Recession Proof Selling -

Recession Proof Selling

Although people may feel like they know what a “bear market” means, the term has many connotations amidst analysts and economists. According to Nerd Wallet, the general overarching features include:

A bear market is defined by a prolonged drop in investment prices — generally, a bear market happens when a broad market index falls by 20% or more from its most recent high.

This kind of drop is usually followed by an overall downward trend, shaking consumer confidence and stocks. Many companies begin to limit their spending and hiring as a means of protecting themselves from a possible recession that can follow a bear market.

Bear markets are characterized by investors’ pessimism and low confidence. During a bear market, investors often seem to ignore any good news and continue selling quickly, pushing prices even lower.

On this post:

Channel Partner Sales in a Bear Market

As companies pull back in their investing and overall budgets, channel partners face a challenge with their maintenance clients. How can you continue to grow your business and be good maintenance partners when budgets are shrinking? What if clients are not able to buy that new Cisco networking equipment you have a great deal on? What if their HP server is not ready for the usual upgrade due to budget uncertainty?

The good news for the channel is that this represents a mutually beneficial opportunity for your clients and your own revenue goals. Channel partners should start by asking themselves whether you are employing the right strategies to support your clients or if you need to expand your approach. The first step is evaluating what offerings you are currently able to bring your maintenance clients.

Data Center Equipment Extension of Life Services

In a volatile market the strategy should change from selling new equipment to selling services to extend the life of the equipment a client already has. This approach means companies aren’t struggling to fund large CAPEX purchases, or worse, going without the coverage they need on their existing, functional equipment simply because the OEM has deemed it at “end of life” and refuses to cover it. It also keeps your clients from being solely reliant on the long equipment lead times.  Those supply chain disruptions are still a very real problem for IT department planning.

It is true that many OEMs do offer extension of life on older equipment. Unfortunately, the pricing is usually cost prohibitive, making it an impractical solution for many customers. Without a channel partner that can offer a hybrid maintenance solution, clients are in one of two scenarios for continued support.

In the first scenario clients find themselves stuck between an increase in CAPEX to buy all new equipment or delaying the functions and benefits a newer model may offer in some of the critical parts of their data centers. In the second scenario they are facing an increase in OPEX to pay the higher prices the OEM charges to continue support on older equipment. Hybrid maintenance offers not only a way to avoid buying all new equipment every 3-5 years, but it also offers a way for clients to reduce the support prices they’re currently paying on older equipment, essentially eliminating CAPEX and lowering OPEX for certain equipment.

Extension of Life gives your clients the ability to:

  • Use what they have to power their IT
  • Reduce costly CAPEX expenditures
  • Decrease OPEX spending

What does “end-of-life” mean for IT hardware?

The reality is that just because the OEM has deemed a piece of equipment at the end of its life, that does not actually mean the equipment is no longer functional. Analysts agree that a large portion of equipment in your clients’ data centers can function for years beyond their “end of life.” Many have such low failure rates to begin with that following an OEM refresh means clients could be throwing away good equipment and their IT budgets for no reason. Network switches have been shown to have a useful life of up to 10 years (though most analyst recommend switching core switches and routers out every 5-7 years).[1]

Analysts recommend that companies working to get a better understanding of when to replace enterprise equipment:

Upgrade or replace network equipment only when the risks become unacceptable or significant new technical requirements emerge. [1]

What is a hybrid maintenance strategy?

Working from a hybrid maintenance management strategy means that channel partners can take a much more holistic view on a data center’s maintenance needs.  A hybrid strategy recognizes that while not all data center equipment needs to be refreshed on an OEM’s timeline, not all data center equipment should be supported exclusively by TPM either. There is critical equipment that should always stay under OEM support but there’s a large portion of your clients’ data centers that would benefit from TPM support. Putting even a small portion of a data center onto TPM support allows a client to create considerable savings on their overall IT budget year after year.

Freeing up those funds allow for a couple of important opportunities:

For the IT Maintenance Client

  • Relieve purchasing pressure in a volatile market.
  • Saves money (customers pay an average of 40% less using TPM to extend equipment life over OEM).
  • Creates a more sustainable IT:
    • TPM slows the path of equipment entering waste resources.
    • Using a company that employs artificial intelligence in their maintenance service delivery creates resources tracking and refinement, ensuring companies are positioned to meet new policies for energy and waste reduction.
  • Funds digital transformation initiatives: Clients can use the support savings to make bigger purchases on new equipment or invest in innovation projects for their digital transformation initiatives.

For the Channel Partner

  • Increases your value with your customer:
    • Customers are shown how a partnership with your company can give them better overall outcomes that flex with their changing needs.
  • Increases margins: reseller margins are 30% on average for TPM support sales (much higher than most hardware sale margins).
  • Expands your offerings:
    • Partnering with a TPM provider can give channel partners the ability to offer more service capabilities quickly and easily. TPM support provides more flexible terms than an OEM offers on aging equipment.

By reframing the offer to include a Hybrid Maintenance model with third-party maintenance support (TPM), channel partners free their sales teams to create new offerings for existing clients.

When evaluating a TPM vendor for your clients’ support make sure you are able to offer recommendations on which equipment they should consider switching to TPM and which you would recommend stays on OEM. The CloudCover platform gives our channel partners and their clients a dynamic overview of vendors, contracts, and expiration dates to help guide this conversation for our channel partner clients with their customers.

Protect and grow your clients in a bear market

There’s are several benefits to adding a hybrid maintenance approach to your current maintenance customers. In general, incorporating TPM saves everyone money. Clients can purchase services or equipment for almost half the price  they would pay with an OEM. Channel partners get increased margins on service sales resulting in a much higher return for your sales team than when you sell hardware to clients.

With the current market your clients are likely already facing budget and uncertainty pressures. Equipment lead times aren’t getting any better and the cost of goods is still under strain from the pandemic. Starting a conversation around incorporating TPM into their support portfolio is a great way to grow your business while respecting and protecting their budgets.

[1] Gartner, “Know When It’s Time to Replace Enterprise Network Equipment,” Caio Misticone, Mark Fabbi.