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Distributors and VARs: The unsung heroes of the IoT market

The background

Commercial IoT has received substantial press over the last three years. It started in 2015 with hyped claims of IoT’s ability to deliver total transformation, but expectations around the technology have matured and IoT is now viewed as a reasonable technique for solving business problems. However, one thing has not changed: When it comes to IoT market participants, the focus of the discussion remains on larger IT vendors, SIs and customers. The missing story is the involvement of the distributors, VARs and smaller SIs, and the current needs of the small to midsize customers.

What are distributors?

Distributors sit between IT vendors and VARs or SIs, procuring equipment or software from the former and distributing it to the latter two. Because distributors generally have a very large customer base, they can help vendors reach more customers or provide a channel for vendors that cannot afford to build their own, such as smaller ISVs. Because distributors procure equipment from vendors and stock it themselves, they are incentivized to educate VARs or SIs about vendor products and help market them as well as to deliver sales training, demos and exhibitions. Distributors are masters of the supply chain, bundling and contract negotiations.

What are VARs?

VARs, along with SIs, serve on the frontline of IT and offer a more tailored storefront to customers than a larger vendor. VARs will seek to build and deliver turnkey solutions by mixing and matching technology and software, as well as layering on services of their own, such as integration, customization, consulting, training and implementation. VARs are often organized by customer type, from those offering general IT services to those specializing in education, the public sector, heavy industry and other niche areas. VARs, along with SIs, often have the keenest grasp on customer challenges, making them well positioned to package IoT components, build applications or offer services.

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.