Managed Services Changing IT Reseller Landscape, Study Finds

A whitepaper from NovaStor finds managed services will significantly alter the IT channel landscape.

A decreasing reliance by businesses on client-server based infrastructures to deliver IT services is drastically changing the business landscape for many traditional IT channel players, including classic IT dealers and Value Added Resellers, according to a whitepaper from data protection software specialist NovaStor. The paper, "Managed Services: How to Adapt to the Channel Model of the Future," provides an assessment of the challenges facing the IT channel and describes how IT resellers can transform the growing demand for managed services from a threat into an opportunity for future business success.

Ongoing pricing battles in the software and hardware segments have caused many IT resellers to resort to price reductions to win customers, thereby throwing themselves into competition with large, anonymous online software outlets, according to the report's author Stefan Utzinger, who is the CEO of the NovaStor Software Group. Utzinger said these large, anonymous online stores have an advantage over smaller resellers when it comes to economies of scale, which makes it impossible for the smaller reseller to compete on price alone.

The report concluded what they lack, however, is the ability to design a solution or install and administer the products they sell--services which businesses are increasingly willing to invest in as it allows them to focus on the business benefits provided by their IT solutions rather than the product alone. "Resellers who embrace the managed services model and stress their consulting competency by offering services instead of products alone can exit the pricing battle, add more value to their offerings, and dramatically strengthen customer relationships and loyalty," Utzinger wrote.

Utzinger's research determined cloud based solutions are of particular interest to small to medium-size businesses SMBs and many specialist dealers, VARs and system integrators are therefore worried that customers may start purchasing their products directly from manufacturers or global providers. As the report points out, according to recent studies this fear is unjustified.

Only approximately 16 percent of all SMBs questioned by Utzinger for the study said they were thinking about purchasing their products or services directly via the manufacturers. "A large majority wants to maintain their business relationships with local providers, and a whopping 50 percent even want to purchase via local VARs and remain loyal to their previous suppliers," he wrote.

The paper concluded the ability to access the managed services market would be decisive factor with regard to the future of dealers, VARs and system houses and integrators. While Utzinger noted significant market potential exists, the economic and technical challenges necessitate realistic planning when developing managed service solutions.

"Critical success factors include realistic financial planning as well as the selection of an appropriate software provider for the cloud computing and cloud backup infrastructures," he wrote. "Furthermore, it must be ensured that the service in question genuinely fulfills client requirements. Another key factor for ensuring success when accessing the managed services market is a realistic alignment of provider and customer expectations with the services in question."