latest thinking

Nowadays, large organisations see much of what’s considered to be standard networking equipment – routers, switches, and firewalls – as commodities. Commodities usually have three characteristics in common: they’re standardised, readily available, and cheap, regardless of who supplies them. At least, they ought to be. So, in light of global pressure to keep ICT budgets flat while accommodating rapid growth, businesses are asking increasingly searching questions about who they get their equipment from, at what total cost of ownership ... and why.

Gorillas on Your List –A Diversified OEM Environment Can Lower Your Risk

Tough questions are changing the landscape for large OEMsAccording to Dimension Data’s Baba Nadimpalli, US Client Director, and Christine MacKinnon, Global Managed Services Vendor Manager, businesses want to know why they should pay a premium for a commodity. Are they staying with a particular original equipment manufacturer (OEM) simply because they’re familiar with its products and their engineers are certified in supporting them? And, by aligning with a limited number of OEMs, are they perhaps missing out on more innovative and cost-effective technology that would suit their evolving environment better?

‘Businesses are also wondering if it’s really worthwhile to refresh devices as often as stipulated by OEMs simply to stay with

premium products that are supported,’ adds Nadimpalli. ‘Maybe their so-called “ageing” equipment is doing a perfectly good job in spite of having no OEM to call on if it breaks? What are the real risks of pushing the end-of-life boundaries?’

These questions are changing the game for large OEMs – the so-called ‘gorillas’ of the ICT market. Says Nadimpalli: ‘Large OEMs are beginning to realise that the trend among the majority of clients is towards greater diversification, not towards single-vendor estates. Some OEMs even acknowledge that a multi-vendor approach just makes more sense for a client because it lowers operational and commercial risk and helps to future-proof the organisation’s environment. However, some client organisations aren’t quite ready yet to move boldly in that direction ... and for good reason.’

latest thinking | Gorillas on Your List – A Diversified OEM Environment Can Lower Your Risk

Navigating the changing landscapeHaving too many vendors in your network is just as risky as having one ‘gorilla’. It becomes difficult to achieve scale and management is complicated. You have no leverage, limited ability to negotiate on price, and added operational complexity. Cheap to acquire is also not necessarily cheap to operate. With a single ‘gorilla’ on your network, it might seem less complicated, but it is a road fraught with a different set of risks, such as being tied to the vendor’s strategy. The ideal situation is somewhere in the middle: a balanced approach with a few carefully selected and well-managed vendors.

Global expansion made easier with multi-vendor approachThe changing vendor landscape was clearly illustrated in the journey Nadimpalli saw one of Dimension Data’s long-term clients take, over the last few years. ‘As a large and well-known software provider, this organisation was itself deeply integrated into the ICT market and maintained valued mutual relationships with prominent OEMs. As a result, the software provider’s environment was as much as 80% single-vendor focused – a situation the business began to see as both risky and expensive to maintain.’

‘The client then took the bold decision to reverse the trend by putting out to tender each and every piece of networking and security equipment – from software phones to specialist routers. It wanted to better understand whether the business was paying the right price for this equipment; whether it was paying for what it needed, or more; and whether procuring the technology at that price was really maximising the benefits for the business itself, and not only for the OEMs that provided it.’

This new multi-vendor approach proved particularly beneficial when the organisation embarked on a more aggressive growth strategy a few years later. Says Nadimpalli, ‘From 2010 onwards, the organisation began acquiring businesses at a rate of up to 12 acquisitions per year. With these acquisitions came an ever-broadening range of vendor brands.

‘The acquisitions also brought new employees with a variety of certifications. Had the organisation enforced a rigid one-vendor policy, it would have incurred unnecessary costs, lost qualified employees, and negated the flexibility and expertise brought into the organisation through acquisition. Later, the organisation settled on a range of OEMs that best aligned with its strategy, and enforced the implementation of these technologies as a global standard. But before reaching that point, the multi-vendor approach helped ensure that it maximised the gains from its rapid, global growth.’

This new multi-vendor approach proved particularly beneficial when the organisation embarked on a more aggressive growth strategy a few years later. Says Nadimpalli, ‘From 2010 onwards, the organisation began acquiring businesses at a rate of up to 12 acquisitions per year.

