A Deeper Look at Services PricingBy Lawrence Walsh | Print
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A new OnForce report not only shows the demand for technology services and the market prices they’ll command, but where solution providers can get the best prices from customers.
It’s no secret that services are the gold that drives profitability in the channel. According to the Channel Insider 2008 Channel Outlook survey, more than half of solution providers’ revenue and profit comes from some form of service offering.
What may come as a surprise is the value of VOIP and telephony services. The Channel Outlook survey found that VOIP and telephony services make up 3 percent, on average, of solution providers revenue. However, VOIP installations command the highest service charges in the channel--$449 per hour. That’s nearly 60 percent higher than most data networking and point-of-sale jobs.
In fact, the average work order value of a VOIP project is nearly $2,500.
And the most expensive cities on a per-hourly rate for IT services: Akron, Ohio, followed closely by Topeka, Kansas, and Irvine, Calif. The most expensive states for services: Wyoming, Vermont and Alaska.
These statistics come courtesy of OnForce, the online exchange of solution provider services capacity. For nearly a year, OnForce has compiled data gleaned from its network of nearly 13,000 solution providers who trade their excess service capacity over its network for MarketView, a near real-time view of the supply and demand of IT services. This week, OnForce releases its first analysis of the market data in its imprecisely titled "State of the IT Industry Report."
To call the report’s name imprecise shouldn’t take away from the value of the data contained within. While several consulting, analyst and media companies (including ourselves) have reported channel market trends, few have delved to activity on a metropolitan level or gauged the value of services (not product). And this isn’t some trivial study. It’s based on three months of work orders numbering more than 750,000 that are processed through OnForce.
"These are interesting statistics," says OnForce CEO Peter Cannone. "The data that we can pull has a lot of value that will be valuable to the market."
Much of the information contained in this inaugural report is precisely what you’d suspect about some markets. The reason why IT services are so expensive in Wyoming, Alaska and Vermont has more to do with supply and demand than the actual technology. Fewer consumers of data products combined with fewer providers of services equals higher market prices. Conversely, industrialized states with large populations – California, Massachusetts, New York, Texas and Illinois – fall in the lowest third for services pricing.
Volume of work follows the same supply-and-demand curve. The report finds a distinct correlation between large populations and the demand for IT services. California, Florida, Texas, New York and Pennsylvania top the list in services-demand volume. Rounding out the bottom of the list is Rhode Island, Delaware, Vermont, Wyoming and South Dakota.
If this is exactly what you’d expect from elementary supply-and-demand influences of the channel, what is the greater meaning of this data? While Cannone and the OnForce team admit the report is scant with detail since it’s the first of its kind and based on one-quarter’s worth of data. Yet, as more data is correlated and analyzed, it will provide critical decision-making intelligence for solution providers with designs on expansion—either in technologies or geographies.
Consider this: The OnForce MarketView data provides immediate insight into specific market’s demand for technology services and the pricing they will yield. For instance, if a Midwest solution provider based in Ohio wants to expand his business into security, he can turn to the OnForce intelligence for guidance on market demands and pricing in security and pick the best geographic—Pennsylvania, Indiana, Kentucky—for security services. With that kind of intelligence, a solution provider can plan a faster expansion that has a higher ROI.
"If you’re a services company, this data can help you target business expansion and develop a better business plan," Cannone said.
Services make the difference between strong and vibrant solution providers and stagnant and plodding box-pushers of the channel of yesteryear. Given the importance of services, it’s vital that solution providers identify the market for services and what the market will bear in price for the services they provide. OnForce is giving the channel community a deeper insight into the market—on a macro and local level—that will be invaluable to those who can take advantage of this intelligence.
Lawrence M. Walsh is the vice president and group publisher of Channel Insider. You can reach him at email@example.com.