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RIP the Old World & Why Cloud Causes Inevitable Change

Date: Apr 17, 2013

Category: Blog

Guest Blog: By Ian Moyse – Sales Director, www.workbooks.com
Eurocloud UK Board Member & Cloud Industry Forum Governance Board Member.

“We change our behaviour when the pain of staying the same becomes greater than the pain of changing. Consequences give us the pain that motivates us to change”. Dr. Henry Cloud & Dr. John Townsend

The need for change and acceptance of the fact that your status quo for business may be no longer be viable has never been truer.  I have been speaking on the effect of the cloud (internet based service and supply) for the past eight years and in the past two have provided much comment on the visible effects we have and are seeing.

Before commenting on why IT supply chains have to adapt and why now is the time to take action I would like to draw context from other sectors and the customer experience they deliver that is causing a well-publicised demise.

In recent months and weeks unfortunately this has become a very visible truth to all concerned. We saw Kodak (a company I just watched in a 2yr old episode of TV’s Apprentice USA edition boasting of their size and brand strength) gone, devastated by the change in how we digest our photography. Consumerisation  of mobile devices is driving many to abandon the traditional camera in preference to using their inbuilt ‘always with’ camera phones.  With this and the online storage and photo media tools such as Flickr, Instagram, Facebook, YouTube (and I could go on) how many of us today use film or pay for developing pictures?  We store and share them electronically, use digital photo frames, email them, print them on our own printers often as very high quality photo paper prints and at best for the retailer or E-tailor we upload and have them post us the prints. Even this is in our favour as the customer, if like me, will realise most sites offer initial print deals – ‘sign up to a login and get your first batch of prints free paying postage only’ type offers abound. Simply register to a new site of with a different email address each time and your prints remain almost totally free. In the same arena we have in the UK Jessops a chain of 176 photographic stores that in January 2013 called in the receivers (costing 1370 jobs), this following electrical store chain Comet (79 years in business) who in December 2012 did the same.  Two major recognised high street brands failing, coincidence right!?

Well no. Soon after we have seen in January 2013 two more high street brands with nationwide stores also failing and throwing in the towel.  HMV (His Masters Voice) a retail chain founded in 1921 and Blockbuster video (closing 129 stores), darling of the VHS video era both becoming further victims to the change afoot in our buying habits and the delivery mechanisms available to us all. I remember with nostalgia going into music stores such as HMV and Tower records (they collapsed in 2006) And browsing the products finding music, games or movies I did not know we’re available. With the internet those days are gone, you know products are coming months before and can easily one click Pre-order, not waiting to buy only when available. You can pre listen to samples or watch video clips and you can do this virtually from anywhere at any time. Add to this that with no bricks and mortar to fund, the online pricing is naturally cheaper and delivered right to your door (I am sure we have all seen all those Amazon packages arriving in the work post, some larger companies trying now to ban this as the work post load has increased dramatically as a knock on effect).

For two years I have spoken at events of example business areas that the cloud/internet will or is affecting and had slides on five areas as examples; music stores, video stores, book stores, greetings card stores (affected for example by online cards,  eg Bluemountain.com the likes of moonpig.com producing personalised real cards sent to you, having an effect on Clinton cards (founded in 1968), a wide retail chain across the UK that left us in mid 2012 operating 750 stores and 8,000 staff) and photography.  All obvious examples where the traditional delivery and business models were being superseded by faster, more flexible, more customer friendly and cheaper offerings!

The big punch for me was when on a recent evening sat watching TV I happened to notice following an advert for moonlight.com, the next was for online E-tailor play.com, my attention was perked so will the next advert also be a .com only provider?  Yes, and the next and the next.  Five yes five adverts in a row were for online providers who have no traditional supply channels, who were names that perhaps five years and certainly 10 ago no one would have recognised and yet here they are paying high television advertising prices and dominating the airtime prime time.  The change is here, not coming, and the failings of the traditional supplier brands who have not adjusted to the customer demand lays heavily on their own shoulders:

“Change is hard because people overestimate the value of what they have — and underestimate the value of what they may gain by giving that up”. Flight of the buffalo: James Belasco & Ralph Stayer

So how do the traditional providers fair against online?  Well they have advantages; existing brand image/name, established outlets, customers can touch and feel the products, personal service, you have the customer right there for closing in person and you have the ability to enthuse and delight your customer by the real world experience you give them. So do they?  Well there are examples such as Hollister where it’s all about the customer experience they have created, Apple who do an excellent job of the customer experience and Disney stores who also drive that excitement when you enter. However this is not the norm.  In the recent month whilst comparing the online world which has driven increased sales, rapid smooth deliveries to the real world what has my experience been?

Firstly stores that are dishevelled, disorganised, some downright messy and not a pleasure to shop in, they are just there!  Staff who more often than not are not excited to serve you, don’t show interest and don’t enthuse you to buy there and then… I recieved an HMV gift card for Christmas (thank you that person) so I go online to their site to use it and guess what – you can only use it in store!  Where is the consistent brand, the customer experience (apart from bad) and the understanding of how this customer world works!  Finally having bought a gift for someone in the inevitable wrong size they want to go and change it. The receipt is duly provided to them, they go to their local version of that store and any guesses?  Was it a smooth customer experience from a real world store?  NO they were told you can only change it at the store you bought it at, not in any way convenient to them as it was 40 miles away.

