Channel Partners Stand to Benefit from "Clownsizing" Trend

Virtualization and datacenter transformation are key technologies VARs can use to help make their customers' businesses more efficient, says Al Senia, ITChannelPlanet managing editor.

November 13, 2008

Al Senia

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There's plenty of caution among VARs right now about the state if IT spending and, more specifically, the willingness of small and mid-sized businesses to make new technology investments going forward. That's why it's important to stick to a few economic fundamentals, even in the midst of an economic slowdown.

These basics aren't rocket science. Past downturns have shown that companies will continue to spend money on technology, as long as a strong cost-benefits analysis shows a viable return-on-investment. They'll spend money to save money. Also, they are more willing to look to outsourcing of all types when things slow down because corporate America these days is all about restoring profitability by cutting jobs (also known as "clownsizing.") That's why everyone from General Motors to Yahoo to Ticketmaster has jumped on the clownsizing bandwagon. Just like in past downturns, in about six months, these companies will discover that there's no one left to do those mundane chores like handling IT needs and developing IT strategies. They'll turn to outsiders – quite possibly, their local VAR – to figure out that strategy.

However to be able to capitalize, channel partners need to become trusted advisors to their business customers. They need to be up on new technologies, especially those that fit the clownsizing equation. They need to understand the specifics of their customers' business so they can recommend effective remedies. And they have to make sure the businesses really trust their ability to handle IT challenges.

Areas such as the datacenter, virtualization and managed services are drawing plenty of attention in the channel right now because they all promise potential big cost savings to businesses.

Distributor Ingram Micro recently hosted its VentureTech Network VAR conference, a networking event for the company's most promising channel partners. There were plenty of workshops designed around emerging technology areas such as digital signage, security, unified communication and, of course, virtualization. The main thrust of the virtualization presentation was that the latter technology "will have the biggest impact on businesses in the 21st century."

Ingram isn't the only company playing this tune. Rival distributor Avnet Technology Solutions rolled out last month a new virtualization solution for VARs around VMWare, noting that market is experiencing "explosive growth." And just a few weeks ago, IBM announced a new global program that helps its channel partners focus on datacenter transformation.

Speaking at the Ingram event, Christina Richman, IDC's research manager for hardware channels, told VAR attendees that they are going to have to change their business model "to grow profitably in these lean times." The good news, she noted, was that the IT business isn't crashing the way it did in the last downturn; software sales are growing about 5 percent this year and services still look healthy, too.

However, it's the potential for datacenter transformation that really rocks the channel because the number of server system sales has gone from 5 million in 1996 to 30 million worldwide today. The cost to maintain all these servers is rising dramatically, and most companies are ill-equipped to do it. Meanwhile, an effective virtualization strategy that reduces the number of servers a company needs in its datacenter can save substantial energy, maintenance and personnel costs. Richman estimates companies can save 50 cents on every dollar spent on virtualization just in cooling and energy costs. This is why so many channel vendors are pushing virtualization strategies on their channel partner base. It's kind of a no-brainer because channel partners can demonstrate a decent ROI equation.

"Virtualization is the new consolidation story," Richman told the VARs, "Change the game to be a trusted advisor" to companies. She suggests showing them how they can accomplish more with less through technologies like virtualization, which also happens to have a beneficial "green IT" impact in reducing energy costs.

What this really means is that VARs need to get a lot more proactive in getting under their customers' business hoods and tinkering with the sputtering engine. Somebody has to do it, and with all that clownsizing going on, you can bet it isn't going to be your customer.

(Al Senia is managing editor of ITChannelPlanet.com.)

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