Most everyone in the channel feels the effects of commoditization. The normal lifecycle of technologies takes a toll on the margins on solution providers, vendors and distributors. Time isn’t always a friend to channel business models, either. With a multitude of new cloud and managed service offerings entering the market, those platforms are already seeing pricing and profitability pressure.
Because of the pinch, solution providers have no room for complacency. If you aren’t innovating and enhancing your business practices and portfolios, chances are you’ve already fallen behind. A decade ago, you could still secure a fair amount of business by offering discounts or throwing a few extra services into the contract, but those opportunities are rapidly dropping away. With so many online and direct sales options available to your clients, the price cutting and add-ons would put all but the most financially stable solution providers out of business in no time.
Face it: Most channel companies aren’t built to win pricing wars, nor should they be. Successful solution providers resolve issues and take the pain out of their clients’ IT systems. They tackle potential issues before they become bigger problems, keeping their customers up and running as much as humanly — and in some cases, mechanically — possible. Your customers’ competitors may seek and find cheaper alternatives to channel companies, but they rarely have access to the personalized services and support you can provide.
From design and implementation to disaster recovery and employee training, few enterprise-focused companies can offer the same level of care that regional IT services companies can. Those who understand that point will most likely end up fighting commoditization, but they can do it from a point of strength and value instead of reducing their rates.
Choose Your Battles
Every business owner must have a firm handle on her or his company’s biggest priorities. While clients’ needs and business partners often influence their urgency, the game plan has to have some consistency, or you lose focus. In other words, don’t shift strategies based on which direction the wind blows. Many experts suggest that’s what happened to Radio Shack, which was on a seemingly constant search for a new identity until it filed for Chapter 11 bankruptcy protection earlier this month.
Remain stable and dedicated to your principles and plans. Radio Shack’s plight perfectly exemplifies what can happen when you lose focus, shifting priorities and direction as quickly as you’d change a calendar. When battling commoditization, solution providers must identify their best options and strategize to address the issue.
Unless new information comes along that proves the strategy won’t accomplish the company’s objectives, the leadership team must commit wholeheartedly to its completion. That’s why choosing the right course of action is so critical. While the options are numerous, here are a few of the most frequent channel choices:
- Expand Your Solutions Portfolio This is typically a low-risk option that, when done right, should allow providers to better support their target clients.
- Develop A Cloud Practice While the online applications are numerous (and growing), most businesses don’t have the tech skills required to make them work. Cloud is not only a fantastic recurring revenue option, but the income from design, implementation and training services can be quite lucrative as well.
- Create Additional Consulting Services Would expertise in more specialized areas lead to greater profits and build greater customer value? Consider the vast array of options, including compliance, security, managed print, social media and big data.
- Expand Billable Services Do you offer assessments, audits and create policies for mobility, security and other areas of your clients’ businesses?
Any changes that could improve your standing with customers and prospects should be considered, especially those that lessen the chance of a pricing war. Offer solutions and support that meet your clients’ more specialized needs and charge a premium. After all, when your company is able to handle more of their workload — and the corresponding headaches — it lets them focus more on their own business. That’s a benefit that larger IT companies rarely offer the SMB, and a real differentiator they may not be able to do without.
Hold The Line
Even with a solid plan for fighting commoditization, it’s all too easy to cast aside deadlines and delay key elements of your strategy when business is hopping. Whether you’re distracted by a large, new prospect or preoccupied with replacing a crucial employee, remaining true to your future commitments is essential.
Keeping a steady course to implement positive changes can be challenging. The CompTIA Quick Start to Business Agility, available to CompTIA Premier Members, outlines some of the most frequently encountered obstacles as well as how solution providers can best master transformation in their organization. Change is rarely easy, but a little expert advice can reduce the risks and simplify the process.
That’s a frequent discussion topic for several CompTIA Communities, too. Regardless of specialties, virtually all of their members have had to transform their business models or portfolios in the past few years. The groups offer a great forum for sharing ideas and challenges, and they often join forces to develop industry-shaping initiatives and best practices. Over the past few years, the CompTIA Communities have collaboratively created a host of tools, programs and resources that can help IT businesses become more relevant to their customers.
If you’re looking for new ways to help fight commoditization in the industry — as well as in your own business — register and attend the CompTIA Annual Member Meeting on March 24-25 at the Sawgrass Marriott in Ponte Vedra Beach, Florida.
Brian Sherman is founder of Tech Success Communications, specializing in editorial content and consulting for the IT channel. His previous roles include chief editor at Business Solutions magazine and senior director of industry alliances with Autotask. Contact Brian at [email protected].
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