Digital Transformation 2.0? IT Teams Look Ahead to 2024
Telarus' 2023 Tech Trends Report shows increasing complexity in IT procurement paired with increased spending appetite. Can technology advisors capture their unfair share?
![Telarus Tech Trends Report Telarus Tech Trends Report](https://eu-images.contentstack.com/v3/assets/blt10e444bce2d36aa8/blt0e0f530037b6a1aa/655ceaf90de563040aca3587/Business_Growth_for_2024.jpg?width=700&auto=webp&quality=80&disable=upscale)
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In Constellation's survey of CXOs, only 6% of them say they're prioritizing cost-cutting. That lines up very well with other industry research, which says that businesses very much want to invest more in technology. While they may be looking to save money in certain areas to spend it in others, the budgets are going up.
"The CFO used to go in and say, 'OK, I'm trying to pump EBITDA. I gotta go find $20 million. Where do I do it? Let's cut the projects,'" said Telarus chief revenue officer Dan Foster. "Now, the executive teams have learned the cost of starting and stopping spend on critical technology initiatives. Enterprises are holding tech spend in the face of these business imperatives that do not change with the economy."
Foster said CEOs are challenged with revenue generation, business productivity, and brand and customer experience. And digital transformation plays heavily into those areas, Foster said. And the agents who have expanded their technology portfolios into those categories can play a more strategic role than ever.
"As IT projects have focused increasingly on major business imperatives, the tech advisor is bumping up against new competitors such as global system integrators," said Foster. "They started out selling circuits and UCaaS. Now they're truly selling this digital transformation. They are enabling those CEO challenges around productivity brand and customer experience. They have become a critical advisor on the highest-level issues of the enterprise. ”
![Telarus' Dan Foster Telarus' Dan Foster](https://eu-images.contentstack.com/v3/assets/blt10e444bce2d36aa8/blt5398a8e178975342/652424432014a2b7dd07de65/Foster-Dan_Ericsson-2021.jpg?width=700&auto=webp&quality=80&disable=upscale)
Telarus' Dan Foster
This shift occurs on the heels of a different kind of digital transformation, in which businesses rushed to move infrastructure and communications platforms into the cloud. Foster said customers now face a “next generation of post-pandemic needs,” wherein they're working to optimize or rationalize all of the things they purchased in 2020 and 2021.
“Now people are sitting there saying, 'OK, we did a quick deployment on technology. We got people out in the field. We got more productive. Now the attack surface has increased. So, now I've also got to worry about securing these remote assets. In addition, my costs have gone up, so I've got to worry about cloud cost optimization,'" Foster said.
The Tech Trends Report also noted that cloud transformation remains very much in its infancy.
Constellation estimated that most cloud investments have prioritized "customer-facing apps." The firm noted that 70% of back-office IT workloads reside on-premise.
"However, our surveyed CXOs and technology advisors indicate cloud migration will dominate advanced solutions sales over the next five years as organizations work to create a scalable, secure infrastructure tailored to now ubiquitous hybrid work models," the report's authors wrote.
Moreover, some of the businesses that have gone into the cloud have hit pause to forge a new strategy.
Telarus' Koby Phillips noted that many customers have diversified where they are putting their application workloads. For example, he said private cloud is getting more consideration in certain areas over public cloud. And no longer is it an all-or-nothing proposition.
“Customers are a bit more educated now than they have been. That's why you see more moving out of public. They were originally saying, 'Oh, I’ve got to go to all-AWS,' or ‘I’ve got to go to all-Azure.' Now they're recognizing, 'I can leverage multiple different infrastructure platforms that make the most sense for my applications and data,’” Phillips told Channel Futures.
Moreover, multicloud strategies continue to gain prominence, as evidenced by Google Cloud partner SADA Systems' recent sale to Microsoft standout Insight Enterprises.
Of course, there's more going on than evaluating previously purchased technologies. Generative AI is the cool kid on the block, and IT decision-makers all feel C-level pressure to understand how they will play with it.
