Digital transformation, volatile rand leave SA channel scrambling
Digital transformation and the volatile rand were some of the biggest issues the South African IT channel had to grapple with in 2018.
This is according to South African channel players, revealing 2018's major milestones and challenges, as well as their expectations for 2019.
The South African rand is expected to trade at R14.58 by the end of this quarter, according to Trading Economics global macro models and analysts' expectations. However, during the course of the year, the rand price fluctuated, leaving the local IT channel scrambling.
Uwe Brandkamp, sales director at Westcon-Comstor Sub-Saharan Africa, comments that at top of the list of challenges that faced the channel in 2018 must be the volatility in the exchange rate. "Not that it necessarily changed, but the constant and unpredictable spikes (both up and down) has caused our industry to be a lot more cautious in the procurement process.
"I remember there was a change (spike) of around 15% in a single month. For our reseller partners and end customers, it made spending against a budget very difficult."
For example, Brandkamp explains, a R1 million budgeted network upgrade could now cost anywhere between R1.1 million and R1.2 million.
"What we saw was that a lot of customers and end-users then waited for the exchange rate to stabilise before making final purchasing decisions. As a result, we are only now seeing projects that were planned earlier in the year coming to fruition," he notes.
Stimulating IT spend
At the same time, political and economic instability has not helped in stimulating IT spend, and similarly the view of ratings agencies has not led to major IT investments either, says Brandkamp.
He points out that everyone in the channel has been left scrambling for the business that was at the time available.
"Unfortunately, this behaviour continued to put pressure on margins which often led to business being conducted or signed at a low to no margin point, just so that partners could pick up the related services a project may or may not yield."
Furthermore, Brandkamp adds, continued skills shortages and the cost of certification and the maintenance of these has also not helped the channel in 2018.
Nonetheless, he notes that a lot of these challenges have opened doors to new thought processes in how to conduct business in the channel and there has been a shift towards consumption-based models.
"I don't think we will have overcome the economic, political or currency challenges we faced this year in the next year," says Brandkamp.
"This means, as an industry, we will need to keep on the path of continued strategic thinking to ensure we create profitable business for the entire channel. We will also need to keep focusing on addressing the cost of generating available business, something that will remain top of mind in the channel."
For Geoff Garrett, acting chief sales officer at Syspro, in 2018, almost all elements of business went through radical changes in the way they operate, engage with customers and partners, and how they remain competitive.
He points out this is all due to the major changes in the marketplace, but most specifically in the technology space.
"Businesses are now juggling cloud migration, management of real-time analytics, and increasing volumes of data generated by social media, mobile and e-commerce platforms," says Garrett.
"Digital technologies such as virtual reality, the Internet of things, robotics and even 3D printing are impacting on the bottom line of businesses and the choices of customers. Consequently, these changes also have a direct impact on the partners that businesses use. Arguably, the technology landscape is the most dynamic, which has a significant impact on how a business remains profitable."
He believes it is critical that channel partners embrace digital transformation to better fulfil the ever-changing demands of their business customers.
Garrett notes that in the IDC's paper on worldwide IT channels and alliances predictions, the analyst firm discusses the changing partner landscape and how by 2021, at least 30% of the channel will not exist in the format that we are familiar with today.
"New partners are entering the fray and new technologies are changing the way existing partners manage and engage with their businesses and their customers. The lines are blurring between what the customers now need in their enterprise resource planning solution and what resale partners can provide."
According to Andries Janse Van Rensburg, channel manager at Westcon, while the channel is changing as a result of both technology and economic factors, it will certainly not disappear anytime soon.
"For vendors and distributors looking at growing channel partners or implementing a channel strategy, it's important to clearly determine what your partner or channel landscape should look like, what you would like to achieve through the channel, and what kind of channel partner will fit your objectives."
Riaan Graham, sales director at Ruckus Networks Sub-Saharan Africa, recommends looking at the surroundings to understand clients' strategies and objectives.
"Partners also need to get out of their shells and start engaging non-traditional companies as alliances with trusted service providers in different sectors; this will, in turn, give them access to a new revenue stream and clientele."
Janse Van Rensburg and Graham agree that cost, solution initiatives and service will shape the channel market in 2019.
Furthermore, they feel the digital delivery of solutions via an omni-channel commerce model will start to permeate the market, particularly as the channel itself looks for new growth avenues. Lastly, a new approach to marketing will be paramount and out-of-the-box thinkers will assist significantly in achieving sustainable growth, they note.
"There is no doubt that the channel is changing; but every year we see change so it's not change we need to fear. Instead, for the immediate future, the channel is here to stay and while the local market adapts to economic challenges, the Africa market is thriving. Looking ahead, we will continue to see a big focus on the cloud for services, with wireless as the catalyst to making this all happen," concludes Janse Van Rensburg.