Thank you for sharing critical insight into your business. Earlier this year, I shared a few thoughts about modifications to your company business plan. Your goal, at least as I laid it out: stay ahead of changes in your customers' buying behaviors. What were the buying behaviors to which I referred? The trend showing IT budget spend moving out of the customer data center and into a managed or cloud services environment.
At that time I said we would share more data as the year progressed around solution provider profiles, profitability and other trends. Let's start with a few demographics, then we'll move to some business model statistics with a goal of offering you a quick benchmark of your business against the U.S. average solution provider. Everything Channel databases account for approximately 196,000 solution providers in the U.S. More than half of you characterize your business model as a value-added reseller (buys from a vendor or distributor, sells to the end customer) or consultant (doesn't resell product, instead generates revenue by selling design, analysis and consulting services to the end customer). Roughly 7 percent of you identified your business model as managed service provider/hoster, indicating more than 50 percent of your company revenue was recognized in a recurring revenue fashion for services you hosted or managed remotely at a customer data center. Custom system builder (e.g., buys components, assembles a server and sells to end customer), Web developer, direct marketing reseller/LAR, ISV, systems integrator and others make up the balance of business models declared in your responses.
The average solution provider in 2010 was a $1.2 million business selling consulting, hardware and software to on average 133 customers, half of which were buying in any given year. Sixty-three percent of your revenue resulted from systems located in your customers' data centers. Of that 63 percent, 19 percent was derived from equipment and the services enabling you to remotely manage the systems for your customer, which you indicated is your preferred managed services model. Twenty-five percent of your revenue was recurring in either a managed or cloud services environment. Twelve percent of respondents were unsure how to classify company revenue.
Regarding profitability, gross margins across all products (hardware to software, enterprise to small business) ranged from 25 percent to 30 percent. When broken out by technology, custom systems and business application software topped the list at 30 percent and 25 percent, respectively, with displays and printing systems coming in at 9 percent and 12 percent, respectively. Storage, unified communications and security showed in the middle of the pack between 15 percent and 16 percent.
In terms of the future of your business, 72 percent of you expected to add new offerings in 2011; in contrast 9 percent of you predicted your company would be sold due to past or expected poor financial performance. When it comes to staying ahead of changes in customer buying behaviors, 66 percent of you are adding or will add cloud services to your line card. And for services, roughly 50 percent of you see 50 cents or less of services attach on $1 of technology product sold.
If you're the type whose eyes glaze over when numbers pour out of the page and you made it this far, well done. For those of you looking for a benchmark as you aspire to execute ahead of the class average, I hope you found a few nuggets of value.
BackTalk: Contact SVP, IPED MarketBridge Alliance Rauline Ochs via e-mail at firstname.lastname@example.org.