Partners of the future.

Partners of the future.

This is the second of a two-part series outlining the differences between IT services firms operating as Partners of the Past, and, with this blog, companies that have set themselves up to be Partners of the Future. The idea of the Partners of the Future was first broached in November, 2015 by International Data Corporation (IDC), a global provider of market intelligence, advisory services, and events for the information technology, telecommunications and consumer technology markets.

For those of you who have been following Revenue Rocket, you’ll readily notice that we have been championing the strategies offered by IDC for years. It’s always good to have independent corroboration for your recommendations. It means we’re on the right track, and you can be as well if you heed this advice.

The company identified “10 Transformations IT Solution Providers Must Make,” that includes:

Technology: IT solution providers must have transitioned most, if not all, of their technology focus from what IDC calls the 2nd Platform to the 3rd Platform, which includes the four key pillars of cloud, analytics, mobile, and social.

Focus: Partners must move from a broad “all things to all people” focus to being specialized in a certain industry or business process.

Customer: Partners must transition from exclusively selling to the IT department to selling to the line-of-business (LOB) buyer, but not forgetting about IT.

Sales motion: Partners need to move away from an all-encompassing focus on the up-front “deal” to focusing on long-term customer “relationships.”

Time horizon: Partners must forgo certain short-term gains to be able to win in the long term.

Marketing: With buyers doing their homework online now, partners must move from a limited amount of “traditional” marketing to a much greater investment in digital marketing.

Activities: Partners need to move up the profit stack by shifting from resale to professional services to managed services to building intellectual property.

Competition: Partners need to look out less for traditional IT-focused competitors and more to nontraditional competitors such as born-in-the-cloud companies, customers turned partners, developers, referral agents, and more.

Alliances: Partners need to move from a “do it ourselves” mentality to being open to forming alliances with other partners to deliver complete solutions to the customer.

Competitive advantage: Partners can no longer take comfort in long-standing, sustainable competitive advantages. Short-lived or transient advantages may be the new normal.

From our perspective, what all of the aforementioned transition strategies will eventually do is to further consolidate the industry, which is not only inevitable, but actually a good thing. Those doing the consolidating will be the Partners of The Future; those being consolidated will be the Partners of the Past.  While the industry’s firms will consolidate, the industry itself will fragment into more and more vertically-oriented segments.

For small firms, looking to survive, they will have to become specialized in one of these narrowly-defined market segments. Mid-market firms, looking to increase value, will specialize in 3-5 verticals, and enterprise companies, looking to grow, will specialize in 6 or so vertical markets. The small companies doing well will be highly attractive to the mid-market firms, and they, in turn, will become more attractive to the global IT community in a highly acquisitive industry. It’s a circle-of-life kind of thing.

The IDC report concludes with what it refers to as “Essential Guidance.” Among these pearls of wisdom, with which we wholeheartedly agree are;

  • “The first piece of advice for IT solution providers is, don’t get overwhelmed at this list. None of these transformations are easy. And the priority in which partners address them will be different based on the company’s strategy. Pick the top 2 or 3 transformations to focus on before going further.”
  • “While profitability may suffer in the short term while you make some of these transitions, keep your long-term success in mind. It will be better to endure a bump in the road in the short term rather than coming up to the end of the road in a few years’ time.”

Hmmm, the past or the future. Pick one.