4 Business Models to Think About Heading into 2021

Heading into 2021, there are four different models that are either well established or well positioned for future growth in the tech industry: consulting, value-added reselling, managed services, and solution building.
Business models

Aside from the big trends that we talked about in the IT Industry Outlook 2021, there are several other concepts floating around that will be worth watching in the new year. Some of these are closer to buzzwords than actual trends—the Outlook report also features a callout box touching on several of these hot topics, from 5G to robotic process automation (RPA) to sustainability. Other concepts are not fully formed—we can see some of the pieces that go into the idea, but not the full path forward.

One example of the second category is the mix of business models we will see in the IT industry, specifically at the layer of the industry that deals directly with customers. Heading into 2021, there are four different models that are either well established or well positioned for future growth. These are certainly not the only models that exist, but they stand out because of the different operational styles required.

Consulting

A business model that needs no introduction, consulting is a full-time business for some and a lead-in to further selling opportunities for others. Consulting is certainly not specific to the IT industry, but the rapid digitization of business (especially in the past year) has led to greater demand for understanding the overall landscape. One area that provides insight into this need for understanding is cybersecurity. As companies transition from a secure perimeter mindset to a zero trust mindset, there are many new considerations that come before ever making a purchase. Helping clients through these considerations requires a solid understanding of the trends involved.

Value-added Reselling

Another business model that is familiar to many in the IT industry, value-added resellers (VARs) came into existence as technology vendors needed pathways for getting their product to market. As computing use exploded from a select few large companies into the general business market, vendors could not directly reach every interested customer. VARs provided a way to achieve scale, and the “value-added” part of the equation ensured that they could capture more profit through integration or training rather than just acting as a facilitator. Even in a cloud-based world, physical hardware is still required in many situations, so this model has traction even as many VARs also diversify with other business models.

Managed Services 

One of the most common models for diversification is managed services. This model moves away from one-time projects into ongoing work (also shifting from one-time sales into recurring revenue). In many cases, managed service providers (MSPs) act as virtual IT departments for their clients, performing the tactical work of keeping IT infrastructure running or monitoring network behavior for security incidents. The managed service sector has become its own cottage industry, with MSP-specific tools such as professional service automation (PSA) and remote monitoring and management (RMM). While the offering is technically an ongoing service, this model is still tied fairly closely to vendor products—the thing(s) being managed typically come from a company higher up the chain.

Solution Building

This final business model is where the crystal ball gets murky. While the other three models have been in place for years (or decades), the creation of unique solutions is a recent response to a major shift in IT operations. Our whitepaper on The Role of Emerging Technology in Digital Operations describes the way that IT activities once-focused on the platform for computing now focus on more complex solutions built on a stable platform. As the basic pieces of IT architecture become commoditized, we will see the rise of what the whitepaper calls “artisan IT”—combining those parts into solutions tailored to industries or individual companies. This model may depend on vendor components for the pieces, but the final solution will be a unique creation from the solution provider.

Moving forward, there is no single right answer. Along with each of these business models finding their own success, solution providers will find success from some combination of these models (and others). The question is more around the best ways to keep a diverse portfolio or meet long-term objectives. Whichever models are used, there must also be the appropriate investments in operational pieces, whether that is technical training, sales restructuring or marketing for new clients. Over the next year, the best practices for different models will be a focal point for industry discussions.

Leave a Comment