Leadership Panel Provides SWOT Analysis Of Channel At RetailNOW 2015
At RetailNOW 2015, Retail Solutions Providers (RSPA) president and CEO Kelly Funk asked a panel of channel executives to offer their views on the strengths, weaknesses, opportunities, and threats in the retail IT channel.
Strengths
Greg Dixon, CTO of ScanSource, said one of the channel’s current strengths is a recovering economy — consumers are spending money and merchants are finding budgets for IT. He said, however, this is occurring at time of change. “I don’t remember many times when customers needed a trusted advisor more,” Dixon commented. Without guidance from retail IT VARs, merchants could make short-sighted decisions. (Dixon mentioned seeing mag stripe reader purchases with the EMV liability shift just months away.) “VARs need to be advisors,” Dixon stressed. “Implement solutions that are future-proof.”
Henry Helgeson, CEO of Cayan, said the advisor relationship that retail IT VARs have developed with their install bases — in some cases built over decades — is a significant strength.
Joseph Majka, CSO of Verifone, and Oliver Manahan, VP or emerging payments at Mastercard, both cited the channel’s experience with electronic payments as a strength, especially in light of data that shows electronic payments use is growing and payment volume is increasing.
Jeff Yelton, VP and GM at Ingram Micro, urged VARs not to look only at the intersection of payments and POS and in their businesses, however: “Look at payments and commerce.” Yelton said most consumers no longer simply go to a brick-and-mortar store to shop — he said 60 percent of consumers make their buying decisions outside of a physical store. “To help retailers we have to connect with the customer at a different place,” he explained. “As business partners in this industry, we can take a much broader view of what a commerce solution is instead of just a POS solution.”
Reseller panelist David Shaw, president and CEO of Postec, said from his perspective, the strength is the RSPA and its members, “an association you can lean on and learn from” to be equipped to capitalize on these strengths.
Weaknesses
The panel also pointed out areas where the channel can improve or has challenges to overcome. Manahan said one challenge is dealing with legacy systems, which has been a significant hurdle and source of frustration in the migration to EMV payment technology. “People are used to pushing a button in an app store and getting an immediate upgrade,” he commented.
Helgeson added that the lack of agility of some existing players in the channel is a weakness: “Whether it’s attitude or technology, I don’t think they’re as nimble as some of the new players.”
Dixon said the “wait and see” attitude some channel members have taken toward EMV certifications is also a weakness. “I think that’s going to hurt us,” he said.
Opportunities
The panel agreed, however, that EMV is also an opportunity, creating churn and leading to additional sales opportunities. Manahan said, “Security will become table stakes. EMV is one of many layers. As you provide security, take a periscope mentality — look around and see what else is going on.”
Helgeson said SaaS provides another opportunity — the chance to move to a recurring revenue business model, which, he says, “is more stable and more valuable to investors.”
Shaw agreed, but recognized VARs need to find the bandwidth and cash flow to make the transition to the as-a-Service model. He said his company started by providing firewalls, now managing them on a monthly subscription basis. Shaw says his company has benefited not only from the predictable revenue, but also from strengthening relationships that has resulted in clients turning to Postec for all of their IT.
Dixon stated a business with recurring revenue is five to seven times more valuable than a break-fix business. He said VARs need to position themselves to successfully adapt to changes, such as the shift to managed services. “If we fail to pay attention or are just too slow, then survival is at risk,” he warned.
An emerging opportunity, says Yelton, is predictive analytics. He urged resellers and the RSPA to begin exploring related issues such as data governance. “Who owns the data? Who has access to that data? That’s going to be key for us in the future. It’s something we need to talk about as a group and start having discussions with our partners,” he said.
He also pointed out that payment processing companies have the network in place that provides a view of the customer across all the paths. He said whether they will become VARs’ partners or competitors to provide analysis of this data is yet to be seen. Yelton pointed out, however, “I think if you combine their knowledge with that of [retail IT VARs], that’s a powerful statement.”
Threats
A number of the threats the panel listed involved solutions providers outside of the traditional POS space — network, data center, or new software solutions — beginning to take an interest in merchant clients. Dixon said mobile POS, for example, is a threat because it opens the door to the retail store to IT solutions providers who haven’t been there before. He pointed out, though, this situation can be an opportunity for retail IT VARs to counter by becoming mobility specialists.
Majka also stressed that security will continue to be a significant threat into the future. “EMV’s not going to be the silver bullet to stop crime. It has to be a part of a layered approach to security. It will be unlikely that everyone can keep hackers out of their systems, so we need to make data useless to criminals with encryption and tokenization.”
The Best Advice For VARs
At the close of the session, each of the panelists offered their best advice to VARs:
- Yelton: Take advantage of the EMV opportunity — don’t let that one go — and look at trends, taking time to step out of your business and manage your business.
- Shaw: If you want to be a player in payments, provide security and be a trusted advisor. They’re going to depend on you for this EMV shift, and you might as well be the seller of their payment processing.
- Manahan: Be agile, and take an approach to solutions that is modular —somewhere down the road the solution you created for one client could be used again.
- Joe: Make sure you secure devices.
- Helgeson: There will never be a bigger or better opportunity than now to try to talk clients into coming over to a residual program. Those who don’t do it this year will regret it.
- Dixon: Stop calling yourself a POS VAR. Transition to become a supplier of complete retail IT solutions.