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Hardware-only is dead (but long live hardware)

In the post-hardware-only world, distributors can rearrange their business models to be service-orientated and be the nexus for the hardware-software-service relationship.

Johannesburg, 20 Mar 2020
Read time 4min 50sec
Bridgette Kemp, Business Unit Manager, Axiz.
Bridgette Kemp, Business Unit Manager, Axiz.

Hardware once ruled digital technology. But as software makes its ascendancy, the place of hardware in today's market is not as clear as it once was. The old chestnut, that buying a renowned brand doesn't get you fired, doesn't resonate as much anymore. Even though customers appreciate the value of specific brands, that is now a much smaller factor in their decision-making.

"A lot of the value you'd get out of hardware depended on sweating it," said Bridgette Kemp, Business Unit Manager at Axiz. "But that model was already expensive and is now more so because refresh cycles are increasing. A large enterprise, such as a bank, would have TCO models to rationalise those costs, but that's not true for most of the market."

Such cost pressure is evident from how quickly organisations changed tack when the opportunity arrived. Hybrid cloud, software-defined solutions, and everything-as-a-service (XaaS) led a new paradigm in the market, where you use what you need. You don't have to justify sinking costs into performance overheads, which is precisely what asset sweating is.

Sweat the small stuff

Sweating still happens, but the market wants to do it smarter. It's not accurate to say that the market has moved entirely to service and consumption models. This trend was briefly the case in the past few years. But as the demeanour and possibilities of public cloud and XaaS became clear, hardware became more appealing.

Yet this isn't hardware in that traditional big-bang, box-dropping sense. Instead, hardware is now much more nuanced. Hyper-converged infrastructure is a good example. It combines hardware engineering, software-defined features and bundled services to create a new type of box-dropping: hardware that is already intelligent and primed to do its job. For example, you can't co-locate an edge data centre that should be on site. But you can drop an HCI box there, ready for action.

"Today's hardware is allowing customers to use their choices better," said Kemp. "It's a much more project-driven space, and hardware solutions are often looked at during complex problem-solving."

We can find this paradigm of hardware all over the industry. IOT devices are an emerging class of hardware that sits far removed from the big-band era of hardware procurement. There is also a trend to use hardware for building new products. Large channel providers are building their own services on top of hardware they procure and manage. Those services are then sold to customers.

In effect, box dropping hasn't disappeared. But its gravity has shifted deeper into the channel with end-customers assuming less of its risk.

Hardware's opportunities

How does the channel market fit into this? Resellers are arguably under the most pressure, as they often relied heavily on large hardware sales. The same, though, can apply to systems integrators and distributors. How should the channel adjust to a post-hardware-only world?

"Customers care about the service they get, as well as the services they pay for," Kemp explains. "That's the value conversation that you often hear about. They are also interested in accessing the skills and best practices that come with those services. So a customer might not own the hardware, but they are paying to access it, the services built on it and the skills needed to run everything."

That defines the current market paradigm. Hardware is still part of the mix, but where it is deployed and how it is used will depend on the active business model. Channel suppliers that can offer that mix will win the most support. The ingredients for this model can vary. Some companies only focus on providing a software service, running on their own infrastructure or that of a partner. Others can specialise more on leveraging software-defined systems.

All of these approaches can create economies of scale, stemming from the fact that less hardware is doing more. As software-defined solutions such as virtualisation assert themselves more, scale becomes available as an important success factor. That relates to everything discussed previously. Traditional hardware can't scale; that's why it needs sweating. But new hardware can.

The channel must align with this opportunity, particularly as Africa enters a data centre boom that could become a leapfrog event. The combination of hardware, software and services has never been more apt to the market's needs. This trinity is also why much of the attention is shifting to distributors that can transform, as Kemp concluded: "Distributors have to change to survive in this new market. Fortunately, we are in the right position to offer service and skills support to resellers. Even vendors prefer to offload many of these responsibilities on to distributors."

If you want a short answer to how channel companies can find their place in this new market, the answer lies with the right distributor. In the post-hardware-only world, distributors can rearrange their business models to be more service-orientated and be the nexus for the hardware-software-service relationship.

As they say, nobody got fired for buying IBM. But today that value can't just be about hardware to sweat until kingdom come. It requires much more nuance. Solution providers that can adapt to that reality will come out as winners.

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