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Channel partner ecosystems evolve to support digital disruption

Over the past several months, TBR has seen increased activity and interest around the topic of channel and alliance strategy across our 12 ICT industry coverage domains. While channel and alliance strategy is a pervasive topic, the intensity and tenor of the questions posed recently signal an increased focus around deploying industry-leading partnering strategies to pursue long-term growth.

Some of the common recent questions we’ve fielded from our clients include:

  • We’ve been partnering with global systems integrators (GSIs) for years, but our relationship in this emerging technology or service area is new. What is the right engagement model for this new area? What revenues can we expect? How do we establish a stronger relationship than our peers?
  • Our competition in this new portfolio area has stronger relationships than we do. How do we develop programs, incentives and recruitment strategies to secure partner engagement?
  • What are the right partners to engage with to achieve our objectives in this area? What type of programs, engagement models, incentives, benefits and management structure will resonate with those partners?

While these questions themselves aren’t entirely new territory, the systemic market forces that underpin them are certainly disruptive to partnering models for many ICT providers. The quote below, from TBR’s 1H18 Cloud Applications Customer Research, speaks to how the economics of cloud and digital IT consumption impacts the role of the services partner in applications deployment:

“Partners are still an integral part of almost every deal we do, but most deployments are no longer $10 million to $20 million to get it installed — now [it’s] just about $1 million. Many companies have shrunk their IT departments over time because of cloud, leading to skills gaps, so partners are so important.”

Senior Director of Procurement, Telecommunications

Partners will continue to fill a critical role for enterprise customers and, by proxy, leading technology companies, but digital disruption will continue to shift how vendors think about partner roles. A few ways we are seeing technology disruption impact vendors’ partner programs and strategies include:

  • Self-developing Partner Ecosystems: Firms are creating formal programs and incentives to encourage partner-to-partner relationship development and joint go-to-market activity (i.e., a marketplace ISV engaging with a reseller to jointly support a customer).
  • Partner Stickiness and Specialization: Leaders use partners as a conduit to specialize by industry, use case or region, and are encouraging partners to expand portfolios and enhance industry and/or solution specialization (i.e., cross-training ISV partners as implementers in an industry).
  • Partner Journeys: Vendors are reconsidering traditional partner tier structures and aligning program tier requirements and benefits to reclassify partners around long-term value opportunity versus purely revenue generation.

I’ll be conducting a webinar on Wednesday, April 17 at 1 p.m. EDT that will dive into these trends and others in greater detail. Click here to register for the webinar. For questions on this or anything else, you can contact me at [email protected].

Channel partner ecosystems will evolve to support digital adoption

An exclusive review of TBR’s ongoing analysis of ICT vendors’ go-to-market strategies and Tailored Services capabilities

Shifts in customer consumption preferences and efforts to accelerate revenue expansion in high-growth business segments continue to transform the go-to-market motions of leading technology and professional services vendors. Vendors are increasingly relying on their channel ecosystems to create self-sustaining economies that support their financial and strategic objectives in cloud, Internet of Things, artificial intelligence, digital, and other disruptive technology and services segments. As part of this effort to pursue channel-led growth, vendors are investing in new and revised channel partner programs, structures and strategies, and new partner types and ecosystems are emerging around major technology domains.

Join TBR’s Bryan Belanger and Colin Naples April 17 for a review of:

  • Major recent channel and alliance strategy trends and developments observed across TBR’s technology market coverage domains
  • Expectations for channel and alliance strategy trends and developments across TBR’s technology market coverage domains in 2019
  • TBR’s perspective on the importance of competitive channel strategy benchmarking, as well as recommended best practices for vendors to use in benchmarking competitive channel programs, structures and strategies

 

 

TBR webinars are held typically on Wednesdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous webinars can be viewed anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].

