State of the Mart 2012 Survey - Part 2 (Technology Outlook, Switching Strategy)
By Shantheri Mallaya & Yogesh Gupta on Jan 31, 2012
ChannelWorld’s The State of the Market 2012 Survey brings to light the market realities being faced by enterprise partners in India. The overall sentiment shows that a tough year is imminent. Will domain expertise help partners to stay above water this year? Read on Part-2 of our special report.
Technology Outlook : Cloud to Rain Business
It’s quite an uphill task for solution providers to grasp rapid technology changes across the IT world. ‘Stay ahead of technology curve’ is the name of the game for a successful enterprise solution provider. It is undoubtedly a huge asset for an enterprise partner in today’s tough market conditions and competitive ‘partner’ landscape.
While partners constantly strive to offer the relevant and latest business model (On Premise/Virtual Hosted/Cloud), enterprises have become more prudent in terms of TCO and ROI for every dollar spent on IT solution. Enterprises today want fast, flexible and cost effective IT solution.
Also Read : State of the Mart 2012 Survey - Part 1 (Market Reality, Partner Issues)
Testing the Cloud
Cloud hype across the technology landscape worldwide and in India. It is therefore no surprise that more than half of respondents (60 percent) in the survey wanted to explore cloud solutions at their customer sites in 2012.
Bangalore based Webcom Information Technology has formed a development team for developing business applications. “The two key areas would be RFID solutions and cloud solutions. The cloud will be hosted kind of applications mainly targeted at SMBs as the model would be high volume and monthly billing based,” informs Anantharam Varayur, MD, Webcom Information Technology. We are developing solutions which will enable enterprises to put critical applications on the cloud. Being a niche segment that we are targeting, we cannot reveal much at this point,” he says.
Mikroz Infosecurity at Delhi operates mainly in hardware, security and cloud. The hardware we work on refers to the part/s of the solution assisting the overall information security, etc., that we need to build, clarifies Ashok B. Shiroor, MD, Mikroz Infosecurity. We are evaluating solutions to be able to offer cloud based storage, specifically for desktops and mobile devices, something we have been getting a lot of queries for, he adds.
“The best part of cloud is that it can be offered worldwide across the globe. The shortest route is conduct a POC for cloud at existing and loyal clients as they trust you and it is easier to explains them benefits of Cloud model,” says Varayur.
SM Networks & Solutions is keen to promote “cloud solution” this year. “Our team is constantly undergoing training with major vendors who offer cloud solutions. We will soon start marketing the same to enterprise customers,” says Manmohan Sharma, Director, SM Networks & Solutions.
Survey Methodology
ChannelWorld administered the third edition of the ‘State of the Market Study’ online in November and December 2011. The 107 respondents include Systems Integrators, VARs and ISVs. About 63% of organizations have individual annual revenues of below Rs 50 crore. all responses were gathered using a secure server with all individual data kept confidential. The degree of error is +/- 4.6 percent at a 90 percent confidence level.
Hardware versus Software
The emergence of cloud and virtualization in 2012 translates into lesser hardware spends by enterprises. More than 90 percent of polled partners felt cloud-based solutions will see added dollar spend by Indian enterprises.
According to Sujeet Narula, Director, Associated Business Computers, “The market for commercial product sales is getting squeezed due to cloud solution entering in the country. Smart phones and tablets are eating away the space of PCs & notebooks (which is definitely a loss to commercial Channel Partner).”
More than 31 percent of the respondents are eager to test the waters with Business Application Software. Developing Business Applications and virtualization are main focus technologies for Webcom Information Technology. “We are also developing small apps that will work across Android platform. Mobility and Cloud all tie back to the future IT strategy of an enterprise, and we are making sure we are present in that segment,” says Varayur. “With thousands of tabs, handheld phones sold in the market, we are keen to explore new opportunities,” says Varayur.
While networking and security show continued demand, 26 percent of respondents plan to focus on virtualization this year. “On the virtualization front, though we are already providing solutions to facilitate it, we are not into (or plan to be in) the space, as we believe this is a space for large SIs or SPs,” feels Shiroor at Mikroz Infosecurity.
For 23 years, Webcom is into IT infrastructure, which ensures top line revenues through repetitive cabling, servers, etc. They have reduced their hardware sales forecast from 60 percent last year to 40 percent in 2012. “We would not reduce this business as it is our bread and butter. But we want to make use of new trend of cloud and mobility,” clarifies Varayur.
