The IT service ecosystem is fiercely competitive. Margins have shrunk to historical lows. There’s not enough qualified talent to go around. VARs, in particular, have a cloud hanging over their head – the public cloud. According to a recent Forbes article, the ongoing shift to the public cloud will be taking a big bite out of the businesses of many VARs.
IT service providers are undoubtedly facing the fight of their lives, but that doesn’t mean that the future is bleak. There will continue to be opportunities for IT service providers to generate new sources of revenue and acquire new customers. The keys to success will be adapting to new market dynamics and making changes in their operational model to keep pace with a quickly changing ecosystem.
1) Offer More Comprehensive Services
The CEO of one very successful IT service provider, for example, recently mandated that his company expand its focus upon mobile and cloud applications, and big data. This move makes the company more valuable to its customers, while also positioning it to be more competitive in the age of the public cloud.
Expanding your service offerings will also enhance your ability to take advantage of a business truism: It’s easier to cultivate additional business from existing customers than to acquire new customers. And your ability to offer a greater range of services to existing customers will also strengthen your relationship with them.
2) Become a One-Stop Provider
As a reseller of hardware and software, you’re of limited value to your customers. After all, they can likely get what you’re selling from a multitude of sources. But when you expand your offerings to include services, you’ll be providing a greater depth of value to your customers.And you’ll also be tapping into a booming market niche. The managed services market is projected to explode to a value of over $193 billion by 2019. If those projections hold, the managed services market will have nearly doubled in just 5 years (the market was valued at $107 billion in 2014).
As margins for hardware and software continue to shrink, businesses are looking for new ways to improve profitability. One way to do that: selling more services, where margins are much more flexible. Hardware VARs serve as a good example. With razor-thin margins for today’s hardware, these companies are shifting their business towards a service model in order to generate more revenue and improve their margins.
3) Capitalize on Freelance Marketplaces
Among the most difficult problems VARs face is in sourcing talent and maintaining a workforce that’s adaptable to fluctuating market demands. But as many of the leading IT service providers have already discovered, the recent development of freelance marketplaces has provided a new and very effective resource for meeting those challenges.
Staffing your business with the right people has always been a critical component of success. That’s as true today as it has ever been. But with the workforce shifting to more of a freelancing model, companies must adapt. And Fortune Magazine reports that IT workers are included in the fastest-growing segment of the freelance market.
Capitalizing upon the surging availability of highly skilled, on-demand IT talent by using freelance marketplaces is both a necessity and an opportunity for VARs.
Same As It’s Ever Been…
VARs are facing a perfect storm of rapidly evolving technology, swirling market forces and intense competition. But evolution and adaptation have always been integral components of surviving and thriving in the business world. So the need for IT service providers to adapt to a changing environment is nothing new.
But what does change is the specifics of the adaptations needed to meet present day challenges. And embracing the 3 adaptations above will help to open the door to a very bright future for progressive VARs.
