The Best & The Worst: No Other Choice

Technology vendors say an internal professional services company is a necessity. IBM Software Group, for instance, has approximately 2,000 services personnel, independent of IBM Global Services. Steve Mills, vice president and general manager of the IBM Software Group, says the temptation to turn to services is a tough one for technology vendors to resist--not only is the demand high, he says, but many vendors need an internal services force to implement products.

"The industry at large is clearly buying more and more services," Mills says. "The labor shortage is severe; therefore you're seeing a strong push on the part of many companies to add services capabilities to their menu of offerings. They've had to do that not because they necessarily started out wanting to deliver for-fee services, but because they couldn't get their products deployed any other way."

In IBM's case, however, Big Blue officials say they remain committed to bolstering software sales through the channel. To that end, Big Blue clearly differentiates itself from its big-name rivals. "I don't know where Compaq is going with its business model and how far they're taking their involvement in services," Mills says. "It's certainly not our model."

Compaq, however, says it is indeed a channel-friendly company, one that is willing to work with its partners to keep them in deals. Marci Meaux, vice president of worldwide channel services for Compaq Global Services, says the company has developed new tools and support that will keep its channel healthy while Compaq increases its services business. "To transition the company from being primarily a product company to a services-led company, it's important for us to work with our partners to help them make the transition with Compaq," Meaux says. "We believe the new training and support will help minimize channel conflict."

Despite the services debate, most vendors agree that partners are putting pressure on their vendors and are demanding more product and solutions sales instead of services competition. "I don't think there's any question that VARs are more demanding today," says Gary Grimes, vice president of partner management and U.S. sales operations at Sun. "Every partner is demanding close integration with the vendor's end-user sales force in terms of go-to-market activities, and they want to be treated the same way the vendor's own sales force is treated."

Sun says it's resisting the temptation to build up its internal services organizations and remains focused on supplying technology. Joe Womack, Sun's vice president of central area sales, says Sun is "the most attractive vendor in the channel" today, contrasting the computer franchise against its competitors.

"Technology companies are rethinking if they are services companies, and a lot of vendors are clearly backing off the technology side of the business and moving to services," Womack says. "We intend to have to have a 100,000-person professional services firm, too. The difference is, our services firm is our channel."

As large enterprises slashed their IT budgets this year, the midmarket has become a hotly contested battleground for vendors and integrators alike hoping to mine SMB opportunities. Many solution providers who have focused on this market for years now find themselves going head-to-head with the biggest systems integrator companies in the industry, whether it's Accenture or IBM Global Services. "It's a tough game for solution providers to play," Sun's Grimes says.

Part 1: The Best & The Worst

Part 2: IT Disservices?

Part 4: Battle for the Midmarket

Part 5: Web Services Scare