The IoT market has begun sorting itself out in 2019 — a vast improvement from its disorganized past

It has been a wild and chaotic ride for Internet of Things (IoT) vendors, with many placing big bets on IoT in the past and entering 2018 largely disappointed by the results. While IoT will likely never meet the expectations placed on it in 2015 and 2016 — the peak of hype — IoT’s contribution to IT vendor revenue will increase, with IoT ultimately becoming a core revenue driver. IoT, as a technique to solve business challenges through the assembly of technology to drive results, such as predictive maintenance, resource efficiency, value-added services or generally, increase insight, is not going anywhere.

The good news for vendors is IoT is getting a lot easier as the ecosystem sorts itself out. The increase in portfolio focus and partnering is making the market easier to navigate for vendors and customers. Offerings are becoming easier to implement and integrate as vendors begin to converge on architectures and standards, as well as orient go-to-market strategies toward coopetition rather than “winner takes all.” Customers are coming to market with a greater understanding of what they are looking for thanks to efforts by vendors and early adopters educating the market and cutting through the hype pays off. TBR believes 2019 marks the emergence of “go-to-market 2.0” as an evolved strategy for both IT and OT vendors seeking to better profit from IoT.

 

The 1Q19 Commercial IoT Market Landscape looks at technologies and trends of the commercial IoT market. Additionally, TBR catalogs and analyzes by vertical more than 450 customer deals, uncovering use trends, identifying opportunities, examining maturity, and discussing drivers and inhibitors.

Maturing offerings, vendors and customers prompt long-term IoT vendor growth

The continued interweaving of the technology component market with Internet of Things (IoT) techniques delivers a well-defined path to long-term sustained growth for many IT and operational technology (OT) vendors, especially those vendors that are best able to differentiate their portfolio and position themselves as critical partners for a wide set of IoT solutions.

The hype surrounding IoT has only served to confuse and overwhelm customers and vendors, but efforts by both parties to cut through the hype is driving the growth of installed IoT solutions. As the hype fades, vendors are better able to rationalize their go-to-market strategies and messaging, particularly around how to assemble IoT solutions, leading customers to better understand how to apply IoT.

However, while it is becoming easier to assemble an IoT solution, it is still challenging to design and implement the IoT technique. We don’t expect a huge explosion of revenue; IoT itself isn’t a “killer app,” but it will enable moderate and slowly accelerating revenue growth for the various components involved in an IoT solution.

In our 3Q18 reports and thought leadership, TBR will focus on three topics that we believe are currently the most impactful on the wider IoT ecosystem: the increasing maturity of the IoT technique, the growing consolidation of generic platforms, and how increasing commoditization around IoT is working in favor of economies of scale and enabling the growth of installed solutions.

IoT is growing up: Increased ecosystem maturity will lead to increased customer adoption

TBR, through discussions with vendors and customers as well as our use case databasing, is noticing growth in installed IoT solutions, whether from net-new deployments or expansions of existing IoT deployments, signaling improved maturity. IoT maturation is not so much about the components of IoT as it is about businesses developing their ability to leverage technologies and techniques that are increasingly applicable to a growing number of business problems.

A major driver of this maturity is greater clarity around IoT techniques, led largely by go-to-market realignment and improved messaging by vendors, organization around IoT by customers, shifts from competition to coopetition by vendors, and general improvements in the construction of the technology that facilitate advanced usage of the IoT technique.

Signals of consolidation appear in the cloud IoT platform space

Infographic discussing signals of consolidation appearing in the IoT cloud platform space

The cloud IoT platform landscape consolidates around largest vendors as customers seek continuity, consistency and the best tools

Cloud services revenue grew 48.2% year-to-year and increased as a percentage of total benchmarked Internet of Things (IoT) revenue from 12.4% to 15.8% year-to-year in 2Q18. Growth is driven by customers, especially those without deep legacy ties, moving their workloads to the cloud. The public cloud ecosystem is beginning to consolidate, with the top vendors competing on best-in-class tools, partnerships and business-problem-solving messaging.

