Profitability: Do You Measure Up?

By CRN Staff

3:00 PM EDT Fri. May. 12, 2006
From the May 15, 2006 issue of CRN
Page 1 of 9

When it comes to making money, all technologies were not created equal. Our second annual survey explores hot spots.

For sheer margin potential, database management is where it’s at. For driving services revenue, custom systems rule. To get in the game most quickly, try digital signage.
The good news is that no matter what stripes you wear as a solution provider—from hardware reseller to network integrator to software deployment expert—double-digit margins are possible if you’ve found the right product-to-services mix.

While it should come as little surprise that some hardware areas sit on the low end of that spectrum, average sales cycles usually are shorter and services opportunities abound, according to the survey results and anecdotal evidence. Networked storage and custom systems shine among this group, both boasting average gross margins of more than 21 percent. To top it off, custom systems showed the highest ratio of services revenue per dollar of product sales, 5 to 1.

Software was a revenue superstar, with average deal sizes ranging from $55,200 for database management to $52,100 for back-office software to $28,400 for e-mail/collaboration. But the investment is not for the faint of heart. Consider it takes as much as five months to see a return from training in back-office applications, while five months is a fairly average sales cycle length for databases.

It shouldn’t be shocking that the survey showed revenue growth tended to be higher for products related to network infrastructure. VoIP demonstrated the highest average revenue growth, 18 percent, while network security logged 16.5 percent. How do you measure up?

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