Margaret Adam (Associate Vice President)
Andreas Storz (Research Analyst)

Most technology vendors pursue some kind of indirect (channel) strategy in Europe to help them implement and support customers at scale, penetrate new market segments, provide additional support in countries and regions where language and culture demand it, and to enhance and extend on their core technology products. As such, partners play a critical role in the European IT industry, a role that has never been more crucial as all companies – big and small – grapple with both the immediate implications of COVID-19 and the longer term recovery of the European economy, where technology will play a critical role.

Over the past few weeks, IDC’s partnering ecosystems analysts have been reaching out to the partner community in Europe to get their perspectives in terms of what it means to their business and what kind of operational and strategic responses they are pursuing to ensure they can continue to support their customers and preserve business continuity.  We have done this through a recent session of our IDC European Partner Advisory Board and ongoing in-depth interviews with a variety of partners.

In this blog, we explore some of the preliminary findings. We explore in more detail on this webcast: COVID-19 and the Partnering Ecosystem.

What are the key takeaways from the COVID-19 crisis for the European partner community?

Next-Gen Partners (Thrivers) More Resilient

Partners that have adapted their businesses and focused on their own digital transformation are in a better position to help their customers and adapt and respond quickly to changing needs. Those partners with a high share of recurring revenue, expertise in cloud (and associated technologies and services), workplace modernization and well-established customer-success functions are more resilient to the short-term (and even medium-term) business impact.

Diversified partners have been able to offset some of the impact of COVID-19 through smart working (e.g. collaboration, cloud, mobility, security and VDI) and new services lines such as business continuity and remote-working support services.  Their work and investments over the last few years means they are well-equipped to help their clients’ businesses function during the crisis.  For many of these partners, the impact of lockdown has been less severe, with a steady stream of recurring revenue to cushion the blow to any lost project revenue.  Many are equipped to service and manage remotely through investments in tooling and services automation, but also by being agile enough to shift resources as needed.

Example: A CEO from a UK-headquartered cloud partner explained “working on a worst-case scenario of no net-new business for 2020, we’re still okay – two-thirds comes from recurring (subscription) revenues“.  Whilst another was able to reallocate key pre-sales, consulting and new business resources into its customer success team to bolster up resources in the areas where they needed to quickly.

First Wave:  Flexibility and Agility

For many partners, the last weeks were focused on crisis response, particularly in supporting customers as they aggressively moved to remote working and related policies.  Many felt that a lot of their customers were ill-prepared, and this meant demand for laptops, devices, peripherals, collaboration, cloud and VDI solutions and related services has seen a significant increase.  This has offset (to some extent) the short-term impact of delayed or canceled projects.  However, partners have had to be very flexible in this time of crisis, with many customers asking for financial flexibility and requests for support outside of contract scopes.

There has also been a significant impact in terms of the logistics associated with this spike in demand, not only from a product supply perspective but also from a last-mile perspective. Most partners IDC has spoken to are being flexible, agile and also, taking on a fair bit of financial risk, taking the view that helping serve their customers in the short-term, will pay dividends long term and is simply the right thing to do in a crisis.

Example:  One large multi-national VAR described how they were getting orders in the magnitudes of 1000’s for laptops, which not only needed to be staged but also delivered to 1000’s of home addresses, many of which were in areas of total lockdown and further required proof of delivery (signatures) for finance and leasing agreements which was extremely challenging.  Another, the COO of a large services-led partner described how in the first week of lockdown in the UK, they experienced a 50% surge in support tickets. Whilst another described how “we’ve shifted our emphasis from “sell” to “serve” and many customers are “asking for financial favors.”

Second Wave: secure enterprise collaboration, business continuity, shorter more flexible contracts

The ‘first wave of collaboration and mobility’ is currently underway to support organizations’ forced shift to remote working in response to crisis mitigation measures, but European partners expect a second wave to follow shortly – and they are already gearing up for it. While the current wave is primarily short-term and reactive, partners anticipate a second wave will be necessary to fill gaps and unify isolated measures as some of the current practices around collaboration “will stick” and “we won’t simply go back to the old”. More forward-looking and proactive in nature, its focus will be on increasing security, setting strategy for business continuity, as well as shifting to shorter, more flexible contracts.