“We expect significant addition of revenue from storage and virtualization as these would be annuity based services compared to our present, at a standard 100 percent first year growth to 10–30 percent subsequent year model,” he says.
Always in Demand
Security and storage ranked three and four in terms of dollars spent on IT budget as per partner community. Since these technologies form the backbone of IT infrastructure amidst environment of ‘data explosion’ and ‘data breaches’, partners expect good number of deployments across these two spaces.
Mumbai based SM Networks & Solutions which works with Cisco, Cyberoam, McAfee, Motorola and Ruckus, is betting big on security. Manmohan Sharma, its director says, “Our major focus would be on security and wireless contributing more than 60 percent of company revenues in 2012. The strategy is to reach maximum upper mid market and enterprise customer with our core security solutions this year.” An IT infrastructure services provider
Sigma e Solution based out of Ranchi is emphasizing on storage, security and network products. Rishi Pandey, Director, Sigma e Solution reasons, “Because of huge increase in digital data, the need for its storage and security is big opportunity for us.” We are also focusing on mail/messaging /active Directory with Microsoft Technologies & Open Source too, he says.
Cloud and Virtualization are clearly the two technologies about which the partner community is highly optimistic this year. Virtualization is picking up at a steady pace in India. But the big question remains.
Are Indian enterprises mature enough to ride the cloud wave in 2012?
Cloud Yet To Pick Up In A Big Way
An ISO 27001 certified solutions provider, Clover Infotech offers end to end solutions and professional services. Javed Tapia, MD at Clover Infotech, speaks on promising technologoies for 2012.
How do you see technology landscape for Clover Infotech in 2012?
We have enormous focus on BFSI which has not shown slowdown in terms of investment. Telco and retail are other main verticals. Cloud Computing is more of a buzzword which is couple of years away for India. While it is a good concept, there is lot of peripheral development to be done. SaaS itself has yet to mature in India. One of our customers is experimenting with Cloud for small peripheral applications but nothing on the core side.
If not Cloud, then what’s the leapfrog growth for you?
The big investment we are concentrating is around middleware. There is renewed interest for Oracle ERP applications including core applications, financials, purchase and others. CIOs want to rationalize these disparate applications across their infrastructure. Consolidation and virtualization is on our radar. We see enterprises getting comfortable with ‘Remote’ model than ‘On Premise’. Through our NOC at Pune, we grew ‘Managed Services’ business more than 200 percent in past six months.
Most solution providers are exploring foreign markets. Large SIs like Wipro, TCS are now focusing on Indian market. Any plans to go international?
For Tier 1 companies, Indian markets are ‘need to have’ than ‘must to have’. For us; it is our bread, butter and jam. From client’s perspective, servicing only Indian market is a huge differentiator for us against large vendors.
Apart from Mumbai, Pune, Bangalore, Chennai and Ahmedabad, we are opening branch in Delhi and Kolkata this year. We expect to grow 65 -70 percent in the coming fiscal.
Switching Strategy : What’s the Plan of Action?
Where there is business, there is strategy. A vision of the future is essential to drive an organization to its potential. The year gone by saw a mélange of the highs and lows at the IT solution provider end – business garnered, business lost, technologies that worked, and those that didn’t. In a year that saw a slowdown setting in, it would be anyone’s guess about the close calls that companies faced.
Survey Methodology
ChannelWorld administered the third edition of the ‘State of the Market Study’ online in November and December 2011. The 107 respondents include Systems Integrators, VARs and ISVs. About 63% of organizations have individual annual revenues of below Rs 50 crore. all responses were gathered using a secure server with all individual data kept confidential. The degree of error is +/- 4.6 percent at a 90 percent confidence level.
The Services Pitch
The State of the Market Survey 2012 is quite indicative of the plans businesses want to look into over the next 12 months. About 26 percent of the respondents opined that their top go-to market strategy would be to offer more services on a recurring revenue model. Not too different from the responses of partners since last year, it has been a while now that services have assumed paramount importance in the larger scheme of activities, with a distinct shift from the product game. Companies now look at services as an end-to-end package that they offer to customers. This not only works out in favour of the customer, but ends up helping the partner organization to benefit in the long term. More and more partners are evidently jumping into the services bandwagon.
While the large enterprises and the smaller companies are grappling to achieve that delicate balance between what processes they would want to retain with them and what they would want to outsource to external service providers, it is time for solution providers to step in and offer just the right fit. Says Sanjeev Gupta, MD, Albion Informatics, “Given the current situation, hosted services is the future and more so in the cloud.” With greater confidence instilled in the viability of the cloud, it seems quite apparent that solution providers are pitching this as one of their top offerings to customers, with guaranteed returns of recurring revenue.
