While some folks in the channel may find it troubling that a December survey by CIO Insight, a sister publication of Channel Insider, found that CDW provided the most value of all the vendors they deal with, solution providers might want to take heart over the long-term implications of that ranking.
CDW, one of only two solution providers in contention for CIO Insight’s Top 40 most valued vendors list, beat out Trend Micro and Red Hat, who finished second and third on the list, and was substantially ahead of No. 6 Hewlett-Packard, No. 13 EMC, No. 14 Symantec, No. 17 IBM, No. 24 Microsoft, No. 26 SAP, No. 30 Oracle and No. 40 Accenture.
What that might suggest is that CIOs are starting to value the services of the people that bring them the technology and make it work, more so than the people that make the technology. And as we all know, any given IT solution is made up of multiple parts, so it’s the solution provider that makes the solution more valuable than the sum of its parts that is likely to be more valued by the customer.
Unfortunately, Wall Street tends to value companies with recurring revenue streams more highly than companies that live from engagement to engagement. But as the whole move toward managed services progresses, solution providers that have recurring revenue streams and high client satisfaction ratings may finally see their stock valuations become commensurate with the value they know their customers see in them.
In fact, a fair amount of the merger and acquisition activity that we’re seeing in the channel today is little more than jockeying for position in anticipation of higher valuations that recurring revenues should bring to the channel. The end result might be fewer companies in the channel, but those that remain will be a lot stronger.
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Meanwhile, for those of you focused solely on the midmarket space, the editors at CIO Insight were kind enough to do a cut of the study that just focused on the vendors that were valued most by readers of CIO Insight from that sector of the market. In that version of the study, Trend Micro edges out CDW, followed by Cisco and a three-way tie between Red Hat, Dell and HP.
As you get ready to compete in 2007, you might want to take a look at both of the CIO Insight lists because products from vendors that CIOs already value are going to be a lot easier to push than products from vendors they don’t know much about. But more importantly, the studies also give you a relative sense of the value among the vendors included in the study, which may give you an indication of what types of products you might want to lead with in 2007.
Granted, name recognition has a lot to do with any type of market research, but that kind of marketing usually provides the kind of air cover that solution providers need to get in the door to make the sale in the first place. And perhaps the most important thing to remember in 2007 is that with every product sold, there comes a downstream recurring services revenue opportunity that in 2007 will have a lot more impact on the valuation of your company than the margins derived from the initial product sale.
Michael Vizard is editorial director of Ziff Davis Media’s Enterprise Technology group. He can be reached at michael_vizard@ziffdavis.com.