Too many years ago, I grew an IT service organization from $10 to 100M in revenue. We did not resell hardware, rather chose to focus on vertical expertise and software (JD Edwards) and partnered with IBM. We held an illustrious position of being one of IBM’s premier partners, but yet felt the shifting sands. So much so, the four partners (myself included), bickered as to the direction of the company. At the time, my favorite phrase was “the elephant will have a picnic wherever it wants to.” That reference was towards IBM entering the IT services, now known as the IGS. Over the next few years, in addition to EDS and IGS, we saw Perot and Accenture and others enter this market.
It was supposed to be the death of the local service provider (aka VAR).
What can we glean from this, given the growth of Cloud Providers?
- The business of service providers and VARs has to change (duh!). If VARs are to service their clients they will need to become represent hybrid architectures, representing both the physical compute elements and the cloud elements. This means they will need to align themselves (or build) cloud solutions to be able to pick best of breed for each client.
- Revenue models shift impacting the P&L, compensation and capitalization. Planning for this shift, forces a longer term view at the business and services for clients.
- At least 30% of the current Service Providers / VARs as we know them will no longer exist. This will be due to failure to manage through the change, or consolidation for perceived cost benefit of scale. Why 30%? Whenever we have hit an inflection, this is the traditional number of VARs that have cycled out.
- Local will still remain important. Relationships matter. Visibility matters. The more complex and environment, the more a person needs to look at the whites of the person’s eyes and know they are taken care of. Of course there will be the use of online services where I never see the person, but just as we have seen the ebb and flow of retail stores, the same will go for the services provided to the IT end user.
Opportunity to have a conversation, and re-invent.