“This is the only way for partners to think about their business operations moving forward. It’s imperative to automate at the back-end because partners can’t be having excess costs.
“If you’re adding a customer at the front-end, you must be able to do this without adding any human resources at the back-end.”
Iles said that on balance, partners acknowledge this but overall, the channel continues to be driven by “very manual” processes.
“There’s an acknowledgement but little change,” Iles said. “Partners add a customer and then add a support engineer or perhaps even 20 per cent of a support engineer.
“But that equation doesn’t work and it unravels pretty quickly as a strategy. The goal for partners must be using technology smartly at the back-end to automate everything and turn staff into billable resources.
“Partners have to start looking at ways to better automate processes but as history shows, the channel isn’t very good at this.”
In response, Barboza outlined the concept of the ‘fish curve’, a theory which reflects the current transition path for most MSPs in Asia.
“This isn’t an overnight flick of a switch type shift,” he cautioned. “We talk to our partners about profitability from a business standpoint, and some of the company goals that are achievable in the near future.
“This is the ‘fish curve’ concept, in that for a period of time, expenses are actually going to stay at the line or go above, while revenues will dip.
"Over time, the curve normalises but during that period, how are you going to manage the change? This sets the tone within the business.”
Barboza said such questions help shape Cisco’s partner engagement and enablement models both regionally and globally, as the vendor also transitions alongside the channel ecosystem.
“The channel orchestrates our programs and impacts how we design our initiatives for partners,” Barboza explained. “For example, we’re currently supporting our partners through helping drive demand generation.
“Why? Because a lot of MSPs do not consider marketing as a strength. Customers are becoming more sophisticated in how they search for technology providers, which means that partners must be front of mind.”
Delving deeper in the heart of the vendor’s ecosystem - which houses thousands of MSPs, system integrators and value-added resellers - Barboza said Cisco is also revamping support incentives in a bid to drive best practice through the channel.
“This isn’t about giving partners a cheque for X amount of dollars sold, this is a much deeper relationship,” he said. “Partners are looking for more from vendors which means we must also evolve, which is evident through the consulting we provide to the channel around the implications of offering managed services.”
But as Barboza stressed, the ‘fish curve’ concept from a financial standpoint represents phase one of the journey, with company staff also central to the shift.
“What type of sellers are required in this new world?” Barboza asked. “How are compensation plans going to change for MSPs, compared to value-added reseller models?
“Once partners realise that managed services is the opportunity, we are here to help them through the transition journey.”
Triggered by the rise of new technologies and changing customer demands, partners are turning toward providing services to stay profitable. Yet in Asia, a clear definition of what an MSP is still alludes the channel.
But despite an increased need for partners to transition, as alluded to by Barboza, migrating from point A to point B is fraught with complexities and challenges.
“This is exactly the problem we have today,” said Markus Stalder, former engineering director at eVantage Technology. “Our business is primarily built on a traditional model, not an MSP-driven subscription basis.
“Making that shift is about business and cultural change, it’s a mindset shift. But at the same time, you need to look at the finances, you can’t just pull the plug, you still rely on the revenue.”
As a result, Stalder said value can be found in partners building out separate services businesses in parallel, creating new financial models, internal processes and sales quotas along the way.
“That’s the easiest way, on paper but that’s not always possible as cash flow can be difficult,” Stalder acknowledged. “It’s great that Cisco is working with the channel to provide this support, as we rely on this to evolve our business.”
From a challenges perspective, Bijjala Radhakrishna - CEO of Total eBiz Solutions - said ongoing roadblocks remain around the delicate issue of customers ‘wanting more for less’.
“Once we increase our cost, do we then pass this onto the customer?” Radhakrishna asked. “We obviously can’t lose the customer but moving to an MSP model requires a balancing act.
“It’s about building confidence as a business owner, going from zero to say, 50 per cent of revenue attached to managed services. This is a huge shift but having a recurring revenue model can give you the confidence to invest in other areas and new markets, such as artificial intelligence and machine learning.”
In essence, the transition to an MSP model represents a 'marathon, not a sprint' for the channel, with resourcing the change a constant challenge for partners.
“How do you sell the breadth and depth of solutions available in the market today, when you have limited resources?” reminded Phua of M1. “Every technology provider is restricted in terms of the manpower at their disposal, which means we have to leverage our partners to stitch complete solutions together.
“Today, 10,000 technologies solve one problem, tomorrow it will be 20,000 technologies. This means we must keep evolving and expanding our partnerships.”
Aligning to opportunities
Across the industry, the growth of the IT services market is proliferating, creating a desire for traditional resellers to make the transition towards a more lucrative future.
In short, companies that provide managed technology services to customers have expectations of high revenue growth over the years ahead, triggering further growth within the industry.
“We’re now selling to different technology buyers,” added Lee of Logicalis. “Our sales teams are engaging with other key stakeholders within organisations, which is also a crucial factor to consider.
“But muscle memory is very hard to overcome, which means that a large percentage of experience salespeople need to sell differently today. They have been very successful and sold lots of solutions, but now they must evolve with the new technology buyers.”
Lee believes such a message should come from the “top down”, creating “consistency from the leadership” to help instigate internal and external change.
“Cisco is a great example of this change, through CEO Chuck Robbins,” he said. “Our message must come down to our salespeople, our partners and our customers, this is important.”
From a vendor perspective, Kelvin Looi - director of partners and alliances at Cisco - said that as the managed services market evolves, the channel continues to mature in parallel.
“Our ecosystem is made up of different types and tiers of partners, and they can’t all be viewed as the same,” Looi said. “But within managed services, this is top of mind for our partners and our customers. We must be able to make selling managed services easier for our channel as the market moves towards an OPEX model.”
Rounding off the discussion, Barboza advised partners to take a collaborative approach to making the transition towards managed services, emphasising the value of the channel ecosystem.
“This is not a destination, it is a journey,” he outlined. “This is not a case of, we’re now an MSP so my job is done.
“As this journey continues, the channel will naturally face challenges ahead but the opportunities are aplenty, and Cisco is well positioned to help partners progress. We want to keep raising the bar even more, and to do this, we must help our channel evolve.”
This exclusive Channel Asia Roundtable was in association with Cisco