The Hybrid VAR: Hardware and Software Still Matter
Despite countless predictions to the contrary, traditional hardware sales and break-fix services are very much alive across segments of the IT channel, even among companies that identify their business models as mainly cloud-based. Surprising?
Not really, as it turns out. The fact is, today’s channel inhabits a hybrid world in which few firms are strictly pure play across any single business model. The new coexists with the conventional, and will continue to do so.
Consider the following finding from CompTIA’s 5th Annual State of the Channel research as one example: Just 13 percent of channel firms offering managed services derive the majority of their revenue from that specific business line — despite the fact that managed services has been anointed the savior of the channel’s future. In a hybrid model, channel firms rely on several streams of revenue across a number of different business lines, including, increasingly, consulting services. With so many balls in the air, many organizations are re-evaluating their value propositions to balance the needs of old and new.
That new value proposition is likely to continue moving providers to a more services-oriented model. Yet it will remain incumbent on each firm to consider what its customers want and what they value most from their IT providers, both today and tomorrow. Based on CompTIA research, here is a slice of what today’s IT services firms offer and their thoughts about the future:
- Roughly 20 percent of respondents list consulting (both IT and technical) as their top revenue source — that number jumps to 26 percent when measuring only firms with fewer than 10 employees.
- Fifty-two percent of channel firms anticipate an increase in hardware and software sales next year.
- Two-thirds of firms that identify their primary business as cloud still say hardware sales are very important.
- Approximately 70 percent of larger and cloud-based firms and Web application development specialists are optimistic about project prospects.
- Fifty-nine percent of respondents expect growth from recurring revenue, including managed services or cloud-based business, as well as mobility, big data and social media.
What Your Clients Really Need — And Who Will Provide It
The reality for many solution providers is that their business customers need more than what cloud and managed services can offer. Many will continue to need on-premises PCs, laptops, mobility solutions, routers and a host of other devices that connect them to the outside world. Some VARs and MSPs have begun to let their customers go direct with those purchases through retail or other vehicles, coming back in post-sale to do integration and implementation work. Still others help directly with IT procurement to maintain account control and to block their competitors from gaining inroads. Indeed, consulting services and project-based work account for roughly half of a provider’s annual sales today.
At the end of the day, the hybrid model is about providing what customers want and need while differentiating your channel business competitively with a mix of support, training and other custom services. The 5th Annual State of the Channel report illustrates this model for the channel. While emerging technologies (i.e. cloud, mobility, big data, and social media) continue to gain traction, most IT services firms are not writing off their legacy portfolios.
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