Software, while still a sizable portion of benchmarked revenue, is experiencing slowing revenue growth, from 19% year-to-year in 2Q17 to 4.2% year-to-year in 2Q18. Software, along with ICT infrastructure, will continue to play a role in IoT solutions with the advent of edge computing, but as providers’ cloud platforms mature and tie-in deals with application partners are cemented, demand increases.

ICT infrastructure revenue grew 14.1% year-to-year in 2Q18 due to increased IoT deployments as well as hybrid IoT becoming an increasingly common IoT framework. ICT infrastructure gross margin rose 80 basis points year-to-year. TBR believes the increase stems from the need for more specialized or powerful hardware to handle the more advanced needs of IoT and its components, such as artificial intelligence (AI) and machine vision. Despite the increased utilization of ICT hardware due to hybrid IoT and the need for specialization, the long view for ICT infrastructure will be complicated by commoditization. TBR expects most ICT infrastructure companies to deeply invest in software and service components to buttress the profitability of customer engagements as the threat of commoditization looms.

Vendors across the technology spectrum are all fervently trying to crack the code for the “killer app” within specific verticals that can solve common business problems and be widely adopted by customers. The vendors that win with building the first widely accepted solutions will be set up for success, while others in the oversaturated market will at best become acquisition targets and at worst become history.

For more information, contact Analyst Daniel Callahan at [email protected].

Increased market clarity drives 16.1% year-to-year growth in commercial IoT revenue

Technology Business Research, Inc.’s (TBR) 2Q18 Commercial IoT Benchmark recorded revenue growth of 16.1% year-to-year, to $10.3 billion, in 2Q18, among the 28 IT and operational technology (OT) vendors we benchmark. The revenue growth is largely a result of continued implementation of Internet of Thing (IoT) and growth of installed IoT solutions.

The dousing of rampant IoT hype, which only served to confuse and overwhelm customers and vendors, is helping drive the growth of installed IoT solutions. As the hype dies out, a wave of increased clarity and maturation is forming with vendors rationalizing their go-to-market strategies and messaging, leading to customers better understanding how to apply IoT and vendors learning how to assemble solutions. Packaged solutions are emerging as vendors cooperate, focusing on their strengths, and assemble components sets that solve verticalwide challenges. TBR believes these factors are driving tactical business-focused IoT projects to supersede overambitious projects stuck in proof-of-concept limbo.

However, while easier than in the past, IoT design and implementation are still a challenge. TBR does not expect a huge explosion of revenue beyond midteen growth going forward.

Total 2Q18 commercial IoT benchmarked gross profit increased 16.6% year-to-year to $5.1 billion. Reduced complexity in IoT due to increased knowledge around building and applying IoT as well as the streamlining of portfolios as a result of increased partnering is improving vendor profitability. Also, vendors are leveraging specialized tools, such as artificial intelligence (AI), to justify higher pricing.

 

TBR’s Commercial IoT Benchmark highlights current commercial IoT revenue and gross profit for vendors. TBR leverages financial models and projections across a diverse set of IT and OT components. Additionally, the benchmark outlines the major vendor drivers and trends shaping the market.

The diversity of IoT solutions and their multicomponent and multivendor nature require new approaches from vendors

The Internet of Things (IoT) market is beginning to stabilize, if not mature, and this is a good time for vendors to focus on vertical markets and use cases within those markets, especially where there is a gap that aligns well with an IT vendor’s strength, such as telecom operators’ capabilities in logistics.

“We project total commercial IoT market revenue will increase from $370.3 billion in 2018 to more than $1 trillion in 2023 at a CAGR of 24.4%,” said TBR Analyst Dan Callahan.

Commercial IoT Market Forecast Alternative Market Performance Scenarios 2018-2023

Other topics we cover in the Commercial IoT Market Forecast 2018-2023 Update include the emergence of embedded IoT solutions, the rise of independent software vendors and independent hardware vendors as paths for propagating embedded solutions, and the drivers and inhibitors for select verticals and technology segments where we anticipate the most change.

