Everyone who works in and around the technology channel knows it can be a tough environment in which to make a living, especially from a competitive perspective. While the channel population may be shrinking and the dynamics changing, partners still need to be fully prepared to grow and sustain their businesses under ever-present competitive pressure.
According to The 2112 Group’s 2014 Channel Forecast: The Shrinking Channel study, 37 percent of solution providers report having at least seven or more direct competitors, and 27 percent report having more than 11 regular competitors. The vast majority say they compete with at least four IT channel companies on a regular basis. (See chart below, which shows the number of companies against which solution providers compete regularly).
While smaller solution providers have fewer regular rivals because of their more defined competitive sets, the overall implication is that channel competition levels are high even if solution providers have not been good judges of competition levels historically.
The tide may be shifting in the solution providers’ favor. As the 2112 Channel Forecast points out, the number of solution providers is on the decline even as the number of customers remains steady.
The declining channel population could lead to greater efficiencies and higher returns for partners; and a smaller channel population means less competition between solution providers, more price stability and a broader distribution of accounts.
In the meantime, it’s important for solution providers to remember that competition – particularly for smaller, younger businesses – is not a bad thing. Studies show exposure to competition in the early stages of a firm’s life increases its long-term survivability.
Challenging environments force companies to focus on satisfying customers and containing costs.
That’s part of the reason Southwest Airlines groomed itself with a quick, no-frills approach early on to compete in the crowded commercial airline field.
It’s also why U.K. billionaire Richard Branson’s Virgin Group goes out of its way to generate competitive pressure. At Virgin, business units in low-competition markets are required to compete with one another internally to create an efficiency-based, low-cost culture.
A firm’s early and successful exposure to competition has a hardening effect, much the way friction creates callouses that afford long-term protection against skin damage. Smart business leaders understand exposure to moderate levels of competition can have long-lasting positive effects on efficiency and survival.
"2112Group Reports" is a series of blogs produced by The 2112 Group and published exclusively to the Intronis Cloud Backup and Recovery blog, offering insights on business and technology trends in the channel. Visit The 2112 Group on the web atwww.the2112group.com and www.channelnomics.com. Follow them on Twitter@the2112group and @channelnomics.