How OEMs can steer channel partners toward XaaS

As XaaS solutions become more popular, OEMs must comply, but they need channel partners to be on board. Here's how to make that happen.

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All-in-service (XaaS) solutions are sweeping the company, forcing manufacturers of original technological hardware (OEM) equipment to jump on board. However, the success of original equipment manufacturers depends largely on their channel partners, many of whom struggle to adapt their commercial approach to the new service landscape, Deloitte discovered.

SEE: Special report: The future of Everything as a Service (Free PDF) (TechRepublic)

Deloitte & # 39; s How technology OEMs can guide channel partners in the XaaS report examined the technology OEMs that are currently undergoing an XaaS Transformation Journey, discovering the challenges, successes and benefits along the way, specifically in the relationships of the OEMs with the channel partners.

What is XaaS?

"XaaS is used to encapsulate various categories of information technology, including those delivered in the cloud as a subscription-based service, such as SaaS, platform as a service (PaaS), infrastructure as a service (IaaS) and platform of applications as a service (aPaaS), "said Rick Howard, vice president of research at Gartner. "XaaS also covers managed desk, help desk and network services, voice over IP (VoIP) and unified communications (UC). From a commercial point of view, XaaS reinforces a mentality of & # 39; service first & # 39; which is customer focused and performance oriented. "

XaaS offers individualized solutions geared to the business needs and desires of a specific customer, according to the report. It is also known that models as a service improve business efficiency, help companies innovate faster and reduce costs in the process.

"XaaS is popular mainly because of cost reduction and cost avoidance," said Jeff Loucks, executive director of the Deloitte Center for Technology, Media and Telecommunications. "Companies can only buy what they use and bypass the IT infrastructure that requires active management. XaaS has another great benefit: it can accelerate agility and innovation. A recent Deloitte survey found that companies are using XaaS to access advanced technologies such as AI and IoT based solutions. XaaS allows companies to access these technologies much faster and with less upfront costs than the traditional IT purchase / license model. "

As customers are turning more towards XaaS solutions, OEMs are forced to change their operating models and offer flexible subscription-based solutions that customers want. However, manufacturers cannot work alone. The manufacture of a product is necessary, but it is the job of the channel partners to distribute the technology, which makes them crucial for OEMs.

"A channel partner is a company that partners with technology companies that manufacture products to market and sell OEM products and services," said Loucks. "Channel partners are also called value-added resellers (VARs). Channel partners can represent a significant percentage of technology OEM sales."

How the roles of channel partners are changing

With XaaS, OEMs are changing their business model from selling physical products to delivering services, Loucks said. In the past, channel partners were responsible for selling those physical products to OEMs, but now OEMs can sell their services directly to the end customer.

"Channel partners that primarily resell or integrate products need to develop their value proposition in an XaaS model," said Loucks. "Instead of reselling, they need to deliver integrated portfolios, including custom software solutions created on OEM XaaS offers."

Tech OEMS relies on its partners to adapt to the expectations and needs of end users. This means that channel partners must gain deeper knowledge of OEM solutions, improve industry experience and focus on how to boost customer satisfaction, Loucks said.

Often, a significant change brings challenges.

The challenges

The report identified the following five different challenges that channel partners may face:

  • Develop a customer-centered mindset, move from a transactional approach to a relationship-based approach
  • Address the emergence of a line of business executives (LoBs) as influential and key IT buyers
  • Threat management of new types of competitors, including hyperspecialized ISVs, native cloud startups and accounting / legal / compliance companies that they offer niche technological solutions
  • Acquiring talent and experience to develop capacities and customized solutions
  • Facing possible negative financial implications of moving to a XaaS business model, as a greater difficulty in making commercial investments

However, these changes are not only beneficial for channel partners, but they are necessary, s egún Loucks

"For the channel partners that can carry out the transformation, there are financial benefits. Deloitte's analysis of the financial data of selected indirect channel partners suggests that the transformation as a service could increase EBIT margins by 300 to 600 basis points over a three-year period, "said Loucks." There is also a simple need to change: OEMs are a transition to XaaS offers because that's what business customers want. To stay relevant, channel partners must make the same transition. "

How OEMs can help their channel partners

The good news, according to the report, is that all the challenges that may arise are The report suggested that original equipment manufacturers take an active approach in the complete transformation of their partners' XaaS OEMs should be there for the IT purchase and implementation journey, expand their own service portfolio, design specific programs and execute changes in phases, making the process more digestible.

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Image: Deloitte

"OEMs should [also] responsibly share customer data so that their partners can better understand how customers use technology," said Loucks. "This can allow partners to interact with the customer more effectively and see what services they are using."

For more information, see the leading desktop providers as a service (DaaS): Amazon, Citrix, Microsoft, VMware and more on TechRepublic.

See also

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