On Thursday 4th June, Dicker Data hosted an industry exclusive webinar, facilitated by Alan Nehemia, NZ National Sales Manager at Dicker Data on Preparing for post-COVID-19.
Keynote speaker Mark Iles, Executive Consultant and Industry Analyst, Tech Research Asia led the session on the road to recovery, looking at what’s next for New Zealand reseller partners as we move towards a post-pandemic phase, identifying the key challenges, opportunities and the significant need to adapt and thrive.
Crisis Mode
While some sectors enjoyed a buoyant quarter, others have been decimated. Current Q1 2020 results from more than half of companies on the S&P 500 saw an average one percent sales growth and eight percent earnings decline on average, much lower than previous quarter’s earnings.
If you examine what happened to land us where we are today, many partners went into crisis mode, scrambling to enable business continuity for themselves and their customers and then those customers hit the pause button.
While the industry is better protected with business continuity bolstered by remote work enablement, industry trends suggest things will get worse before they get better. Predictions indicate IT spending will be down around ten percent in New Zealand.
Key Challenges
During the webinar, six primary challenges impacting New Zealand partners were identified:
- Unpredictable revenue:from non-priority projects put on hold, partners are going through the process of recalculating budgets and forecasting cashflow against an uncertain backdrop.
- Payment issues: fifty percent of ANZ partners are looking for alternative funding sources as a direct result of predicted or actual cashflow pressures.
- Low profitability: the strong revenue growth most partners have experienced over the last couple of years, has masked fundamental issues in profitability that now need to be urgently addressed.
- Operational changes: high labour costs and low profitability within the IT sector will drive partners to assess their operational efficiency and look for new, more efficient ways of doing things.
- Cashflow pressures: from delayed payments amid COVID-19, compounding lack of confidence in the channel.
- Workforce rebalancing: the job market is bouncing back with more IT job listings in May than any other category and also represents an opportunity to reskill staff into emerging solution areas.
Time for Change
Business resilience over rules everything. COVID-19 has forced organisations to rethink their business model. To effectively mitigate risk exposure, partners need to conduct a thorough analysis of their business including market and solution focus and put realistic and detailed plans in place including revenue and cash flow forecasts.
The current crisis presents the opportunity to do things differently, package IP more effectively and explore new ways of working. This includes the adoption of SaaS tools, automation, more lightweight and nimble processes. Seventy percent of webinar attendees indicated they are currently adapting their solutions offerings to better align to recent market forces, which is a great sign that we all recognise the need to change.
Speed is the new competitive advantage. Customer engagement will need to become shorter, snappier and more focused with expectations of quicker ROIs.
Partners will need to shift their sales focus to account-based, data-driven, personalised, differentiated and automated contact to engage with customers and drive business. New customer acquisition will get harder, retention and upsell are key.
Mark stated, “There will be a shift in organisations purchasing on value vs. price. The trend is moving to repeatable, bite sized and outcome-based projects. Partners need to be ready for this type of engagement.”
Opportunities
The pandemic environment has intensified the focus on digital. Today, businesses need to invest in the skills to become native in digital. Seventy-three percent of webinar attendees said they plan on investing in workplace skills and development in the next three months, again a great sign that although we acknowledge the challenge, we also recognise the opportunity.
Other growth and opportunity areas include digital workplace, business continuity, collaboration, security, network/SD-WAN, AI, automation, public and private cloud migration and application modernisation.
Interestingly, security is the one category that is likely to still surge in 2020 and beyond. Cloud is another area of growth since the move from the physical office to a virtual way of working takes away the argument for on-premises workloads.
Applications will play a significant role moving forward, including remote process automation and creating strong apps built around containers across both private and public clouds.
In contrast, managed services are a risk area with push back and downward pressure from customers on costs. Mark encouraged organisations to review objectively if this is an area where you can compete if a price war starts. It may make more sense for some partners to outsource the delivery to a 3rd party so they can focus more on delivering higher level services. It doesn’t mean you let the contract go, you just change how you deliver the service.
The new normal is being defined as a faster, more agile, digital, collaborative, strategic, connected, trusting and lower cost world and there are opportunities for those partners that can move from survival mode to growth mode.
In closing, I found it particularly pleasing to see 76 percent of our kiwi partners feel optimistic about their business prospects for 2020 from our poll. With this in mind, Dicker Data’s customer-first approach means we are proactive in engaging with our resellers and allows us to dynamically shift with changing market conditions as we support our partners to step into Level 1 today, and come out of COVID-19 stronger, transformed and more resilient than when we went in.
