Johannesburg, 25 May 2017
South Africa's technology distribution industry should prepare itself for complete disruption in the next few years as new technologies such as the 3D printer and the Internet of things (IOT) reach an inflection point and as cloud computing and as-a-service business models change how end-users buy technology.
That's according to Anton Herbst, group strategy, Tarsus Technology Group, who says that one of the major challenges facing distributors, vendors and resellers alike is balancing the need to prepare for tomorrow's game-changing technologies while protecting traditional areas of the business.
"Right now, we're watching growth in commodity businesses such as servers, PCs and printers flatten out or even slow down, yet we expect to see exponential growth from the next wave of disruptive technologies," says Herbst. "At the same time, we're seeing the convergence of the telecoms and data centre sectors accelerate. The products we sell are changing, as is who we sell them to."
At this point, however, it not clear how trends such as IOT, artificial intelligence and 3D printing will play out and the growth has yet to come, says Herbst. Against that backdrop, most distributors, resellers and vendors are pursuing diversification into new, niche businesses as well as scale-up mergers and acquisitions to defend and grow their businesses.
Completing the technology stack
One international example is Dell Computer's acquisition of EMC to round out its technology stack by adding stronger storage products to the portfolio, as well as to bulk up its scale. Closer to home, Tarsus has diversified into information security and cloud enablement in recent years to positon itself in higher margin, faster-growing businesses that complement its volume distribution business.
The reseller business, too, is changing, though perhaps not fast enough to keep up with the evolving needs of end-users, Herbst says. "Customers are telling the industry that they need the optimal mix of technologies and services to meet their goals, whether these are on-premises data centres, public cloud, private cloud or hybrid cloud," he adds.
"Yet there are too many resellers that can only offer them one option rather than a complete solution that blends them in a way that works for the business. We need channel partners to be able to go customers and say, 'Here's an agile IT platform that will address the challenges you face and give you the business services you need'."
As a result, we're seeing large systems integrators consolidate a wide range of capabilities and businesses in their stable. At the same time, traditional value-added resellers are needing to build up their integration skills and managed service providers from the telecoms industry are also moving aggressively into traditional IT.
Incremental vs exponential growth
"We can break our own business into two broad categories - those that will grow incrementally and those that will grow exponentially," says Herbst. "Our traditional incremental volume business is growing in a more predictable way. Here we can focus on expanding in a controlled way and on enhancing earnings through scale and efficiencies. But the exponential businesses are evolving in ways that are more unpredictable."
Herbst says that the challenge lies in the reality that investing in the technologies of the future is expensive and the returns are uncertain. Often, the channel skills and ecosystem to support them do not yet exist. One needs to invest in rare skills and be patient and courageous.
What's more, the channels to sell new technologies may not exist yet - for example, traditional IT resellers might not have the skills to sell IOT devices into vertical markets such as healthcare and transport. At the same time, there could be potential to work with new sorts of channel partners, for example, security companies or care companies.
This was the case when companies first started dabbling in the cloud in 2011 or so, before growth accelerated three or four years later, says Herbst. The investments paid off, but they needed to be nurtured. "You're making a bet on new technologies and new channels to market," Herbst says. "Companies that don't do so face being left behind as the market changes."
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