Telarus' report found that 35% of CXOs are actively working on an AI implementation in a pilot effort. Another 23% have a "well-formed plan for how AI will be regulated and implemented." Twelve percent say they are paying close attention and will build an AI plan/policy in 2024.
On the other hand, 9% of CXOs said their companies have forbade the use of generative AI.
Technology is only one element of a digital strategy. Who's going to manage it?
A distinctive element of the technology advisor (agent) model is that their provider partners manage and bill for the customer's technology. Moreover, the agent model, built out of the telecom carrier industry, has always focused on an ongoing service managed by the provider, rather than a piece of equipment that the customer must manage.
The as-a-service model has undoubtedly taken off, evidenced by some of the world's largest IT hardware providers pushing subscription models. Moreover, Phillips said IT talent shortages are heightening the trend. Large IT firms are paying top dollar for IT people, leave internal IT teams short-staffed.
“That leaves a big void for midmarket, small enterprise and even some large enterprise companies try to keep up with," Phillips said.
However, Phillips said the transition to outsourced IT isn't taking place all at once. There's value in a company retaining internal people who know their own system well, just as there is value in bringing in third-party people who can save them time and money.
Therefore, internal and outsourced IT are learning to play with one another, Phillips said. He called the trend "fusion teams" or "hybrid IT management."
"How do I get from point A to point B in the most efficient manner possible? If it's internally, great. But most of the time, that’s not the answer for a lot of companies," he said. "So it's not only leveraging to get off the right legacy technology into a new technology, but it's also doing that without having that 70% failure rate [statistic] that's still floating around from Gartner and Forrester as far as digital transformations go. How do I avoid being in that 70% and get into the 30%?”
Redpoint spoke to 517 partners in Telarus' ecosystem.
The partners collectively provided a fascinating glimpse of the average technology advisor. Twenty-four percent of partners are earning more than $1 million a year. Specifically, 20% of partners are earning between $1 million and $5 million.
A plurality, 36%, slotted in between $100,000 and $499,000.
That number matches fairly well with Channel Futures' Q3 technology advisor survey, which found that 27% of agents made between $1 million and $5 million in revenue in 2022. Channel Futures' survey, which had 59 respondents, found that 41% of partners made less than $1 million in 2022.
These numbers should not come as a surprise considering that many technology advisor agencies have only one or two people.
Sixty-eight percent of tech advisors surveyed said cybersecurity is getting the most customer demand of any technology right now. Moreover, 85% of them predicted security to see the most demand in the next two years.
In the meantime, tech advisors are selling UCaaS (86%) and traditional networking (76%) solutions more than anything else in the portfolio. However, that share could shift in the coming years. While only 17% of partners said they are going to "de-emphasize" parts of their portfolio, those that are most frequently pointed to networking and UCaaS.
Customer experience (66%) and cloud (65%) solutions currently sit at third and fourth and look primed to rise.
According to the report, 85% of tech advisors engage with clients because the customer is looking to replace legacy technology. The movement from on-prem unified communications to cloud-based unified communications (UCaaS) is a perfect example. For agents, who have aligned themselves with cloud-based, as-a-service technologies, UCaaS demand gave them a big opportunity.
Moreover, Phillips said tech advisors also offered a depth of platform choices that outweighed what VARs were selling.
“An Avaya PBX dealer is a value-added reseller for Avaya. That's all they do. So if a customer didn’t want to stick with that, and they didn't want to keep using Avaya, and you would have a TA come along and say, 'Well, here's the Zoom or RingCentral or 8x8 - whoever it is,' and give them options,” Phillips told Channel Futures.
Now many VARs have added agency practices as a way to extend their portfolio and give end customers more choices, Phillips said.
“Increasingly [customers] are looking at a tech advisor who's got a much broader purview than just selling them Dell, VMware and Cisco," Foster said. "I think the tech advisors are increasingly in a position to compete against the VARs and really have a different playbook that I think is resonating with the folks as they're trying to move to a digital transformation fairly quickly.”
According to the report, 85% of tech advisors engage with clients because the customer is looking to replace legacy technology. The movement from on-prem unified communications to cloud-based unified communications (UCaaS) is a perfect example. For agents, who have aligned themselves with cloud-based, as-a-service technologies, UCaaS demand gave them a big opportunity.
