Canalys North America Forum Highlights: HPE, Dell, Partners & AI
The event is bringing together hundreds of partners, top vendor execs and industry analysts to a California desert resort.
Cisco hosted a networking event at the Canalys North America Forum, Nov. 13, 2023.
During an onstage Q&A with Canalys CEO Steve Brazier, Hewlett Packard Enterprise (HPE) CEO Antonio Neri tackled some of the most pressing issues facing HPE and its channel partners while expressing optimism about partner growth and the rise of AI.
“AI in my mind will be the most revolutionary tech in our lifetime, bigger than mobile and Web 2.0. It will transform our society and business through the acceleration of learning of the model. When I think of AI, it is a life cycle from training to consumption.” Neri said.
The HPE CEO told audience members that the company has been in the AI market for a “long time” and that “when we look at our customers, we must deliver outcomes. How we select the right model, tune it with data. HPE is uniquely positioned to deliver that through partners.”
Neri recounted the mega-trends he was watching in late 2017 before HPE named him president and CEO the following year. It was clear, he said, that not everything was going to be in the public cloud — the world was going hybrid.
That led to the creation of HPE GreenLake, the edge-to-cloud platform, in 2021.
Public cloud, comparing it to the Eagles’ famous Hotel California, Neri said, “you can check in, but you can’t check out” because of the high cost.
“Many businesses have become hybrid by accident,” said Neri. “The question is, how do you do it by design? And that's what we bring to the table."
GreenLake also is a platform for artificial intelligence and machine learning innovations, said Neri. The platform has 65,000 customers.
“We have unique capabilities in AI that we are able to power with our supercomputer capabilities,” said Neri. “The question now is how to make it accessible to every enterprise.”
An audience member pressed Neri on the company’s ability to focus on the SMB market and the needs of partners who sell to small businesses given the company’s focus on enterprise. While not answering the question directly, Neri did indicate that the company’s products and services do appeal outside of the enterprise, especially via GreenLake.
“We will continue to be a partner-led company in everything we do and provide you with the tools to succeed.”
Neri reflected on his first acquisition — Aruba — and how that business has fared since the 2015 purchase.
“I saw the opportunity to bring a unified experience to connectivity and that wireless will be the next big frontier, and to drive a data-first digital transformation, because without connectivity you cannot do anything,” he said.
He wanted to clarify any thoughts about the separation of the two brands by stating that “Aruba is part of our go-to-market strategy; it is not separate.”
He said more recent acquisitions such as Axis Security build upon Aruba by providing the SASE framework and private 5G that are “fundamental to out strategy.”
Denise Millard, who just took over as global channel leader at Dell last month, says she’s focusing on talking and listening to the IT giant’s partner community in her first 90 days.
“When you think of our partner program, we view it as best in class,” she said. “We hear from our partners it’s all about profitable growth and predictability. That’s the foundation of our partner program and how we engage with them.”
Dell this year made headlines with what it calls a “partner-first” approach to storage sales, a move that has been both lauded by partners and criticized by rivals who suggest it is pandering.
When asked if the company will expand the approach to other technologies, Millard was noncommittal, saying that Dell is enjoying success in the early stages with partner-first storage.
Millard said there are three pillars to Dell’s channel approach: helping partners to grow and modernize their businesses; improving the ease of doing business; and assisting partners in navigating changes to the technology ecosystem.
“How do we make sure we have the right ecosystem to go after these areas like cloud, AI and cyber, helping our partners get these skills?” Millard said.
On the AI front, Millard said 20% of Dell’s server revenue in the second quarter is attributable in some fashion to AI and has helped to build a $2 billion backlog for the company. And the company’s partner ecosystem is playing a major role.
“We are seeing massive momentum as it relates to AI,” said Millard, also pointing to the new professional services that the company is building around Microsoft Copilot, the AI-based productivity tool.
With more people returning to the office, Millard also sees opportunities coming for partners in PC peripherals. PCs themselves are starting to go through a post-COVID refresh cycle as well.
Dell, which continues to have a significant partnership with VMware since spinning it off two years ago, is watching Broadcom’s pending acquisition of VMware very closely.
“From a Dell and partner perspective it’s really business as usual,” said Millard. “There’s no change to the way we’re operating with VMware. We had a really strong Q2. We continue to innovate with VMware. We continue to be one of their top partners. I don’t see that shifting overnight. There are a lot of market dynamics and dynamics that are geopolitical, and customer shifts … we can only control what we control.”
