By Ken Oestreich
The trend is undeniable: Many pure-play VARs and IT professional services organizations are beginning to lose their business to hosted services. Customers of all sizes and verticals are embarking on the use of outsourced IT, software-as-a-service (SaaS), online apps and a plethora of other types of cloud-based services. And they are realizing that the era of owning and operating their own equipment is slowly drawing to a close.
Customers are also embarking on a sea change in IT acquisition: the move from one-time transactional purchases of capitalized hardware to a subscription model for services that are operating expenses. This economic change can be as disruptive as the technology change.
To remain relevant, VARs need a plan — one involving maintaining or growing customer relationships while providing even higher-value IT services.
Channel partners with forward-thinking management are pursuing newer ways of maintaining customer relationships while increasing customer wallet share. And this means making the transition from a pure-play VAR or professional services organization to one that provides a portfolio of hosted and/or outsourced services.
Sell Value, Not Volume
Rather than racing to build a cloud service, the savvy VAR should first determine what their customer base looks like from a vertical industry perspective and how their specific customer needs are changing. Some customers will continue to need highly customized work; others will value more standardized and, therefore, lower-cost offerings.
But one thing is clear: Look to provide value, not volume. The market is literally choked with service providers that provide little more than commodity services such as email, dedicated servers and website hosting. These are low-margin businesses with a high degree of churn. Instead, look to higher-value services such as hosting line-of-business applications, mobility services and even entire hosted desktop workspaces. These are significantly higher-margin businesses, and are strategic to the customer — ultimately resulting in greater customer loyalty and repeat business.
More hosted service providers are turning to the application and workspace markets. That is, hosting applications, entire application suites or in fact entire desktop workspaces. A February 2012 survey of MSPs by MSPmentor found that cloud-based virtual desktop infrastructure (VDI) was offered by nearly half of respondents.
Bundled into the hosted desktop business are line-of-business apps, storage and even voice services. And while “commodity" services command low per-month prices and thin margins, hosting apps and desktops can command value-based pricing well above $100 per seat, per month — with commensurate margins.