Moreover, Phillips said tech advisors also offered a depth of platform choices that outweighed what VARs were selling.
“An Avaya PBX dealer is a value-added reseller for Avaya. That's all they do. So if a customer didn’t want to stick with that, and they didn't want to keep using Avaya, and you would have a TA come along and say, 'Well, here's the Zoom or RingCentral or 8x8 - whoever it is,' and give them options,” Phillips told Channel Futures.
Now many VARs have added agency practices as a way to extend their portfolio and give end customers more choices, Phillips said.
“Increasingly [customers] are looking at a tech advisor who's got a much broader purview than just selling them Dell, VMware and Cisco," Foster said. "I think the tech advisors are increasingly in a position to compete against the VARs and really have a different playbook that I think is resonating with the folks as they're trying to move to a digital transformation fairly quickly.”
Renewed digital transformation plans and shifting internal IT resources are opening the door for technology advisors to play a bigger role with their business customers, Telarus concluded in its 2023 Tech Trends Report.
Telarus' recently unveiled Tech Trends Report covers a wide swath of data from both end-user customers and the technology advisor (agent) partners that serve them. The report includes Constellation Research's survey of 150 "digital CXOs" – which Constellation considers as C-suite executives that handle digital responsibilities – and Redpoint Research that surveyed more than 500 Telarus technology advisors.
Telarus at its annual partner summit earlier this year teased some of the results from Constellation's survey. Notably, Constellation identified a yearning and a habit from digital IT purchasers to rely on a third-party source for their procurement. Some 93% of enterprise CIOs rely on "trusted technology advisors" or desire to leverage them. However, a much smaller subset of those buyers were officially turning to a channel partner — let alone a technology advisor.
But Constellation vice president and principal analyst Dion Hinchcliffe said the gap represents an opportunity for partners. Many partners agree, stating that they intend to take the place of large consultancies in the enterprise space.
“Channel is underutilized. There’s an open opportunity, and there’s a hunger for it,” Hinchcliffe said earlier this year. “[Customers] just don’t clearly identify it as much as they could.”
![Constellation Research's Dion Hinchcliffe Constellation Research's Dion Hinchcliffe](https://eu-images.contentstack.com/v3/assets/blt10e444bce2d36aa8/bltfa2d4b34d1a15982/6525f816bb130210a3ed06ba/Hinchcliffe-Dion_Constellation-Research.jpg?width=138&auto=webp&quality=80&disable=upscale)
Constellation Research's Dion Hinchcliffe
As technology advisors and technology services brokerages (TSBs) such as Telarus that work with them seek to move up-market, end user IT departments are navigating a dynamic world.
While people have been talking about "digital transformation" for years, the trend appears to be re-emerging in 2023 with the widespread popularity of generative AI solutions. For agent/advisor partners, who have for years made their business of migrating customers off on-premise legacy hardware, that's good news.
However, the opportunity will require education and nuance. As Telarus executives noted to Channel Futures, technology platforms are only one component of digital transformation. Businesses are mulling who will manage their technology and often deciding on a complex "fusion teams" approach that combines internal, vendor and MSP teams.
The pitch from the technology advisor community is that they can help these groups work together.
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Telarus' Koby Phillips
"If you're taking a company that's trying to transition and move everything to a managed service provider, it's going to take a little bit longer because you lose that internal goodness of understanding why things are the way they are, where the current landscape is, and how do I transition it?" said Koby Phillips, vice president of Telarus' cloud practice. "You need that collaborator from the internal team to help bring in the managed services team. And now you're in a co-managed or hybrid IT type of environment. And it's a different skill set. It takes a lot of pressure off the organization to have to do everything themselves.”
Above: Telarus CEO Adam Edwards talks with Channel Futures editorial director Craig Galbraith at the 2023 Channel Futures Leadership Summit in Miami Beach, Florida.
Phillips and Telarus chief revenue officer commented on other findings in the Telarus Tech Trends Report in an interview with Channel Futures.
See the six images above for key takeaways from their research.
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