So in today’s competitive world where the customer is certainly the Prince if not King and has no need to put up with less than quality service, where freedom of choice and price is rife and historical brand loyalty is waning fast it’s time that real world brands wake up and smell the coffee. Customers are more fickle and can afford to be and you are being challenged fast.  Brands such as Blockbuster and HMV could have been the Netflix/Love Film or iTunes of today if they had ten years prior not stuck their head in the sand and been glued to their legacy ethos and business mantras.  I am sure in many a boardroom today organisations are looking at new business models and brushing them aside as not a risk, ‘we’re doing okay’, ‘customers won’t want that’, ‘it’s too big a change’ and the like phrases being happily bandied around.  Think back, listen to the news and consider how many of today’s casualties are now paying the unfortunate price for ignoring change.

Will this be the end, no?  It’s predicted by retail analysts that entering 2013 over 120 retail Brands were on the precipice and the cloud storm of online competition and service delivery continues to heat up.  More mobile smart devices and tablets are being sold, bandwidth and access is becoming increasingly available, faster (4g with 5g not so far off) and cheaper.  It’s rare now you are disconnected for long, even on holidays, on the train, car and in the USA on demotic flights now even on planes.  Younger buyers expect to have a modern fast and appropriate engagement with companies and ignore this at your peril!  Why do we not have more stores embracing technology, incorporating it into the experience, smart screens in store,free WiFi, a seamless online and bricks and mortar experience and a created in store experience that can’t be delivered online,  go visit those Apple, Hollister and Disney stores and learn fast.

The zeitgeist today is online, mobile access and this will only accelerate, do not ignore it.  Multi-channels and new ways of engaging with customers are here now, not something to put off or worry about later. The customer is king in their choice of buying medium and certainly is a more educated buyer from the wealth of information available at their fingertips, anytime from anywhere.

From an IT channel viewpoint this isn’t you right?  This is retail and you can do as you have always done.  Wrong.  Analysts and the channel press are already reporting losses in the IT channel and expectations are that a lot of it resellers are on the brink.  We have seen 2e2, a large reseller in the UK fold in early 2013 with losses of around 1,000 jobs (this after they bought over the years by Morse Group, Netstore and Compel to bolster their size) and Fujitsu recently announcing a reduction of 5,000 staff and of course HP’s cuts of 30,000+ staff even prior to the Autonomy $8bn write-down being discovered!

Doing the same old same old won’t deliver those old margin retaining results we all enjoyed ten years or more ago. In our sector this is not only about supply and demand competition from online stores for physical product, but much like comparing Netflix to Blockbuster we are seeing many IT solutions fully moved to the cloud.  Meaning the actual customer no longer procures physical goods of hardware and software and no longer needs someone to plug it together and come out and maintain and upgrade it. Having spent the last 36 months around Europe evangelising to IT channels ‘why adapt to the cloud’ and the risks of ignoring it, I have witnessed  a mixed reception.  Those that are already there are doing well and want it kept quiet and to themselves,  those that agree are trying to figure it out and it’s nuances (cashflow changes,  value propositions , commission schemes, etc) and unfortunately the majority are ignoring or putting off doing anything about it.

The clear warnings are there for us all from many other industries. Nothing is sacred or safe and everything needs review and forethought to ensure you do not become one of the ‘do you remembers’ of this economic and technological change. I have said to many, ‘ignore it at your peril’. No I am not saying everything will be cloud, but review, appreciate, understand and make smart decisions; do not assume the cloud will not affect you and your customers!  There will be less product sales, installation and break/fix around as customers burn IT longer and selectively adopt new cloud based solutions to mix with existing on network ones. Localised hardware will need less  upgrading as cloud solutions only need that browser footprint, so expect refresh rates on PC’s or local devices to slow. Less server hardware will be sold as customers utilise the multi-tenancy servers at the Datacentres to get more affordable and reliable server power, and that sold will be to the Datacentre, not to the actual customer.

Also understand that you will compete with a variety of new challengers from cloud-only resellers who are nimbler, educated on the cloud and are built on the annuity and cloud billing model, through to MSP’s, ISP’s and telecoms providers who step wider from their previous supply chains to deliver an increasing number of billable services to clients.

There is a need to understand how your customers want to engage with you, how they expect you to provide value and that their relationship with you is likely to change as they become more aware of the options available to them, of other ways to get support, to digest IT and to interact with suppliers. Do not become ignorant to the changing engagement models as other industry leading brands have already demonstrated the dire consequences this can bring.

If you feel it is a threat, is going to have an impact on your business, then address it and start now.  Don’t ignore that feeling or put it aside for a later day, as that day may be too late.  We are seeing faster technological change than ever before and it is all too easy to fall from that ledge that you saw approaching and ignored. The proof point’s are all around us and believing the IT sector is immune and you can weather the storm by battening down the hatches and doing what you have always done is blinkered.  Now is the time to educate, adapt and resolve to make changes to ensure future success and alignment with customer needs and spend!

“History will be kind to me … because I intend to write it”. Sir Winston Churchill

If you want to read in depth the ifs, buts and ors of cloud in the Channel I wrote a series of four free vendor agnostic papers on reselling cloud that were well received and reviewed in late 2011, most of which bears true today. Please contact me via www.ianmoyse.co.uk to request copies.

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