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IT resellers: Disruptive or Disrupted?

As IT continues its evolution towards a more integrated ecosystem of applications and infrastructure, the very nature of infrastructure platforms will change. Higher technology tides float all boats, and that will reduce the gap between the best of breed and the good enough. The result will be a shift in how people think about infrastructure.

When good enough becomes better than enough, the key purchasing criteria shift from performance and features to price and convenience. This is a huge part of why there is so much energy around merchant silicon and white box. But much like a rising technology tide floats all boats, so too does a rising pricing tide. What happens when everyone gets more or less the same pricing advantages from a narrow set of common components?

Price, convenience, and integation

The answer is that what was once price and convenience becomes more about convenience. This favors integrated solutions. But where does that integration come from?

In a best-of-breed world, integration is provided in large part by systems integrators and resellers. But when integration is no longer an afterthought but a leading differentiator, it only makes sense for a small number of mega suppliers to handle integration on their own. Companies like Oracle already do this on the enterprise applications side, and we should expect that as infrastructure and applications collapse, IT suppliers will expand this practice.

This is actually a fundamental shift that has huge ramifications on lots of companies that have built their businesses around this best-of-breed model. If, for example, Cisco gets into the integration game and bolsters their services business in a meaningful way, where does that money come from?

Resellers and integrators

Net-new IT spend is never created. Whenever one market emerges, it does so at the expense of something else. IT budgets track much more with GDP than with the emergence of technology. So if Cisco and the other major suppliers start taking new services revenue, that money has to come from somewhere. The losers in this transition are those who provide that service today.

So now imagine the reseller world.

As the networking landscape heats up, it makes pricing far more competitive than in the past. This makes every point of margin that much harder to go after. Competition is fierce. And if everyone is selling more or less the same kit, competition in the reseller space becomes more about relationships and entrenched business than anything else.

For smaller resellers, this should be terrifying. It means that new business is increasingly hard to come by, and over time, the mega suppliers will be chipping away at the edges. Who will the first targets be? It seems unlikely that anyone would upset their largest resellers first (the disruption to revenue is enough of a deterrent), but what really protects the legions of smaller partners?

The answer is as obvious as it seems: nothing.

Now, this doesn’t mean the reseller space is a dead man walking. It just means that resellers need to be aware of the macro changes in the industry, and they need to take deliberate steps if they want to do more than just survive this transition.

Enter SDN

The best part about technologies like SDN and NFV and virtualization is that they effectively allow resellers who are in this difficult predicament to expand the product catalog. There has never been more competition in the infrastructure space, and this allows resellers to plot their strategic courses: either align with the mega suppliers if you think you will be one of the ones who survives there, or open up the catalog and align with other technologies.

This brings an interesting strategic angle into play. While the Third Epoch is certainly coming, it will take time for vendors and customers to fully make that transition. And the resellers and integrators need to both sell today and plan for tomorrow. This means that there is a vulnerable attack surface here.

In the enterprise space today, resellers act as all of: distributor, support, services, and recommendation engine. This last one is the most fascinating. Resellers are basically recommending architectures to the enterprise. If these resellers undergo a change in how they view their own business, those changes can ripple through the industry.

The bottom line

This means that resellers are both Cisco’s biggest advantage in the switching space as well as their biggest threat. The outcome here is anywhere but certain for individual players, but disruption will force often unpredictable behaviors. The question we ought to be asking might not be about disruption as it relates to the vendors; instead, the more impactful question could be which resellers get disrupted. And which ones will choose to be disruptive?

[Today’s fun fact: Neck ties were first worn in Croatia. Such gentleman in Croatia.]

The post IT resellers: Disruptive or Disrupted? appeared first on Plexxi.

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More Stories By Michael Bushong

The best marketing efforts leverage deep technology understanding with a highly-approachable means of communicating. Plexxi's Vice President of Marketing Michael Bushong has acquired these skills having spent 12 years at Juniper Networks where he led product management, product strategy and product marketing organizations for Juniper's flagship operating system, Junos. Michael spent the last several years at Juniper leading their SDN efforts across both service provider and enterprise markets. Prior to Juniper, Michael spent time at database supplier Sybase, and ASIC design tool companies Synopsis and Magma Design Automation. Michael's undergraduate work at the University of California Berkeley in advanced fluid mechanics and heat transfer lend new meaning to the marketing phrase "This isn't rocket science."

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