The Commercial IoT Market Forecast 2018-2023 Update highlights the current and emerging revenue opportunities in the commercial IoT market for vendors. It leverages financial models and projections across a diverse set of IT and operational technology components, verticals and geographies. In addition, the report outlines the major component and industry drivers and trends shaping the market.

For additional information about this research or to arrange a one-on-one analyst briefing, please contact Dan Demers at +1 603.929.1166 or [email protected].

 

ABOUT TBR

Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, and telecom vendors and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to address client-specific issues further or information needs on an inquiry or proprietary consulting basis.

TBR has been empowering corporate decision makers since 1996. For more information please visit www.tbri.com.

The exaggerated expectations created by IoT hype play a big role in how vendors approach IoT in 2018, for better or worse

HAMPTON, N.H. — Internet of Things (IoT) vendors are succeeding by focusing on business problems, not transformation, according to Technology Business Research, Inc.’s (TBR) 3Q18 Commercial IoT Market Landscape. Shane O’Callaghan of TSM Control Systems, a PTC customer, explained it at LiveWorx2018 in the most straightforward manner: “IoT is not a technology project; it’s a business project.” TBR believes leading vendors are gaining market traction because they are molding their IoT go-to-market strategies around solving tactical business problems with solutions proved by case studies.

Vendors that focus on technical aspects are unlikely to gain breakthrough success and will be relegated to being component suppliers to vendors more engaged with customers at a business-problem-solving level. At LiveWorx 2018, PTC CEO Jim Heppelmann told analysts PTC may have been looking too far forward, focusing on cutting-edge technology, and had trouble explaining IoT to customers and how its platform, ThingWorx, would improve outcomes.

Like PTC, some vendors appear to be caught between trying to evolve from a component-positioned, technical-messaging vendor and a vendor trying to solve business problems. And many vendors are struggling to rise above the messaging of more successful peers or put a unique twist on their solutions to differentiate them amid an increasingly saturated and hypercompetitive market.

In its 3Q18 Commercial IoT Market Landscape, TBR deeply examined paths vendors are taking to evolve.

  • Emphasizing partnering is one approach most vendors use. Partners are critical because most IoT projects include components from several vendors, and very few of those vendors have a relationship with the customer.
  • Increasingly, IoT is embedded in both hardware and software products from independent hardware vendors (IHVs) and independent software vendors (ISVs), respectively. IT vendors are leveraging large- and small-scale ISVs and IHVs to bring their technologies to a broader market beyond providing custom solutions.
  • Some vendors are narrowing their focus and messaging to verticals in which their expertise matches the challenges experienced in the vertical.
  • Some vendors are beginning to sell off underperforming business units or looking for attractive acquisitions in their areas of focus. TBR expects 2018 to be a year of consolidation and acquisition activity.

The 3Q18 Commercial IoT Market Landscape looks at technologies and trends of the commercial IoT market. Additionally, TBR catalogs and analyzes by vertical more than 350 customer deals, uncovering use trends, identifying opportunities, examining maturity, and discussing drivers and inhibitors.

For additional information about this research or to arrange a one-on-one analyst briefing, please contact Dan Demers at +1 603.929.1166 or [email protected].

 

ABOUT TBR

Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, and telecom vendors and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to address client-specific issues further or information needs on an inquiry or proprietary consulting basis.

TBR has been empowering corporate decision makers since 1996. For more information please visit www.tbri.com.

IoT evolves rapidly

Internet of Things (IoT) offers long-term sustained growth for many IT vendors, especially vendors that can successfully position their offerings as critical components for a wide range of IoT solutions. This opportunity, however, is accompanied by challenges in product or service design, market targeting, partnering, and reaching decision makers within customer organizations. IoT’s diversity of solutions, its operational technology (OT) market, and the multicomponent and multivendor nature of its solutions all demand new approaches from vendors.