Example: A large reseller emphasized how they are already preparing for increased security requirements around collaboration tools. Another cloud-native systems integrator, described how they announced new, smaller, more flexible consulting offers for business continuity assessments, providing the first consulting engagement for free to help customers in the short term.  They are also anticipating demand for shorter terms with respect to managed services contracts.

Helping Employees

Partners are prioritizing the health and well-being of their employees. Most IT companies are more used to working remotely than their customers, but what had been a convenience suddenly became a necessity and partner offices remain closed for the most part.  Some partners are not renewing leases on their office space and shifting to remote-only working.  All support services have needed to entirely switch to remote delivery, even if the customers preferred support on-site. European partners also prioritize employee retention, and many focus on investing in their people by offering training and upskilling during the crisis. In fact, while cash preservation is key for partners, just as it is for customers, many partners plan to continue hiring through 2020 to secure talent and bring themselves into position for the recovery.

Example: One solution provider explained how the launched new initiatives like “daily brain food” and communication structures to support the mental well-being of its people and to offer resources to manage the current lockdown and forced remote working situation. Another partner discussed how some clients still asked them to go on-site in late March, but the partner refused citing its strict work-from-home policy in support of Covid-19 mitigation and employee health.

Helping the Community (#CoronaKindness)

Many European partners are engaged in #CoronaKindness activities to give back to the community and support relief efforts through their expertise in technology as they believe it is “the right thing to do”. In some cases, partners are doing this jointly with their vendor partners who are supplying technologies free of charge to support (non-commercial) Covid-19 response efforts. Other partners are deploying “freemium” offers during the crisis to support organizations that were ill-prepared and are struggling in the lockdown situation, especially SMBs.

Example: One UK-based partner is offering free configuration and development services to the UK government to build apps that support the Covid-19 crisis management. Another cloud transformation specialist is currently offering free deployment services and webinars around collaboration tools and has a launched new website to help people adopt remote working solutions.

Key Takeaways for Vendors

One of the challenges facing vendors is that the IT partner ecosystem consists of a diverse mix of partners including software and IP-centric partners (e.g. ISVs), services-centric partners (e.g. Managed Services Providers, systems integrators, consultants), specialist partners (e.g. start-ups and OT providers), and volume partners (e.g. distributors and value-added resellers), all playing a different role and supporting customers in different ways.

The sheer diversity of services and activities provided by the partner ecosystem means that there is no “one-size-fits-all” strategy to successfully support and enable these partners in their day-to-day business.  Critically, it also means there is no “one-size-fits-all” response strategy in a crisis, such as the COVID-19 pandemic we are experiencing right now.

However, there is some consistency in what partners are asking for from their vendors right now:

1. How can you help me with the targets I have and protecting tier status? Many vendors including Microsoft, HP, Lenovo, Amazon Web Services and others have announced measures to extend tier requirements and relaxing of some commitments. However, on the whole, partners have felt that there has been too little communication, too slow from most of the vendors they deal with as one partner noted “we’re waiting for them to work out how, practically, they can help us.”

 

2. How can you help me with cash flow? As many customers are asking for flexibility in credit terms, partners are hoping vendors will extend this to partners too. Most are reasonable about this expectation, but as they take on more risk, many partners will be accelerating these requests.  Additionally, the majority of partners IDC have spoken to believe their will be an upswing in demand for financing, leasing and other OPEX-based models.

 

3. How can I use MDF now? As most events are cancelled, partners have had to shift marketing priorities.  In some cases, partners have even stopped all marketing activities as they are concerned about setting the right tone and not appearing opportunistic.  Whilst many vendors are extending deadlines for MDF, partners are also requesting more flexibility in how they use the MDF, for example, being able to use it for charitable work, training and customer success activities.

Setting the right tone was a common theme in these discussions, most partners want to do the right thing and it is a balancing act being able to go above and beyond in supporting their customers, whilst balancing that against the need to support their own employees and trying to mitigate any financial risk on their own businesses.  What they most need from their vendor partners is transparency and empathy. Vendors who provide this to partners, will garner greater loyalty than those that don’t.  The same is true for customers.  Vendors and partners that are able to communicate and support their customers in a transparent and empathetic way will be those that thrive once business returns to “the new normal”.  Customers will remember.

For more information, please contact Margaret Adam or Andreas Storz , or drop your details in the form on the top right.

If you want to know more about how COVID-19 will affect the technology landscape, see more resources here.

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