Millard, like many speakers, addressed the issue of whether customers were moving or seeking to move data and applications from the cloud to on-premise data centers or servers. With customers reckoning with contractual lock-in and growing costs of the hyperscalers, Canalys is predicting the industry will see a growing movement of data and applications out of the public cloud. She said partners must understand their customers' workload strategy and where data and applications should be housed.
“When it comes to cost optimization, partners with a real strong POV will succeed.”
Throughout the morning session, Canalys analysts and senior leaders discussed the impact of global economic forces, wars, the cooling Chinese economy and how disruption of supply chains between the U.S. and China could negatively impact the channel. The theme of choppy seas was the backdrop with Canalys’ Rachel Lashford, who opened the event saying that channel leaders must navigate not only calm seas but periods of tumult.
“This is the first time in our lifetime where politicians are making decisions that are right for their countries but not in the global economic interest,” said Steven Brazier, CEO and founder of Canalys. Canalys Forums and Canalys research are now part of the Informa organization which bought the Singapore-based company earlier this year.
Other takeaways from the opening session included:
The channel and industry vendors will benefit from a major PC, laptop and equipment refresh that is coming as result of customer purchases made during the pandemic to bolster their remote workforce and to upgrade systems.
Many vendors are discovering the channel is not an extension of their workforce but there to make vendors and tech suppliers more efficient and cost-effective.
Despite strong growth in the MSP channel, Canalys is predicting growth to return to the large solutions integrators and product-focused sellers in April 2024.
Canalys is predicting a huge surge in ARM-based processors powering PCs and laptops, and within the next few years could be the engine of 30% of all PCs. Analysts said this movement represents an “existential threat to Intel.”
The four biggest mega trends impacting the channel and vendor community are generative AI, cybersecurity, sustainability and cost optimization. “Cybersecurity is the gift that just keeps giving,” Canalys CEO Steve Brazier said during opening remarks. He cited research indicating that customers will increasingly demand sustainability strategies from their partners. That sentiment was validated during interviews with HPE Antonio Neri and Lenovo’s Matt Zielinski.
The profile of today’s customer is changing, which is impacting how partners engage with buyers and how they understand their journey. By this next time next year, the majority of buyers will be of the millennial generation “who do things differently.”
More highlights:
Canalys analyst Jay McBain has been vocal throughout the year about the flow of tech spending through the channel and further drove home that message at the Canalys North America Forum. He said the channel earns $2 for each dollar spent on tech and pegged the overall worldwide tech market at $4.7 trillion. Research shows that for every dollar consumed by the hyperscalers, there is $6.40 in opportunity for partners to provide services, support, management, monitoring, integration and implementation services among others.
What a partner ecosystem looks like today is becoming more clear and beyond just another made-up word in tech. According to Canalys research, there are seven partners in deals involving SaaS software purchases from providers like Salesforce, Netsuite and Hubspot. Citing his research, McBain said implementations of cybersecurity and cloud solutions by Google, Microsoft and AWS are what he termed “seven-layer,” involving multiple layers of partners, software providers and specialists.
The health of the channel from a profitability standpoint was on display during analyst presentations as well. Canalys Channels VP Alex Smith said a study of gross margins of the global systems integrator vs. those of mainstream tech providers such as ePlus and CDW shows a distinct contrast. Smith showed a chart of gross margins for the past 10 years showing a decline for the global systems integrators such as Accenture vs. an increase for the mainstream solutions integrator. Since 2013, margins for GSIs have declined to 28.3% from 29.3%, compared to those of the mainstream partners which rose to 18.3%, up from 15.9% in the last 10 years.
Top execs from some of the world’s largest partners and distributors shared predictions for 2024 in a panel dubbed "Expert Hub."
Michael Urban, president, Americas, TD Synnex, looks to the expansion of cybersecurity and AI opportunities for partners in the coming year.
Top execs from some of the world’s largest partners and distributors shared predictions for 2024.
Michael Urban, president, Americas, TD Synnex, looks to the expansion of cybersecurity and AI opportunities for partners in the coming year.
Thai Lee, CEO of SHI International, the solution integrator giant, agreed, but noted that while “generative AI is exciting, we just don’t know how to make money from it yet. ”
Joyce Mullen, CEO of Insight Enterprises, pointed to the expansion of multicloud, and all the permutations and services that go along with it. She, too, is on the AI train, saying it will be even bigger in 2025 than in 2024.
Mike Norris, CEO of Computacenter, didn’t point to an individual technology, but the channel’s potential overall.
“We are in a great industry that will grow more over the next two years faster than the GDP worldwide,” he said.
The other highlight of the conversation revolved around the onset of hyperscaler marketplaces over the past few years. The debate rages on in terms of how big of a threat they are to partners, as customers can conceivably bypass them to purchase services directly.
