Business Solutions: Business model evolution

Partners debate how their business models need to change to be able to sell IT solutions from a business perspective

A critical question posed by Microsoft’s Gianpaolo Carraro was whether the channel was innovating from a business model perspective to meet new demand for more accountability, ROI and solutions success. As an example, he asked if anyone had moved away from selling man hours to a percentage of the savings being offered.

“One of the interesting things cloud evolution allows is changing the way we sell and how we think about the value proposition we offer. I’m not hearing enough in the conversations I’m having with partners about the business model innovation this allows, on top of the technical evolution,” Carraro said.

Dataract’s Craig van Zeyl said his company had just completed its first sale on conjunction with processing house, Salmat, and software player, Civica, using a savings-based model.

“The three of us got together and what we offered our customers was a reduction in their cost of processes,” he explained. “We calculated the cost of processing, and if at each stage it cost $1, we offered to charge the customer $0.70 for delivering in the same format at that point. Some of them really struggle with that, and many think they can do it themselves for $0.35, but they have to spend $10 million to do it themselves.

“Some of the others will agree to a three-year contract and re-negotiate at the end of that.”

NewLease’s Doug Tutus flagged one of its clients now looking at metering processing power through virtualisation technology for an end customer.

“The more you use, the more you pay for the virtual offering, to the point where they put it back to us to partner with them and need to be able to invoice against their metering,” he said. “I thought it was a very innovative idea.”

At Ethan Group meanwhile, managers were often breaking things down to Input/Outputs per second (IOPS) or base hardware level and billing accordingly, Nick Stranks said.

“All our projects are scoped to the lowest level possible and therefore it becomes hardware independent, and the software is the best fit for the environment,” he said.

Dimension Data’s David Hanrahan agreed a variety of different conversations and business models were emerging. But just like the channel serving them, customers still ran existing infrastructure and had huge sunken investments, which made it difficult and slow to turn things around.

“Organisations that are more innovative are those engaging with us on different outsourcing models for example, where they’ll take parts of the infrastructure, give it to us on a three- or five-year contract, but instead of traditionally just running it, take over all the mess with a blueprint and project management plan in place to transform it over time,” Hanrahran said. “At contract end, they are on current technology. And there are a variety of charge-back models starting to take place behind that.

“The biggest challenge is to innovate while keeping it all running underneath. That’s the channel’s problem – we built a business model, we have shareholders expecting ongoing returns, and we have to keep change happening on top of what’s already there.”

NewLease’s Tutus pointed out vendors were in a similar situation and argued the transition phase was the most critical element needing support.

“If any of the vendors could get it right, and get it right quickly, they’d have market dominance in the short-term,” he claimed.

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