2008: A Bright Outlook - Services First
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Services first
Mike Novotny, president and CEO of InterTech Computer Products, said
he is projecting 15 to 18 percent revenue and 20 percent net income
growth as his company continues to put more energy into expanding its
services business, now at 40 percent of overall revenue.
"Our real net new customer growth is coming as a result of leading
with professional services, with managed services being part of our
professional services portfolio," Novotny said. Managed services make
up about half of the company's overall services, he added.
But not everyone in the channel has figured out the managed services
opportunity. Many VARs remain reactionary, rather than proactive, about
services, Bova said. "Whether VARs are delivering real managed
services, such as remote monitoring and patch management, outside of
their traditional break/fix contracts, is still a question," she said.
Krakora said managed services can be tough for channel players to
get into because of the change in business model, supporting SLAs
(service- level agreements) and lack of customer readiness to accept
the model. "Managed services is an opportunity to increase
profitability, but 2008 is likely to still be a transition year," she
said.
Ian Cook, CEO of solution provider Logicalis, said it is challenging
for VARs to achieve the right mix of managed services with their
traditional business model. However, Cook added that the U.S payroll is
the lowest it has been since 2004, so managed services is there because
VARs are managing IT systems without companies having to employ staff.
"As the complexity of IT infrastructures increases, companies are
saying more and more that they need someone to come in and look after
it on their behalf," Cook said.
In addition to the focus on services, some providers may also be
planning to add customers as a result of mergers and acquisitions.
According to Outlook 2008, one in six channel companies is likely to be
acquiring another business in the coming year, with 62 percent of those
expecting to acquire saying that new customers are the first priority
for acquisitions.
Other objectives were adding new products and technical
capabilities, expanding geographic reach and improving existing
services.
Logicalis is one of the companies that has publicly stated its intentions to grow through acquisitions next year.
But Cook saw imbalance with this approach, saying that finding new
customers through acquisition works only if the acquiring solution
provider has something to offer the customers. "If you do have
something to offer the customers, then why not just approach that
customer anyway," he said. "Acquisitions should be done really to gain
new areas of expertise and new skills sets, so long as you can hang
onto the staff."
Furthermore, Krakora said there should be three primary reasons for
buying a company. "Talent is the No. 1 reason," she said. "Second is
the methodology or product sets, and third is the customer base."
Krakora said providers should not assume customers will remain with
an acquired company. Acquisitions can often inspire them to look around
or attempt to change their contracts, she said. Customers often worry
if the management changes, and technology changes can make them
nervous, opening them up to exploring other options.
