Channel Chiefs To Partners: Specialization Is Key, But You Can't Be Experts In Everything

The importance of solution providers transitioning their businesses to a more services-oriented approach is reaching new levels.

That was the consensus of a roundtable panel of channel chiefs from Cisco Systems, Dell, Hewlett-Packard, IBM and Rackspace, held at XChange 2014 in San Antonio in August.

"In this new world, if you don't innovate, you die and a partner needs to have that mentality. They have to continually innovate and reinvent their model and I think this, with all the technology that's out there right now, enabling all these new business models ... they have to innovate their business model or they will not survive," said Cisco’s Bruce Klein, senior vice president of the Worldwide Partner Organization.

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[Roundtable Video: Who Are the New Partners?]

With that shift comes the need for a more consultative approach to clients, which all of the channel chiefs agreed is both a challenge and an opportunity for their partners. In this make-it-or-break-it moment for the channel, they said they are seeing a lot of solution providers specialize around a combination of verticals and technologies.

The benefit of specialization, HP Enterprise Group Channels Vice President Stephen DiFranco said, is that a solution provider can't possibly be "everything to everybody." To that end, solution providers need to build a practice around understanding how workloads function within an industry, he said. With the in-depth knowledge required, a single company can't juggle 10 or 15 of those workload practices. Instead, it's better for them to focus on one or two of those specializations and lead with deep consulting capabilities.

"The economics are telling us that VARs are going to have to focus on a few of those and go very deep, which is a lot different than what we've had for 25 years, which is a relatively horizontal data center VAR," DiFranco said.

Rackspace Vice President of Channel Partner Sales Will Knight agreed, saying that he is seeing a lot of solution providers building practices around a core set of solutions. That trend is especially true, he said, as the sales process for solutions and services becomes more complex. Solution providers have to transform to focus on the client business outcomes, instead of just selling a technology, which is a huge challenge, he said. That's where a vertical focus for deep specialization and then vendor support to back up that investment comes into play, he said.

The specialization question is a particularly personal one, said Tami Duncan, IBM vice president, North America channels. The decision is based on factors such as geography, business goals and how far it is out of the solution provider's comfort zone, she said.

Next: Capitalizing On Veriticals, Emerging Technologies

Dave Monk, CEO of Berkeley, Calif.-based ArcSource Consulting, who attended the XChange event, said that ArcSource has benefited from specializing around an architecture vertical as well as creative and marketing firms. However, verticals aren't the be-all and end-all for his business, he said.

"We specialized in a vertical for several years, but we also think that there's strategic advantages and importance to having some diversification. But, I'd rather have multiple specialties or a handful of specialties than be super-broad-based. I do think there is a really good way to build a brand in a niche market or a niche vertical. I am seeing the benefits of that in my own company," Monk said.

Brad Hokamp, CEO of Omaha, Neb.-based Cosentry, said the company has seen more than 20 percent growth from diving deep into understanding customer-facing applications. That helps Cosentry transcend verticals, he said, but still gives it a deep specialty in a specific area.

"We find with our competitors, they don't have that breadth and depth that Cosentry has in that market. It is a big differentiator for us," Hokamp said.

There also are strong economic benefits for MSPs to standardize around a more select group of technologies, according to Monk. However, he said that he tries to keep an eye on emerging technologies, with the help of vendors, to see what his next specialty down the road will be.

"I try to stay on top of the technologies that are out there such as new cool technologies that emerge that may become a new specialty. ... We try to transition [clients] to our standards where appropriate, but niche specialization and technology specialization are good goals but they are achieved over time and they have to be navigated carefully," Monk said.

IBM's Duncan said vendors have to be careful to not push solution providers to transition too quickly or it will not be a healthy move. However, once the solution providers show they are ready to make the move, she said vendors such as IBM can help them make the leap.

For solution providers, a lot of the problem in the transition comes with adapting the sales force, said Dell's Frank Vitagliano, vice president, channel sales. End-user decision-making is being shifted out of the hands of IT or the CFO and moving into other lines of business, such as marketing, he said. That means that solution providers need to have a different level of expertise and approach the sales conversation differently.

"To be able to have those discussions with the lines of business, a VAR needs to have a level of expertise with that kind of business and it becomes a different set of discussions that they're having. ... The only way I can prove my value is, 'How do I help them with their business?' So, they have to get to that level. Well, you can't have that at a generic level with no understanding of the vertical or the practice," Vitagliano said.

Next: Getting Solution Providers Up To Speed

To develop that expertise, a focus on finding and investing in the right talent is key to bringing that transition over the goal line, the channel chiefs all agreed. Most of them said that they have put programs in place to help solution providers get their employees up to speed and help train the next generation of talent. For example, Klein said Cisco works with students right out of their university to help train them and help them step right into the partner community.

"This is a way that we as a community are going to need to help the VARs to get young talent that really know what the channel's all about," Klein said.

As partners build on their future, it's also important to think about the present, IBM's Duncan said. The company culture and skills that a partner has right now are just as important, she said, especially as partners look to move to the cloud. Some solution providers are thinking outside of the box and, for example, recruiting former lawyers or placing hefty rewards on recruiting new talent. Duncan emphasized the importance of leadership in both finding the talent and developing a future vision.

"You've got to have a firm leadership that is open to that and helps build that. Even if they're getting assistance from the vendors and the distributors at the firm level, if they're not open to it, they're going to struggle and they may not survive," Duncan said.

ArcSource Consulting's Monk agreed that finding the right talent is a challenge, especially in the San Francisco area where his company is based, but he knows that it's a key to future growth.

Meanwhile, Cosentry's Hokamp said a transition can't be accomplished by new talent alone and that the company's heritage and recent key acquisitions have helped grow the team over the years.

The big question becomes as the business model transition continues is whether the solution provider model still be a viable one. Channel chiefs answered with a resounding "yes."

"How much opportunity do you think there is? I think it's limitless," Duncan said. "I think the bigger question for the partners is where is the ideal home for me? What skills do I have? How do I move into this new world in a way that is profitable and good for my clients so that I can see my future?"

The channel has proven that it is resilient, Dell's Vitagliano said, and he expects this transition to a services business model will be no different.

"People are going to come in and out. The names will change, the faces will change, but at the end of the day what matters is somebody providing value in the ecosystem and the truth is [solution providers] do," said Vitagliano. "They're providing tremendous value in the ecosystem. They've been doing it for, as I say, 30 to 40 years, and they'll continue to do it. If they weren't, 75 percent to 80 percent of what gets sold into the marketplace wouldn't be going through them. ... It's as simple as that."

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