And get ready for a wild 2011
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Here's to a healthy and prosperous New Year for everyone in the channel. That said, if you think the past few years have brought vigorous changes to the channel, think again. You ain't seen nothin' yet! The New Year will bring what promises to be the most dramatic changes yet to solution providers grappling with mind-numbing technology and business model shifts. The move by customers of all stripes to operating-expense-based, cloud-computing purchases
with a monthly IT utility bill and multiyear IT outsourcing deals is driving the new dynamics in the channel. And those solution providers that don't get with the program are going to find themselves struggling to survive.
The new economic reality -- no, Virginia, there is not an economic rebound in sight -- is accelerating the move to both cloud and outsourced IT. Businesses of all sizes are pulling back on huge IT infrastructure purchases. They view the cloud as a smarter, more efficient, stable and, yes, even more secure computing model.
What's more, customers are moving to spend more of their IT budgets on services and solutions that directly lead to revenue growth and less on what McKinsey & Co. calls factory IT purchases -- e-mail, databases, word processing. The dirty secret in the IT business is that companies are spending as much as 70 percent to 90 percent of their IT budgets on these factory-level IT processes. The cloud-computing model is aimed directly at reversing that trend.
The solution providers that prosper in the new decade will be the ones that drive revenue growth for their customers based on what McKinsey calls "Enabling IT" -- IT that spurs innovation and revenue growth. I prefer the term Innovation IT.
For far too many years, IT has focused on cost savings. Those cost-savings projects are still there. But the solution providers that go higher up the pyramid to strategic business consulting projects aimed at revenue growth will be the winners in the new channel.
If you need any evidence of the impact of the technology and business model changes, you need look no further than the merger and acquisition activity hitting every nook and cranny of the channel. Some of the best and brightest solution providers in the market bearing Cisco Gold badges sold their businesses this year. Among the companies being snapped up this year: Dimension Data, one of the largest Cisco Gold partners in the world at number 30 on the VAR500, MSI Systems
Integrators, a highly respected super-regional Cisco Gold partner at rank 133 on the VAR500, and Network Infrastructure Corp., a small Cisco Gold technical titan.
By all accounts, there is going to be more market pressure from the technology and business model shifts in 2011. The good news is those that make the transition will find bigger profits and a tighter, more strategic relationship with customers. The bad news is those that don't make the transition will find themselves marginalized in a profit-starved, commodity segment of the market.
BACKTALK: How much of your business is made up of Innovation IT?
Contact Steven Burke at firstname.lastname@example.org.