While the panel has mixed opinions, SHI’s Lee leaned toward concern.
“It comes directly out of our total addressable market,” she said. “We have to figure out how to add value to this process. I realize there are cloud partners in this audience, but it is a threat long term.”
Top execs from some of the world’s largest partners and distributors shared predictions for 2024 in a panel dubbed "Expert Hub."
Michael Urban, president, Americas, TD Synnex, looks to the expansion of cybersecurity and AI opportunities for partners in the coming year.
Top execs from some of the world’s largest partners and distributors shared predictions for 2024.
Michael Urban, president, Americas, TD Synnex, looks to the expansion of cybersecurity and AI opportunities for partners in the coming year.
Thai Lee, CEO of SHI International, the solution integrator giant, agreed, but noted that while “generative AI is exciting, we just don’t know how to make money from it yet.”
Joyce Mullen, CEO of Insight Enterprises, pointed to the expansion of multicloud, and all the permutations and services that go along with it. She, too, is on the AI train, saying it will be even bigger in 2025 than in 2024.
Mike Norris, CEO of Computacenter, didn’t point to an individual technology, but the channel’s potential overall.
“We are in a great industry that will grow more over the next two years faster than the GDP worldwide,” he said.
The other highlight of the conversation revolved around the onset of hyperscaler marketplaces over the past few years. The debate rages on in terms of how big of a threat they are to partners, as customers can conceivably bypass them to purchase services directly.
While the panel has mixed opinions, SHI’s Lee leaned toward concern.
“It comes directly out of our total addressable market,” she said. “We have to figure out how to add value to this process. I realize there are cloud partners in this audience, but it is a threat long term.”
CANALYS NORTH AMERICA FORUM — The Canalys organization brought its internationally well-known analyst forum to the U.S. market with a blockbuster agenda featuring some of today’s biggest names and most influential players in the channel spanning vendors, distributors and partner organizations. In a series of analyst prognostications and interviews with senior leaders of vendors such as HPE and Lenovo in Palm Desert, California, on Tuesday, attendees heard about the harsh realities facing the entire tech sector.
While vendor leaders were ebullient about their growth prospects, partners were a bit more cautious. Thai Lee, CEO of powerhouse SHI, said AI is just not a reality for partners today and said the partners.
“Generative AI is exciting; we just don’t know how to make money from it,” she told attendees.
Lee also said cloud hyperscalers AWS, Microsoft and Google do represent a threat to channel players like SHI by taking hard dollars out of the addressable market. Lee said while the rate of hiring at SHI has slowed to reflect market realities, she said SHI is doing a better job of onboarding and improving the skill levels of their employees.
Lee remained upbeat about the overall channel opportunities around a coming refresh cycle of PCs and laptops along with more clearly communicating the value partners bring to customers. That was a sentiment echoed by Insight Joyce Mullen, president and CEO of Insight, who discussed how to best position IT service providers.
“We like ‘solutions integrator,’” she said, describing the model as one that can bring products and services to market more rapidly than the global systems integrators can, and deliver more value to the strategic vendors they work with on a wide range of solutions.
While HPE CEO Antonio Neri extolled the promise of AI and HPE’s growing relevance to the channel partner community, Lenovo senior leaders said they are focused on adding more AI functionality to their commodity hardware products to provide more value to customers. So-called AI laptops hold promise and represent a significant channel opportunity, said Matt Zielinski, president of Lenovo international markets. For Zielinksi and other vendor leaders − including Dell’s new top channel executive − the specter of channel conflict is increasing as they push deeper into professional services. There seems little doubt channel partners and vendors are going to be dealing with conflict and new ways of engaging in this new ecosystem going forward.
“No. 1 is the customer comes first. We all live and breathe to service our customers and, in most cases, partners have far better ability to service local customer needs than we do,” said Lenovo’s Zielinski.
He said that while partner by partner, Lenovo maps its capabilities vs. those of the partner, there are some instances where partners are better off reselling a Lenovo service than providing their own.
While there were very serious topics, such as how marketplaces are changing the ways customers and partners source technology and software pressuring traditional distributors, there were some lighter moments. HPE's Neri, who appeared on stage in a casual vest and sneakers, was asked about which brand of sneakers he is wearing these days. In another, a mid-40s Lenovo executive was asked about his corporation ascension at such an early age.
Perhaps the showstopper was Neri’s handling of a question about who’s the best soccer player of all time. In answering the question, he admitted to having played the game with Argentina’s Diego Maradona.
See our slideshow above for highlights from the Canalys North America Forum.
Additional reporting by Craig Galbraith. Informa, which is Canalys' parent company, also owns Channel Futures.
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