Study: End Users Will Pay More For Complete Solution

"Suppliers sell parts, but customers want solutions," IDC's Janet Waxman told the 550 IBM solution providers attending the event, held here.

She urged solution providers to start selling solutions, either themselves or with the help of partners.

"Partner-to-partner relationships are a great place for distributors and solution providers to be involved in," she said.

The customers most in need of solutions are "the 'M' in SMB," Waxman said. "SMB partners focus on the 'S' and the low end of 'M.' Enterprise focuses on the high end. In the middle is a giant vacuum that no one pays attention to," she said. "The middle of 'M' needs help."

Solution providers should not worry about how customers buy, because an IDC study of 600 end users found companies do not plan to radically shift sourcing decisions. About 43 percent of customers purchase direct now and the same amount expect to purchase direct in the future, according to the study.

Large companies favor direct purchases, while SMBs favor indirect, further evidence of the opportunity for solution providers in those markets, Waxman said.

"Seventy-five [percent to 80 percent of the server market is below $25,000. People need print servers, Web servers," she said.

Growth in indirect purchases will be higher than direct purchases through 2004, Waxman said.

In software, the compounded annual growth rate (CAGR) for indirect purchases is 12.9 percent and 11.1 percent for direct. In servers, indirect CAGR is 7.8 percent and 2.5 percent for direct.

"The barriers of entry are coming down. Acceptance of indirect partners is there," she said.