Transformation is the New Normal

As a partner, you may view digital transformation (DX) as an overused term, but don’t mistake that for lack of opportunity or impact in the real world. Monies spent on DX initiatives are significant and the impact of this trend is profound – for your customers and your own business. Not to put too fine point on it, but if your company isn’t transforming, you’ll be challenged to be an integral part of any customer transformation.

But let’s put things in perspective so any decisions you make in your business are done with your eyes wide open. Two key points can help you do this. First, DX is happening today, but it’s still early in the spending curve, which means customer wallets will be opening wider in the future. This is not a lost opportunity; it’s simply the start of something big. Second, you and your peers are starting to make investments to transform your businesses in ways that will position you for success.

The Opportunity Before You

It’s important to understand that the DX market opportunity is far-reaching. We at IDC view it as being comprised of two broad categories – the 3rd platform (i.e. cloud, analytics, social, mobile) and innovation accelerators (e.g. AI and IoT). I’m not going to go into detail on each of those here, but I want to be clear that both are experiencing significant growth rates (4.7% and 18.4%, respectively, from 2016 to 2021).

Let me share a more immediate and impactful stat. In 2019 customers worldwide will spend $400 billion on 3rd platform technologies and $1.3 trillion on innovation accelerators. It might be easier to think of these high spending numbers in their traditional IT categories of software, services, and hardware. Through that lens the 2019 DX opportunity is comprised of 42% services, 26% software and 32% hardware. There’s plenty of room for partners in this new world, provided you’re positioned to address the customers’ DX transformation journey. A key takeaway for you here is to follow the money.

The Customer Connection

Many of your customers are probably already thinking about or executing on transformation strategies.  We’ve identified five stages of end-customer digital transformation that shows that it’s happening today, but most are in the early stages of this process. This speaks to the opportunity for your business, mainly because transformation is not easy, takes time to initiate, and is an ongoing process for customers.

What’s important is that 40% of funding is jointly between LOB and IT. So IT is still in the game, and that’s probably good news for you because you’re well connected there, but LOB is equal to or greater than IT in their influence and funding. In fact, sole funding of technology projects is greater from LOB at 24% than IT-only projects at 20%. IT must continue to educate LOB executives and understand the technologies that support digital transformation. Partners that are skilled in digital technologies will be at the forefront of making this happen.

It’s equally important to pay attention to the process by which your customers arrive at a technology purchase. Our research has shown that customers go through a process of engagement for solutions, and you’ve probably seen some version of the customer lifecycle infinity loop, which includes six-stages – the up front explore, evaluate, and purchase, and the post-sale stages of expand, renew, and advocate. You need to be engaged across all of these stages, but there are two key points for me to make on this.

First, the world of sales and marketing is changing rapidly. No longer is the sale process the majority of the effort required in winning business – marketing now reigns supreme, and it’s all going online. Without a digital marketing strategy, you’re missing out on a lot of market opportunity, especially when you consider that at least 65% of purchasers have already made a decision to buy before they engage a sales rep. That’s profound in that you could be losing business to competitors, but you wouldn’t know it because you were never a part of the initial discovery phase.

Second, the digital world includes a great deal of cloud and subscriptions, so it becomes very important to build a recurring revenue model that will grow over time and be more stable than the revenue peaks and valleys of project work. A key way of making this happen is by employing customer success managers whose role is to ensure customer adoption and renewals. Equally important is their ability to extend the value and footprint of your business within those customers, which equals greater revenue and profitability.

Partners are Businesses Too

Partner business transformation within the larger trend of DX is a fact that now faces the entire ecosystem. Everyone talks about the end-customer transformation, but you’re a business too and are also on this journey. We conducted a partner survey to understand how the ecosystem aligns relative to digital maturity and what’s interesting is that most partners are engaged in developing or executing on a digital strategy. But there’s a lot of work to be done, with 61% in the early stages of maturity.

Your transformation, like your customers, is a complex process that includes your leadership, people, processes, culture, and org structure. It’s difficult to think about all these things while you’re also continuing to drive your business with customers. For this reason, it’s important to have a planned approach to transformation – focusing on one area before starting another to prevent spreading your business too thin because, big surprise, all of this takes time, resources and money.

Partners at the highest stage of DX, what we call the Disruptors, stand out compared with other partners in several key ways. They’ve made changes to their org structure to support transformation, customer sat is their #1 KPI, and they’ve experienced higher KPI improvements from automation. Perhaps more important is that they’re making big investments in their own IP (that’s intellectual property and represents products and services they create and sell) and have high expectations of IP revenue growth. This all means higher profitability, which I think is the goal, especially if you’re making big investments to make this happen.

Let me finish up by saying that the majority of end-customer IT spend relative to their DX efforts are concentrated within the operating model, omni-experience, and information transformation. For you these equal areas of opportunity in helping customers transform, but the big question remains – can any partner that hasn’t transformed in this way help their customers make this transformation?

For more information on this topic related to the partner experience, please download IDC’s Cisco-sponsored eBook, Market Transformation: Partner Journeys to Success. We interviewed dozens of Cisco partners to learn how DX is changing their business. Read about their insights at cisco.com/go/IDCpartnersuccess.

Watch the Impact Session: Partner Transformation: Journeys to Success from Cisco’s Partner Summit 2018 here.