By: Jim Roddy, President & CEO at the RSPA
par·a·digm shift: a fundamental change in approach or underlying assumptions
When I first started writing about the channel back in 1998, I was instructed to never, ever, ever use the phrase “paradigm shift” because true fundamental industry changes occur so rarely. And, for nearly 25 years, I have never, ever, ever used that phrase.
Channel Connect 2022, held Oct. 2-4 at the Music City Center in Nashville, marked a paradigm shift for host ScanSource and likely our retail IT channel. The multibillion-dollar distributor brought together nearly 2,000 executives from the traditional ScanSource community (POS, barcoding, hardware, software; VARs, ISVs) and its Intelisys community (voice, data, cloud services; agents) and, at every opportunity, implored them to become “hybrid” solution providers selling far beyond their current linecard.
The two-and-a-half hour general session Oct. 3 deluged the audience with tools designed to create superhighways between ScanSource and Intelisys offerings. For example, a series of videos featured VARs and agents turned hybrid solution providers testifying about the rewards of their new-and-substantially-improved business model. “We have grown exponentially,” said one, while another attested “the world opens up to you.” A third said, “Today when our customer calls us, they know we’re going to have a solution to their problem.”
Later on the main stage, during a presentation by ScanSource SVP of Worldwide Marketing Ansley Hoke, a 12-foot QR code appeared on the screen behind her with the question, “Interested in becoming a hybrid sales partner?” If that wasn’t overt enough, at the same moment all attendees received a push notification through the Channel Connect app with the message, “!! Interested in becoming a hybrid sales partner? !!” followed by a link to a form to help the VAR or agent get started.
A host of other ScanSource and Intelisys executives took the stage (I’ll share some of their quotes later in this post) repeating the same core message making the case for hybrid: The convergence of technologies fuels new opportunities; VARs and agents are positioned to seize these opportunities — if you act and adapt for the future; and if you don’t sell it, someone else is going to.
That message itself isn’t what’s earth-shattering. The RSPA and other channel leaders have been preaching Total Solution Provider to every VAR and ISV within earshot. What’s different here is that ScanSource isn’t merely crossing its fingers that its partners take the hint. They’re investing seemingly every resource available in the $3.5 billion organization to make an army of hybrid solution providers a reality.
Payments and POS Eventually Converged, Is “Hybrid” the Next Big Thing?
ScanSource’s hybrid message was top of mind when I ate breakfast with a few RSPA VAR and ISV members on Day 2. After our discussion, I jotted down the 10 steps that make a new concept in our channel a reality:
#1 Aware of the concept
#2 Think about the concept
#3 Visualize the end state or versions of the possible end state
#4 Talk through the concept/end state with other channel executives, shape the idea
#5 Execute part of the concept poorly, measure your results and adapt
#6 Execute part of the concept better, measure/adapt
#7 Execute part of the concept well, measure/adapt
#8 Execute more of the concept well
#9 Simplify/streamline the offering and the execution
#10 Continue measuring, refining, and adapting
Channel Connect 2022 helped most with steps 2-4: think, visualize, talk through. This was the first conference I attended where several traditional POS resellers were strategizing at length with each other how to offer UCaaS (Unified Communications as a Service) and other services not exactly adjacent to their core offering. Among ScanSource’s goals this week appeared to be moving the retail IT channel’s Overton window (the range of ideas and practices considered acceptable by the mainstream at a given time) towards voice, data, and cloud services solutions, and to move the Intelisys community’s Overton window towards hardware and software. Based on my conversations in Nashville, several leading VARs are ready to maneuver through that widened window.
The next challenge for ScanSource and other retail IT channel distributors is executing with their partners. I don’t see this phase as having a 2023 finish line. ScanSource President of Global Business Strategy Mark Morgan said during his main stage talk that the company has been working on shaping this new reality since 2015. So, if a resource-rich org like ScanSource needs nearly a decade to move this far forward, SMB solution providers will need time (i.e. years) as well.
Good news for VARs and ISVs on this front is a path is being cleared for them to follow. It’s not paved or even a dirt road yet, but distys and vendors are making the path visible and shrinking some obstacles. I believe distributors are central to making the Total Solution Provider/hybrid solution provider a reality in retail IT. They have the products, services, and support infrastructure that can show VARs and ISVs the way.
