Over the last couple of months, across three separate partner conferences, I’ve seen a common theme of discussion and debate: How does a solution provider in today’s changing and more complex IT world reap the benefits of specialization, yet capture the breadth of customer opportunity and IT spend?
Regarding solution provider specialization, our research shows that partners who specialize typically drive a higher gross margin performance. A couple of examples include white box resellers and managed service providers, who each drive an incremental 10 to 20 points of gross margin on custom systems and managed or cloud services, respectively, when compared to solution providers who pursue a more general business model without specializing.
Everything Channel’s most recent solution provider data shows 44 percent of solution providers intend to expand to targeted vertical markets. Vertical specialization (health care, public sector, financial services, etc.), product capabilities or the development of complementary intellectual property to extend a product’s capability also offer incremental revenue and margin opportunities.
We at IPED are strong promoters of the idea that your business opportunity and challenge is to capture your customers’ IT budget, even as the data shows, customer IT spend is trending out of the customer data center. You further validated this IT spend trending point with your response to our U.S. partner survey indicating roughly 24 percent of your 2010 revenues were a result of customer IT spend that has moved outside the customer data center, either to a managed or cloud service delivery method.
Our changing IT ecosystem also highlights the specialization required to capture IT customer spend in health care, public sector, regulated or other vertical industries in addition to capturing growth in mobility, wireless and other UC needs.
So returning to the debate, how does a solution provider derive the profit and differentiation that comes with specialization, yet maintain the comprehensive trusted adviser status with customers, factoring in an IT landscape that has added a staggering breadth of solutions with ever-increasing complexity? The answer is another case of what’s old is new again. Aggressive partners address the breadth of their customer needs and still go deep in their chosen areas. They do so by partnering with other partners. Our summer 2011 solution provider data shows that when expanding to new targeted verticals 26 percent are partnering to do so, while 24 percent invest organically to add vertical expertise. The number of you partnering increases to 46 percent when you are adding a new technology.
Think back then. How many of you have participated in vendor-hosted cocktail parties, “speed dating” sessions, utilized partner directories or other vendor-provided means of finding another provider of a product or service, then used a teaming agreement either formally or informally to sell side by side to complement your offerings, enabling you to present a more comprehensive solution? Don’t look now, but it’s back, the partnering with partners program!
As you add your next vertical or technology offering and if you didn’t engage the last time your vendor or distributor offered a partnering program or event, you may want to take a second look!
BACKTALK: Contact SVP, IPED MarketBridge Alliance Rauline Ochs via e-mail at email@example.com.