On Growth

Now Is the Time To Become an IT Services Company

In the new technology marketplace, it's the buyers -- not the sellers -- who have the power. And buyers are increasingly focused on intangibles.

• By Mike Harvath
• May 02, 2012

Up until the dot-com fiasco, power resided in the hands of the product-selling community -- the vendors and product resellers who profited handsomely from the voracious appetite of companies for all things technology. It was, to borrow the phrase that defined the time, a period of "irrational exuberance." Skip ahead a dozen years or so since the bubble, and the technology landscape is different. We're evolving out of the desktop era into cloud computing and computing mobility.

Power has shifted from seller to buyer. Gone are the days when wide-eyed corporate buyers spent bloody fortunes on all sorts of technology whether they needed it or not. FUD (Fear, Uncertainty, Doubt) was the primary selling strategy to souls fearful that they might be on wrong side of the technology revolution. This naiveté, a brutal victim of the bubble debacle, ushered in a decidedly new corporate ethos. Now the buyers are in charge, and they come to the table armed with a healthy dose of skepticism, tighter budgets and a more thoughtful, disciplined menu of what they want.

We're in an environment where what we're selling, or should be selling, is less the tangible product and more the intangible qualities of trust, respect and credibility, which are the foundation of a services-selling market. The transformation from a product-based selling environment to a services-based environment means that vendors and partners have to work more closely together to create the selling mechanisms that cultivate this trust-building environment with customers.

The partners who are best positioned to ride this new wave of transformation -- and who will be in demand by the hardware and software vendors and corporate customers -- are IT services companies, or the VARs and ISVs who want to be IT services companies. The reasons are there for all to see:

1. More complicated technology ecosystem. Companies are growing more comfortable outsourcing the management of their technologies, which is getting too complicated and costly to manage themselves, and they simply no longer want the hassle of assuming the risk.
   
   
2. Closest to the customers. Because they've embedded themselves in the culture of their customers, IT services companies are close to the issues, problems and opportunities customers face every day.
   
   
3. Specialization. Companies, as well as vendors in a services-based market, are looking for IT partners commanding a specialized segment of the market. Specialization is what generates the confidence among customers that they're buying the assurance that you can do for them what you've done for others.
   
   
4. Architecting more breakthrough solutions. In a services-based market it's not about simply selling off-the-shelf solutions. Because you're close to the customer, and because you specialize, you're better able to architect more customized solutions for your customer's unique business goals.
   
   
5. Faster to solutions. Because of reasons one through four, IT services firms can respond faster to the needs of the economy, the market and the customer.
   
   
6. Cost-effective managed services. Companies are interested in how they can reduce their total cost of ownership by having a single IT services firm manage their infrastructure, applications, maintenance and support with well-defined service-level agreements.
   
   
7. Scale and grow. This is the win/win/win model for all three parties. Services firms -- in partnership with their hardware/software vendors -- can grow by offering new products and services, and customers can see greater value in the relationship with more effective performance at more-efficient costs.

The marketplace triumvirate of hardware and software vendors, IT services companies and the customers they both serve are the heart and soul of a services-oriented industry. As the industry transforms away from the waning product-based business model into the waxing services-based business model, it's vital that vendors and partners get on the same page.

More Columns by Mike Harvath:

• Why the State of Vendor-Partner Relationships Is Good, But Not Great
• For Partners, the Cloud Keeps Getting Cloudier
• Column Archive