companies are operating in the cloud where virtual applications and social media have eliminated the need for hard infrastructure. "In the next decade more complex technology at relatively inexpensive prices will ensure a further proliferation of mobile devices in the New Zealand workforce.”
Rosemary Spragg, senior telecommunications market analyst with IDC New Zealand, says the new reseller model will require partnerships that give customers a more complete and independent strategy.
"There are a lot of opportunities but the question is whether the main operators are prepared to shift from a more command and control model to a more open two-sided business model, and how quickly that develops.”
While the telcos want to lock customers in with special handset offers and plans, increasingly people can go to TradeMe or a parallel importer for handsets and compare call plans online. "Customers don’t want to have to traipse between stores to weigh up all options,” says Spragg.
Direct sales pressure
The arrival of 2degrees and its big push into branded stores shook up the market just as Telecom and Vodafone were trying to cut costs by pulling back on their retail presence.
And the challenges have only just begun as mobile virtual network operators (MVNOs), including CallPlus, Orcon and TelstraClear, look at ways to add value as they integrate mobility with their fixed line offerings.
"To date they’ve struggled with scale; even TelstraClear’s only got 45-50,000 customers, and the ‘thin’ reseller deals from Telecom and Vodafone haven’t given them much opportunity to compete on price,” says Spragg.
However Telecom luring CallPlus away from Vodafone with better data pricing indicates there’s been some change. Spragg says it’ll be interesting to see the response from 2degrees when it expands its network and is not so dependent on Vodafone.
Rather than voice and text it’s mobile data services that will define the market going forward.
Spragg says MVNOs will need scale to get favourable terms with the main carriers but it’ll remain a juggling act as Telecom and Vodafone won’t want to cannibalise existing customers or be perceived as commoditised utilities.
"They clip the ticket for data but they’re not capturing the entire value chain with apps and advertising. Although there’s an opportunity there, they’ll find themselves competing with the more nimble over the top operators.” By that Spragg means MVNO’s running cloud-based applications and services ‘over the top’ of their networks.
Mobility weak Uc link
Mobility is critical to any smart business but Gartner’s Geoff Johnson says it’s still the least delivered part of the unified communications (UC) mix. "It’s the weak link, usually addressed as an afterthought rather than a primary thought.”
That disconnect needs to be addressed systematically like any other business practice. For most small to medium sized businesses a mobile phone with email, calendaring and basic communications is ‘good enough’ to meet 80% of mobile UC needs.
The big sleeper however is UC ‘as a service’ delivered on your desktop or laptop, smartphone and eventually the tablet by Microsoft and the big carriers. Johnson says Gen-i/Telecom and TelstraClear are currently ‘wrapping their minds around this’.
He says the move to enterprise level cloud applications will be attractive even for small businesses forcing them to rethink their IT investment from capital expense to operational expense models where they pay monthly
Today 99% of businesses capitalise and manage their own office and desktop infrastructure. If Google offers to do it for $3 per month including refreshes and updates, Johnson says the cloud becomes a very attractive bottom line alternative.
Looking for suite spot
A concurrent shift in the way applications are sold, delivered and supported will be to integrated shrink-wrapped suites. The only saving grace for the reseller is that customers will need help evaluating and deploying these solutions, particularly when it involves the mobile space.
For resellers the client is the future, not the supplier, and this is likely to be a difficult transition. "Clients today don’t appreciate that yet but consultants will need to come to their office and be paid while they work out what is needed… You’ll need to start talking this process through now rather than waiting for them to come to you.”
As communications and IT is being commoditised, they’re going to source it differently. For example the reseller will need to advise and help them decide between Microsoft and Google or Gen-i/Telecom vs TelstraClear.
Exclusive reseller deals with carriers will also be challenged. "They’ll have to decide whose best interest is served by that arrangement. The customer will prefer an agnostic, more ecumenical arrangement rather than being locked down to one carrier.”
Johnson suggests what is happening with Telstra in Australia may indicate the way forward for New Zealand. "They’re blowing away the competition from Optus and Vodafone with an aggressive wireless strategy and 10Mbit/sec LTE at a reasonable price”
Weighing up the cost
And while Johnson agrees New Zealand’s mobile data rates are expensive – two to four times higher than competitive economies like Australia – the trick is to weigh this spend against other business costs.
"If you run a car, a truck or a ute that’s at least $2000 a month in a fleet management deal, whereas a typical organisation would spend about a tenth of that on mobile bandwidth.”
What’s needed, he says, is a business perspective. "Clearly productivity is going to come form the networked environment.”
And he agrees that perhaps more than most other nations the ability for New Zealand users to swap out between cellular and Wi-Fi networks and hot spots, adds value to the reseller proposition.
"If you are sitting at your desktop you certainly want the comms coming to you by the cheaper Wi-Fi network and only go to cellular when you need it.”
Johnson says, most technology today has Wi-Fi hand-off capability and resellers should ensure the devices and infrastructure they are selling to clients take this into account to manage cost and improve speed.
Even Chorus’s new access prices for fixed connections at $455 for 1Gb fibre services and $1350 for 10Gb, are overall lower than the cost of running a vehicle.
He says resellers need to look at a combination of mobile and fixed networking and ways to optimise business use of both "If fixed network costs become so cheap there’s a whole new metaphor for running branch offices which means less people on the road because you can do so much more including smooth video and supplement the mobile work with Wi-Fi or femto cells about the campus.”
Perfect storm ahead
According to IDC’s CIO Innovation Survey 2011, mobile business is the number one issue on the minds of IT professionals in Asia-Pacific with ‘mobile everything’ becoming the norm in the future.
New access networks, new devices, new mobile operating systems, applications, platforms and delivery models are coming together to create true and all-embracing enterprise mobility in what he suggests is a ‘perfect storm’.
Tim Dillon, IDC’s Asia-Pacific associate VP for end-user and mobility research, says the changing landscape for devices will see tablets, iPads and large-screen smartphones running almost fully functional versions of all enterprise software and services.
In short there’s a mobile revolution underway on multiple fronts that will expand the boundaries and capabilities of the organisation. And while mobility holds the key to future productivity, work practices and policies and how to protect against negligent users and malicious attacks must also be taken into account.
Carriers, businesses and resellers are now on notice to consider how they might adapt and what the consequences might be if they do not.