RSPA members I talked with speculated TSP/hybrid could follow the route of another industry paradigm shift: the convergence of payments and POS. Until Mercury Payment Systems came along in the mid-2000s, payment processing and point of sale were separate. When Mercury introduced the “integrated payments” concept, much of the channel community shrugged, bristled, or scratched their heads. I recall meeting Mercury co-founders Jeff and Marc Katz at the 2006 RSPA Winter Conference (now called RSPA Inspire) where they shared with me a three-minute version of their vision. To be honest, I didn’t get it. I wish I would have asked them questions to better understand, but the concept was too new for me – and the rest of the industry – to know what a good question would be.
Fast forward a few years, and Mercury became the top dog among dozens of payments providers working with VAR and ISV partners – and paying them handsomely – before being sold to Vantiv in 2014 for $1.65 billion.
“We need to stop telling ourselves ‘that’s not what we do’”
Several Channel Connect presentations featured ScanSource and Intelisys executives side-by-side, speaking in sync to their respective constituencies. Two talks that stood out to me were given by ScanSource CEO Mike Baur and the aforementioned Mark Morgan, who both focused on the hybrid concept. Among Baur’s statements:
- We’re always looking for opportunities where the market is changing, and the indirect channel is needed. We really have changed to what we’re calling “the new ScanSource.”
- Nobody likes going through a transition. I’m glad to say today we’re a transformed company. You should be excited about what we’re doing now and what we see for the next five years.
- This is an amazing time to be in the technology business. It’s also a risky time. … You have to be ready to take advantage of these opportunities.
- This is not easy money. You have to build your company differently to take advantage of these opportunities.
- The new hybrid environment will add complexity to the sale. It’s attractive for us to say, “you’re going to make more money,” but, again, this won’t be easy.
- It’s going to be hard to change from what you’ve been doing for the past 10-15 years. But if you do, you’ll attract the right people to your business and you’ll have a future that’s extremely bright.
Morgan said, with giant “HYBRID” text on the screen behind him at times:
- The traditional linear business model is evolving into an ecosystem.
- We need to stop telling ourselves “that’s not what we do.”
- I challenge each of our sales partners to leave here with six new supplier partners. And I challenge our suppliers to leave here with at least 50 new sales partners.
- This isn’t the old replacing the new. It’s the old enhancing the new and vice versa. This is all “and” — it isn’t “or.”
Just before the conclusion of Channel Connect, I met one-on-one with ScanSource SVP of Supplier Services Brenda McCurry so she could help me sort through all these changes. We talked about much of what I just outlined above, and she provided depth to ScanSource’s – and our channel’s – go-forward path. Top insights from our conversation include:
- Initial steps for VARs and ISVs who endeavor to be “hybrid”: “This will be crawl, walk, then run. The first step is to talk with your account executive and then meet with our hybrid business development team. They’ll have a conversation about your business, understand where you want to go and what you’re not doing today, and then build a plan with you and bring in resources as needed.” McCurry added that ScanSource has five full-time employees on the hybrid team, all with years of experience in the VAR channel.
- Traits of successful hybrid solution providers: “The ones we’ve worked with invest in their sales team, are focused on their customer base, and they have specialization. At RSPA RetailNOW earlier this year, we saw lots of partners working towards specialization. You have to be a total solution provider. You have to go beyond one offer.”
- Behind the scenes at ScanSource to make hybrid a reality: “We made a conscious effort five or six years ago to move in this direction. We invested in platforms (e.g. SAP) so we could grow. We grew organically and through acquisitions (e.g. POS Portal, Intelisys). We did that because we saw the market going here. This was very intentional.”
- Where the retail IT industry goes from here: “We wanted to send a message loud and clear that we can be the partner to help you through this transition. We teased it this week, and next we’ll have deeper conversations with partners.”
The RSPA has witnessed an increased level of sophistication among our member base, both longtime VAR and ISV members and the 200+ new member companies we’ve added over the past 17 months. That’s due in part to our staff and several community members frequently sharing Total Solution Provider best practices. But distributors having the desire and wherewithal to help VARs and ISVs become Total Solution providers/hybrids should be even more impactful because of their immense power, connections, and resources.
Understand that distys won’t be able to fast-track this transition because the complexity of the situation won’t allow it. Years are likely to pass before we can say the retail IT channel “made it” to where this journey will lead all of us. But, make no mistake, the new shape of the future of our industry is in full view.