The days of pushing boxes for solution providers are long gone. Solution Providers with a full suite of advisory, professional and managed services who can serve as trusted business advisors have significant opportunities before them in today’s market. But they also have plenty of challenges, including changing customer buying habits, shifting business models and encroaching technological disruption.
It’s a stated imperative among the most successful solution providers and industry analysts that solution providers must evolve from transactions and products to technology services and business advice. This trusted advisor status has become even more important as line of business decision makers (defined as technology buyers outside of the IT organization) now make approximately 50 percent of technology buying decisions, according to research from the CompTIA trade association. These business decision makers don’t care about technology for technology sake; they care about their business outcomes and organizational productivity, instead. As such, these buyers often demand an ROI on their investments in as little as three-to-six-months.
Vendors with a solid history of staying ahead of industry change and who offer their partners expertise and enablement will likely excel in this dynamic digital transformation economy. This includes, I believe, VMware. But for everything to align as hoped, partners must “future proof” their businesses to stay relevant. Here are five things you can do to help achieve this goal:
Diversify your business models
One of VMware’s capabilities includes project services. To us, it’s no longer relevant to talk solely about partners who conduct transactions for VMware. Instead, we zero in on a partners’ overall value to customers. Partners with deep industry and vertical capabilities who capitalize on industry trends are more quickly able to build new client offerings and solve customer challenges, we find. These partners are also more profitable. In many instances, they earn margins of 30-50 percent on project services. Not only are they more profitable than peers with monolithic business models, they enjoy deeper customer relationships. Solution Providers of the future are thinking about a broad set of services that increase their profits and customer value, not just the deal of the moment.
Develop recurring revenue streams
Recurring revenue, in many instances, is fast becoming 20 percent or more of most solution providers’ businesses. This doesn’t mean break/fix maintenance revenue earned over time. It means hybrid-cloud revenue that is generated by customer consumption and other measures. The stickiness of this revenue is powerful; it’s the gift that keeps on giving. In addition, a dollar of recurring revenue is worth anywhere from 2-10 times more than a dollar of resale business, which matters greatly to a solution provider’s valuation.
Package your intellectual property
Progressive partners from large global companies to small digital service providers now routinely “package” their intellectual property. These entrepreneurs demonstrate their innovative spirit by building customized deliverables that are proven and repeatable solutions for clients. This includes Sovereign Systems, which recently spun out a development company from its core business to focus on custom software applications. Similarly, Light River, a transport system integrator, just completed an acquisition of a software development firm to get into the customized application market. Intellectual property with standard and customized applications, custom processes and services integrated into a unified offering gives a company a higher valuation than an organization that offers only standard or commoditized offerings.
Offer business advisory services to IT
A partner who has gone into their clients’ IT organization and helped it become more valuable to the rest of their company has an edge in today’s world. It enjoys greater customer loyalty and often yields improved customer satisfaction. It’s the solution providers who advise, educate, coach and mentor IT organizations who stand out. In today’s market, that counts for plenty.
Increase the profile and skills of your technical staff
In today’s competitive labor market, employees have an upper hand. Thus solution providers must provide a career path for their technical staffers. This includes doing more than defraying the cost of vendor certifications. Today, engineers and technicians value ‘hands-on’ expertise and multi-vendor training. Value today rests in broad technology learning and deep customer experiences, not outmoded certifications and repetitive administrative tasks. Technical employees want employers to help them develop better business, collaboration and people skills. They understand that they no longer operate in installations and IT data centers solely. Instead, they want to help move the needle when it comes to deepening the overall value a digital service provider brings to its clients. They want to become better professionals, in other words, and they want you to help them achieve their aims.
What lies ahead, no one knows. But if you focus on one or more of the above, you’ll be better prepared for whatever comes your way.