I know I'm probably starting to sound like a broken record, but if ever you needed another excuse to start focusing on services, this week's front page report on IS budgets must be it.
We all know that margins on hardware and software are shrinking. This report shows expenditure on hardware is falling dramatically too. Now, I don't know about you, but continuing to rely on a model where your margins are slashed and revenues are slipping makes absolutely no sense at all, especially when your customers are demanding services.
When Gateway launched its channel program in Australia recently, its channel manager Tony Hughes stressed that resellers needed to let their customers know exactly what they are paying for. Under the Gateway model, the customer must get two bills - one from Gateway for the hardware and one from the reseller for its services. This way, the reseller doesn't get trapped into giving away its services to a customer who expects it to be bundled into the PC purchase price, Hughes argued. I must admit that I was a tad sceptical that customers would be willing to pay for all the services they receive from the reseller. After all, they have been getting them for "free" for all these years.
But this report has changed my mind.
The reason customers will be willing to pay is because they know the real cost behind services are people - and boy, do they understand how much people cost. Having previously edited a publication for IS managers, I know that this was the one issue that would not go away. Not only were people costing more and more, but they were increasingly difficult to find.
And when IS managers did find the right people, they were even more difficult to hold on to. At a round table on the issue last year, one manager lamented that he felt more like a personnel manager than an IS manager.
It's not surprising that IS managers want this problem off their hands, and this is what is fuelling the rapid growth in services and outsourcing.
Of course, what is a problem for the user is also going to be a problem for the reseller. Finding and being able to afford the right people and then keeping them is a significant challenge. Actually, that's an understatement. It is the biggest challenge you have.
As margins shrink and you rely more and more on services, the asset that becomes your differentiator is the asset the customer is willing to pay for - the intellectual property of your people.
In recognition of the increasing importance of services and value-add, the publisher of this newspaper, IDG Communications, will in November launch a new publication called ARN Integrator. Its charter will be to aid resellers and integrators who are focused on building the services component of their business. Editorial will focus on systems and network integration, systems assembly, software and Web development and so forth.
To ensure you're on the initial mailing list for ARN Integrator, e-mail me with the details of your company and the issues and topics you would like to see a publication like this cover to email@example.com.
Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.