Gupta however, adds a rider that the SME is still a major focus for cloud since the large Indian enterprise is still warming to the idea, unlike the more mature markets in the North Americas and Europe. Albion has separate service business lines, namely, infrastructure built services, managed services and cloud services. While Infrastructure and Managed Services (which the company hosts on its own platform) has been the mainstay of this solution provider till date, it seems quite apparent that Albion is all set to take the leap to cloud managed services, which the company started on a scale in July 2011. Albion also hopes to see a lot of traction in IaaS in the coming year. Says Gupta, “Contrary to popular opinion, IaaS has showed distinct signs of picking up.”
Agrees Ashutosh S Karkhanis, Director of Pune based Askari Infotech, “Hosted services through a quarterly or monthly billing help us to gain insight into customer requirements. As a result, we are able to add value to the constantly evolving needs of the customer.” Askari Infotech is scaling up its hosted services model with a new NOC in Pune. Measuring around 2500 sq ft, this datacenter will service both domestic and international clients of the solution provider. Given this, Askari seems to have pulled out all the stops to ensure that managed services become a significant topline contributor to its kitty this calendar year. Says Karkhanis, “Hosted services currently generate about 10-15 percent of our revenues; by 2014, we hope to take this figure to 50 percent.”
Vijay Mohan K, Country Manager, Miti Solutions, feels that most customers are moving their email and web servers to the cloud, but the level of awareness among the partner community about several key cloud-related issues such as security is not really high. He adds, “There has to be an overhaul in the way partners understand the cloud and pass on their conviction to the customer.”
New Wine, Old Bottle
A logical survival and growth strategy for any organization would be to retain existing customers. And this can be achieved only if there is something new on the platter for the customer. About 24 percent of the respondents on the survey stated taking new concepts to customers would be a top priority for the year. Says Karkhanis of Askari, “Introduction of new technologies keep the momentum between us and the customers going at an even pace.” Askari is looking at pitching UC in a big way to its smaller and medium sized customers in the IT/ITES and banking sectors, to name a few. Interestingly, Askari is not aligning with Cisco but is going with Microsoft, citing that the former’s UC solution as more suited for the larger enterprise as compared to the latter’s UC offering which works well for the smaller customers. Karkhanis claims that there has been greater acceptance for UC in the last year or so, and that this is just the right time to go ahead and talk about it to customers.
On the other hand, many solution providers now want to innovate in their services and consultancy approach in a manner that would help customers improve their overall business processes. At least 18 percent expressed that one of the chief business goals would be to help customers leverage technology to innovate in their industry and about 17 percent felt that they ought to focus on improving customers’ business process. Says Rahul Kanodia, VC and CEO, Datamatics Global Services, “Our goal is to improve enterprise productivity. We look at business process and see how we can achieve this by automation.”
The company believes that their approach of mapping and improving customer process would help create differentiators from others and move to the big league in the short and long run.
As each company evolves its own USP and winning formula, it would be interesting to watch the trends that emerge.
Know Process, Increase Productivity
Neha Jalan, Senior Associate, AMI-Partners, feels that strategies and opportunities for the partner companies to grow are still aplenty.
It seems to be a services story for solution providers. Is the growth curve likely to be consistent this year too?
Yes, we have noticed that the partners who moved to managed services and the cloud saw their revenues doubling, as compared to those who did not. So, this is a huge opportunity to capitalize on. Yes, hosted services may not be very high on margins, but present opportunity in terms of incremental revenue depending on whether they resell, customize and host, only customize or only resell. The first model entails a lot of bandwidth and know-how. In the long run, the results begin to show in terms of toplines.
What is the SWOT for partners with cloud?
While the cloud seems to be a very rich proposition to talk about, the success of the public-private or the hybrid models really depends on the customer industry vertical, the kind of investments that the customer might have already made and what he might want to hold on premise. Partners have to possess thorough knowledge of the proposition they intend to make, in order to convince the customer.
What should IT solution companies ideally do?
Customers are increasingly using technology to increase productivity. While use case scenarios are good, they don’t always work. Ideally, partner companies should be proactive in giving free trials, convince the top management about the viability of the technologies being offered. Partners should also step in as consultants and help organizations to understand the impact of mobility and how productivity can be enhanced in the case of a huge mobile workforce.
