Client organisations and vendors, alike, benefit from a disruption to the traditional reseller model when it yields selective, independent IT consultancies with specialised knowledge.
All IT consultants need to be across the offerings of the major market leaders such as VMware, Microsoft, NetApp, Cisco and, more recently, cloud providers AWS and Azure. A very clear path to achieving this is to enter into partnership agreements with the vendors, who in turn provide training and certification at each level of speciality. With this comes the obvious commission rewards flowing to each partner consulting firm acting as a reseller, upon sale, upgrades or licence renewals. On the client side, there is assurance of knowledge and continuity.
The industry has been based on this type of reseller partnership for decades, but the traditional reseller model has cracked in recent years. Commissions are shrinking and vendors prefer to deal directly with end users, forcing many players, both large and small, to rethink their business models and find new ways to add value. Technology disruption is producing innovation in the most unexpected places, and the vendors are not always ahead of the game. This poses a dilemma for some clients – and consultancies.
The vendor partner relationship has always presented a trust dilemma to clients. On the one hand, they value brand recognition and want to trust the expertise and therefore products from a well-known, market-leading vendor partner. On the other, a nagging concern remains: is the IT consultant providing best in breed advice or simply pushing the latest offering from a vendor partner so they can earn a commission?
This can be a dilemma from the consultant’s perspective too, especially when a new entrant or a competitor makes a move that puts them ahead of the game. This new offering may better meet the client’s need, but the consultancy may be reluctant to risk an existing partner arrangement, or risk its own reputation, by aligning with an unproven company.
Vendors have been squeezing margins for some years now. First of all, it was on the products themselves, and then, where possible, by selling directly to the client. Recently, vendors started to intrude into system integration services – the value-add traditionally provided by IT consultancies. With the market radically shifting, IT consultancies have been looking for ways to expand their services to make up the commission shortfall – and thus facing an ‘independent advice’ dilemma. They still have vendor relationships to manage, but cannot rely solely on those so must find a way forward by walking a fine line between complete independence and holding onto key vendor relationships, bucking against the traditional partnership model while they do it.
Disruption and innovation have also put some serious cracks in the traditional reseller model. One simply cannot count on the established players to have all the answers. Some do stay ahead of the game, and others miss opportunities and maybe play catch up later. New technologies have opened new pathways to differentiate in the IT consulting space.
It can be a real challenge, keeping up with the sheer number of technologies reshaping the market, with traditional partners adding more and more offerings as well. Consultancies may feel the pressure to add more and more partners and solutions to their reseller portfolio. How can they claim expertise in all traditional, new and emerging technologies? And how can they claim/retain independence?
The changing reseller market is less of a dilemma for the larger consultancies. They tend to deal with an enterprise level client base and command sufficient marketing power to get a discount for bulk – enabling them to retain decent margin. Secondly, their focus is strategic business direction guidance. If IT is needed, they may then recommend what they feel is possibly the best off-the-shelf fit. Thus, they tend to embrace multiple partnerships, leaning towards a broad overview of each partners’ offering. They can continue to service clients with the latest offerings of their vendors of choice, maintaining a predictable trajectory as the market evolves. For many clients, especially those with the largest budgets, this may be considered sufficient, although at times it may also mean playing catch-up.
The changes have hit the smaller IT focussed consultancy the hardest. For a number of years now we have seen a shake up at this end of the market, and as with any change, opportunities present themselves if you know where to look.
What’s a small company to do?
As a small, agile IT consultancy that valued independence yet needed vendor partnerships for the learning experience, income, and access to solutions and support on behalf of its clients, the traditional reseller model always had its setbacks. Disruption was welcomed. It forced us to rethink our relationships with clients and with vendors. It forced us to differentiate.
We decided the path to differentiation was to be knowledgeable, selective and independent.
Smaller IT consultancies should monitor and research technology trends and become selective based on criteria they identify for themselves, likely to be a combination of the pooled knowledge of their team and any specialties they already have, as well as the market opportunities they can identify. The only way to be deep experts, technically proficient in a partner vendors’ range of products, is to strategically limit the number of vendors with which they partner and train.
In order to provide true value to clients, small IT consultancies can no longer rely simply on commissions from partners. They must be more independent and look for opportunities around redefining the consultancy/reseller balance and be certain they are adding value to the product sale. In some cases where a challenger solution is the best one for the job at hand, it may be necessary, even prudent, to maintain independence and objectivity by trading the commission on a potential partner product sale for the lower ‘finders’ fee of recommending a competitor.
We’ve seen the positive results of this approach with both clients and – perhaps surprisingly – vendors.
By gaining a deep level of knowledge in each chosen technology, we can fully explore features and functionalities and even find alternate uses for them, to suit our customers’ needs. We wrote about this in our recent article explaining how we unlocked a feature of Veeam Virtual labs to revolutionise the automated build: Reducing the burden of automating multiple Non Production environment builds
As our technical proficiency deepens, some vendors have turned to us as a professional services resource. We have become the product experts the vendor resells. We are so knowledgeable on the selected solutions that the vendors often select us to implement and deploy technology solutions for their clients. We work with VMware and NetApp this way, for example, as part of their extended professional services organisation.