Financial benefits above all else Nadimpalli points out, however, that the success of this approach greatly depended on how the organisation was run. ‘Our client is managed with strict financial goals and business outcomes top of mind. In such an environment, there’s little tolerance for decisions made either to maintain a comfort zone, or out of loyalty. All decisions had to make business and financial sense. In contrast, many organisations still operate as though the equipment or devices they procure are the most important aspect that determines success – there’s a focus on features and functions, rather than on overall strategic intent.’

MacKinnon points out that another determinant of success with the multi-vendor model is access to the right level of skills and expertise to ensure that all components of the disparate OEM environment interoperate optimally. ‘Here, the organisation can choose to acquire, retain, and develop in-house expertise through training, or use the services of an appropriately skilled systems integrator. The in-house route is both more risky and expensive. It’s risky, because the business can never be sure that the skills and expertise it invests in today will be those it would need most in the future. Technology evolves rapidly and often unexpectedly. This is one way in which a broader multi-vendor approach can help future-proof the environment. In-house upskilling is also expensive, because specialist skills in niche technologies are scarce and difficult to retain. Outsourcing this risk and cost to a service provider that can aggregate support for a broader range of OEMs in your environment is clearly a better way to go – financially, operationally, and with the future in mind.’

latest thinking | Gorillas on Your List – A Diversified OEM Environment Can Lower Your Risk

Training and certification: a double-edged swordFocusing on in-house skills development can be a double-edged sword, adds Nadimpalli. ‘Keep in mind that the certification process is key to the channel strategies of OEMs. When today’s largest OEMs started out, the only way they could grow their international footprint rapidly was through providing training and certification to integration partners, as well as to engineers within large client organisations. This created a natural tendency within those organisations to favour that particular OEM ... even years later.

‘Those relationships are still strong today, as those engineers have moved into decision-making positions. In fact, some client organisations get substantial OEM discounts as well as high-level access to experts and product knowledge within the OEMs, even more readily than integrator partners do. But certification and preferential treatment also tie the bond between the client organisation and the OEM more tightly, which makes it all the more difficult to adopt a multi-vendor approach.’

Smaller vendors also use training and certification strategically, says MacKinnon. ‘Large OEMs simply can’t lead in all areas. So, while all OEMs use as much training and certification as possible to ensure they move more product, some smaller vendors are beginning to realise the benefits of niche specialisation and focus more of their training on interoperability. This is particularly true in the security arena where the risk of hedging your bets with only one vendor is more pronounced. This focus on tight specialisation and maximum interoperability provides smaller vendors with a foot in the door in large multi-vendor environments, as well as a chance to gain trust through partnering with knowledgeable systems integration partners.’

Seeking a systems integratorIn this highly competitive and ever-evolving landscape, it’s not easy to be an organisation that’s thinking about diversifying. ‘Organisations are understandably nervous about moving away from large OEMs with which they’ve forged close relationships,’ says MacKinnon. ‘They fear losing any preferential treatment and weakening their negotiating position with the OEM. It’s also impossible to transition the environment all at once because you can’t change your entire infrastructure overnight – you need to do so component by component, section by section.’

‘Moving to a multi-vendor approach requires a high level of decision-making maturity in the organisation in order to evaluate OEMs without bias and with a focus on strategic benefit,’ adds Nadimpalli. ‘The process must be formalised and well managed, as everyone – from the top executives and throughout the business – needs to understand and align with these decisions.’

‘An ICT services provider with broad and in-depth skills, and close relationships with a range of leading OEMs, can be invaluable in helping this process along,’ advises MacKinnon. ‘But it’s crucial to select the right partner. Beware of multi-vendor ICT services providers who still act as extensions of the OEMs’ businesses and approach each opportunity as an individual vendor-led sale. Rather, your ICT services provider should be an extension of your business in finding the right OEM to suit your environment.

Make sure you’re not blindly following the strategy of any one ‘gorilla’ on your list. The ideal partner should understand your organisation’s business and adopt its goals and ambitions as its own – whether it’s cost-reduction, efficiency gains, or aggressive growth and expansion. The ambition of your partner should be to help you evolve your technology environment to best support your vision’.

CS / DDMS-1458 / 01/14 © Copyright Dimension Data 2014 For further information visit: www.dimensiondata.com

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