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IT Services Convergence: The Best Defense is a Good Offense

23 Jan, 2012 By: Gary Stevens, Agiliant Inc. imageSource

Convergence has been a fashionable topic lately. Of particular popularity has been the idea that the conventional lines between managed IT (information technology) services and managed print/output services are quickly graying and will soon disintegrate.

While fashionable speculation is always aplenty, the most substantial opportunities and derailments are often derived from a business leader’s ability to sift through the fodder in order to identify, evaluate and appropriately react (or preferably “pro-act”) to the trends and changes that are imminent in their respective markets.

For those in the BTA channel that haven’t already come to their own conclusions on the aforementioned market convergence, I’d like to make a potentially alarming proclamation: you’re already behind. Not only are you behind, but there are new competitors in your market planning and preparing to eat your lunch as you’re reading this article.

MSPs (Managed Services Providers) and VARs (Value Added Resellers) in the IT products and services space that have traditionally looked at imaging/output equipment, service and supplies like a child does broccoli, are now being offered new, innovative and surprisingly comprehensive “MPS in a box” programs. They are far more pragmatic than legacy programs and specifically tailored to address the top to bottom needs of a small IT services provider, enabling them to more easily and widely enter the output world.

The traditional barriers of having to supply toner and service the equipment themselves are being mitigated and the path to entry is getting simplified. As evidence, a recent MSPMentor study found that 30% of MSPs are now offering some form of managed print/output services. And to put away any doubt as to whether their assault on the BTA dealer’s territory is a tenuous fad or not, that number is up 50% from the same study done the prior year.

There is no doubt the BTA channel is about to be faced with new competition that is seasoned in selling solutions and services (i.e., not transaction-focused), has established IT credibility with the customer and is now able to deliver a comparable and competitively priced MPS solution too.

Owning the Network

If you’ve ever heard the expression, “He who owns the network wins,” it implies a very simple truth; if the customer trusts you with managing the backbone of their business (i.e., the IT infrastructure) then having the vendor consolidation conversation about adding imaging and output management to their invoice is not a stretch in the eyes of the customer. They will have the customer’s attention, and what’s more, they will be well-positioned to make vast inroads (i.e., to eat your lunch) before you’ve even realized there’s a threat inside the gates.

Message to dealers – they ARE coming, they have new tools and interest in your business that make them a formidable threat, and they will try to eat your lunch. To the BTA dealer that is unwilling or unable to acknowledge and “pro-act” to this extremely viable threat: hang this article up, because it serves as the “writing on the wall.”

The convergence is real, that’s no longer even in question, as evidenced by the many consolidations, acquisitions and introductions of new programs that are systematically bringing the two worlds together. The real question is what the independent dealer can do to combat it.

Like any market convergence or enduring trend, the best approach isn’t actually to combat it because not even the biggest ship in the water can ultimately change the tide. The wise choice is instead to embrace it as a new opportunity and determine how best to get in front of and leverage it to differentiate, benefit and ultimately grow business.

Build, Buy or Partner

So how does the independent dealer embrace the convergence of IT and output/print services? Conventional wisdom says you “build it” or “buy it.” But heading into the world of managed network/IT services isn’t like adding a document management solution to your arsenal. For the same reason MSPs have largely stayed away from output (until now), BTA dealers aren’t widely offering managed IT services yet either; because it’s a tremendously complex and capital/resource intensive business to enter and is laden with risk. It requires tremendous focus, infrastructure and expertise that a typical dealer simply doesn’t possess. Why would you? It’s not your core business.

Both the “build” and “buy” models are fraught with their own respective pitfalls, just a short list of which include required capital, acquisition of expertise, business re-organization, extensive time to market, development of infrastructure and offerings, distraction from the core business and the difficulty of operating two disparate businesses side-by-side (because integrating the two brings added complexity, cost, resources, etc.). Make no mistake, it is an entirely different business, but one that requires all the rigors and more of your current business to build and make successful.

This is why more recent published pieces on the subject have suggested “partnering” as an attractive alternative to building or buying. On the surface, it seems like an ideal solution to mitigating many of the burdens presented by the build or buy models.

Unfortunately, the partnering model for fully entering an entirely new business comes with its own set of unique challenges and threats as well. Anyone that’s entered a new space through partnering before can attest. Partnering is generally thought of as the “easy way in” because it enables you to dip your toe in the water to test the temperature before you jump in. It doesn’t require the upfront investment and it’s much easier to unplug a partnership with a separate entity than it is a division of your company. The reality though is that partnering doesn’t allow you to go much deeper than surface level of the water because the venture will be given less focus by each partner (it will always play second fiddle to the respective core businesses), which almost indelibly dooms it to failure or modest growth at best. Moreover, in partnerships you must concede having ultimate control of the function, meaning when challenges/disagreements in operation, delivery, etc., develop (and they will), the “my way or the highway” mentality that can be employed to make tough decisions when required for your own business will often lead straight to the highway (without passing go or collecting your $200) for a partnership.

Even if managed successfully (not saying it’s impossible), the many customer and vendor benefits and economies of delivering the two services as a fully integrated solution are nearly impossible to realize in a partner model. Furthermore, because of the continually disintegrating barriers to entry to the output/print side of the business I covered earlier, partnering means you are absolutely walking a potential future competitor into your account base. Not to go all “conspiracy theory,” but if you’re introducing a partner into the IT services side of your customer’s business while they’re doing the same for you on the output side (while they’re being solicited simultaneously with sophisticated “MPS in a box” programs) the well-chronicled market convergence taking place will eventually make your partnership a race to see which of you decides you can do both on your own, without surrendering a high percentage of those revenues to the other. Then you will have put a lot of the stock of your company in the enforceability of some non-compete language buried within a partnership agreement. A risky proposition to say the least.

So while the convergence of managed IT and print/output services is imminent and well-chronicled, the best way for the independent BTA dealer to “pro-act” to the convergence is far less resolute or feverishly prescribed by industry experts and sources. There are options, each with their own inherent merits, opportunities, costs and risks to be carefully evaluated, with the best answer likely being different for every company. So buyer (or builder…or partner, uh, er) beware and be sure to carefully examine the alternatives available.

I will be presenting a session at ITEX 2012 titled, “Dive into IT Services Without Getting All Wet.” This session will focus on these topics and provide both valuable and objective insights, facts and information that will help the independent dealer sort through the various options, weigh the benefits and risks of each and make more informed decisions for how best to navigate this fast approaching market convergence. I hope to see you there.

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