Measure For Measure

The results of the 2007 CRN Profitability Study illustrate why it's dangerous to be focused too much either on the short term or the long term and offer key performance indicators that should help solution providers with planning for both time frames.

The data show the business software practice area yields the highest average gross margins, at 25.5 percent, up a full 4 percentage points from revised 2006 data. It also offers the second biggest opportunity for acquiring new customers, according to the CRN profitability data.

But it also takes longer to see that return. Not only did business software tie for the dubious honor of longest median sales cycle (along with database management and storage management), it also took longer for solution providers to recoup their training investment for business software than all but four other practice areas.

And yet ... custom software development cropped up as a theme for adding value in the mobile technology category, where thin margins on devices have inspired solution providers to become more creative. The mobile practice area definitely turned a corner over the past year: It provided solution providers with the third-largest increase in new customers, and it tied with VoIP for strategic importance—a full 74 percent of solution providers reported that both areas were of at least moderate interest to their customers.

	Gross Margin (Sorted)	Top-Line Sales Growth During 2006	Percentage Change In Number Of Customer Companies During 2006
• Business Software	25.5%	15.1%	15%
• Database Mgt.	20.2%	11.9%	12.5%
• Custom Systems	19.9%	8.4%	7%
• Network Security	18.4%	12.8%	11%
• VoIP	18.4%	35.5%	32.6%
• Digital Display/Signage	18.1%	19.5%	10.2%
• Storage Mgt.	17.3%	11%	8.4%
• E-mail/Collaboration	17.1%	10.4%	8.4%
• Network Infrastructure	16.9%	11.2%	7.4%
• Mobile Technology	15.4%	15.6%	14.7%
• Network Storage Infrastructure	14.9%	13.2%	12.1%
• Printing/Imaging	14.7%	8.1%	7.5%
• Client/Desktop Security	14.6%	8.8%	6.8%
Mean Average of percentages reported by solution providers participating in each market. Source: 2007 CRN Profitability Surveys Base: 322 solution providers

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