Some enterprise markets are saturated, but at least four technologies have emerged that smart VARs could take advantage of. The trick is to align them with business drivers that customers need
Specialty Installation Ltd. used to be a traditional reseller, mostly repairing desktop equipment. Today the Edmonton VAR has found a niche doing systems management for some of Canada’s largest enterprises, a market some industry observers believe is saturated.
Not Tom Booth, Specialty’s president.
“As the market changed, I’ve had to change with it,” he said, “and I found going this way was the better way to do it.”
Numerous enterprises have already purchased systems management solutions, but many are having difficulty implementing them, he said. And more enterprises are looking for quick wins, as opposed to standing back and looking at technology from the top-down. “We talk about driving ROI as fast as you can,” he said.
Sure, some enterprise software markets are saturated and many Tier One vendors are actively targeting small and medium businesses. According to a June report by Forrester Research the enterprise software industry over the next five years will feature fewer large suppliers, greater technical adaptability and pricing flexibility.
When it comes to business apps, it’s still pretty much a direct play for vendors in the enterprise space – or they’ve developed alliance relationships with global system integrators, said Paul Edwards, global software channel strategies analyst with IDC Canada. “They’re all sell-with relationships and influence relationships.”
On the other hand, he added, “everybody used to talk about saturation of the enterprise market but I don’t know if that’s particularly true either, because there’s clearly a lot of business still being done at that level.”
Forrester sees four factors changing the way applications are sold and supported (and therefore turning software into a commodity): service-oriented architecture (SOA), open source, software-as-a-service (SaaS) and offshore development.
However, to really take advantage of how the marketplace is evolving interested channel partners have to address enterprise-sized companies’ top business and technology drivers.
Reducing software costs is still the top concern for enterprises, according to Forrester’s Business Technographics Nov. 2005 North American and European Enterprise Software and Services Survey. Other business drivers include security and improving integration between applications.
What’s interesting is that applications meeting these problems are increasingly industry-specific, said Greg Myers, vice-president of marketing with Tech Data Canada in Mississauga, Ont. For example, forestry companies now have a selection of forestry enterprise tools to consider that have been developed by vendors or ISVs with their business requirements, he said. Similar applications are available for healthcare, public administration, and oil and gas.
The technology drivers that are affecting those companies are playing into opportunities for resellers. Here are a few:
Server consolidation and virtualization
“Virtualization is probably the biggest phenomena we see presently in terms of how an enterprise tool is deployed to reduce costs and improve consolidation,” said Myers. A Yankee Group study found that for the overwhelming majority of enterprises the question is when, not if, they will deploy virtualization in their data centres. More than three-quarters of respondents said they would deploy virtualization, while only four per cent said they would not.
“There’s more data, there’s larger applications, there’s more users,” said Myers. “All of that complexity really drives toward an enterprise-wide orientation and set of tools.”
And then there’s regulatory compliance, which offers an opportunity to resellers to develop expertise around content management associated with compliance, particularly message management.
Compliance and automation
“A lot of organizations are challenged to meet (regulatory) requirements because they don’t have the tools,” said Richard Brown, president of Opus Consulting, a Vancouver solutions provider. Within enterprise organizations there’s usually somebody responsible for regulatory compliance, but the challenge is not so much being compliant, but having a process in place to become fully compliant and manage that compliance.
Service oriented architecture
SOA represents a new wave of infrastructure investment in the industry, said Stuart Charlton, enterprise architect with BEA’s Strategic Consulting Services in Mississauga, Ont.
“What we’re looking to do (with SOA) is free ourselves from the business process and organizational decisions of the past,” he said, “so it’s a new set of infrastructure we call service infrastructure.”
He’s seeing uptake in medium and large enterprises that are examining their business processes and looking to streamline their operations, so for the channel, this could mean a new wave of investment. BEA is looking for channel partners, added Charlton, particularly those with a vertical focus, to introduce SOA to their customer base.
But while adoption of SOA is quite strong in the U.S., it’s lagging in Canada. “There’s a lot of guidance required in how to approach this appropriately and this is where I think a lot of the value-added players can do well,” he said. Education about governance, reference architecture development and asset management is required to make SOA work.
Software Spectrum Canada is a software reseller that represents more than 4,000 software vendors and sells to 70 per cent of the global Fortune 500 companies. “SOA is rapidly gaining acceptance and there’s more and more interest,” said Michael Charter, the company’s country manager based in Mississauga, Ont. “It’s relatively early days, but there’s an increasingly strong demand for clarification and information and solutions built around it.”
“I think enterprises are somewhat skeptical – they’re always skeptical and increasingly skeptical of the latest and greatest – but certainly in this case SOA seems to be built on a good foundation.”
The reusability aspect, in particular, makes it appealing to enterprises that are increasingly strapped for cash and looking for efficiencies in their business operations – and are under pressure to roll out new competitive offerings. Any enterprise that has a requirement for rapid development and reliable delivery of new services should look at SOA, said Charter.
“So far the outlook looks promising,” he said. “Obviously [it depends on] what other competing architectures may come up, although there’s nothing on the horizon right now, so I think there’s a uniform impression that this is going to be a strong directional move for quite some time.”
“There’s a huge area of opportunity from what we can see as companies start to recognize that the cost of managing their environment is huge, especially today trying to fight the never-ending patch battle of keeping things up-to-date,” said Opus Consulting’s Brown. And the only way you can really do that is by having a strong suite of tools to offer clients.
While enterprise organizations already have an IT department, he said, they might not have all the tools they require to be really effective at managing their environment. “They’re willing to rent the product from us for a while and work with us and when they see how it works in their environment they move to purchase the product so it’s permanently in their environment,” he said.
LANDesk Software sells systems and security management tools to channel partners, who’ve traditionally had a good revenue stream from services around architecting and deploying solutions, said Dave Taylor, vice-president of worldwide marketing with LANDesk Software in South Jordan, Utah. “But the services they’ve been delivering have been a little bit more technical, not business value-add.”
The company recently came out with a business process management tool called Process Manager 2.0. In addition to architecting and deploying solutions, channel partners can use the process tool to show customers how they’re running their IT business – and how to better manage change in their environment.
Once these customers realize there’s room for improvement in how the IT department drives value for the business, said Taylor, there’s going to be accelerated growth in automated processes. This shift from a traditional tools orientation to more of a service delivery orientation provides channel partners with a higher value-add consulting practice, he added.
Huge market opportunities are created for VARs when business drivers are in alignment with technology drivers, said Tech Data’s Myers. As software vendors make their tools more customizable, the easier it is for resellers to engage with customers. And the more these tools are simplified and targeted at specific verticals, the easier it is for resellers to get their arms around them.
The enterprise software market is far from dead. But it’s changing, as enterprises embrace new models of software delivery, management and support. SOA and SaaS are both taking off in the enterprise space, despite vendor concentration and brand loyalty. Resellers have a choice: maintain the status quo or reinvent themselves to reflect today’s business and technology drivers.