Vendors Push Partners Deeper into Pro Services
Hewlett-Packard earlier this week unveiled ServiceOne, a new initiative under its PartnerOne program designed to enable and encourage solution providers to sell and deliver a broad spectrum of IT services. The idea is to help solution providers become more profitable while ensuring end users receive high quality, value-added localized support.
“[Solution providers] need access to technology service and technology solutions, and HP is extending its portfolio and opening its entire portfolio,” said Ken Archer, vice president of Americas Channels and Alliances, HP Technology Services, in an interview with Channelnomics earlier this week.
HP’s ServiceOne is a multi-level initiative that enables solution providers to sell HP-branded professional services, augment their own professional services with HP staff and resources, and sell their own professional services based on HP best practices and tools. To facilitate this program, HP is giving its solution providers a raft of best practices, training resources, marketing materials and access to professional support.
The goal of ServiceOne is nothing short of ensuring end users receive the professional services support they need for their HP-based solutions.
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“We’re trying to make sure all support is proactive rather than reactive, and it’s all based on the quality of support,” Archer said. “What we want is high customer satisfaction and loyalty. We need to makes sure customers receiving HP services have a good experience.”
ServiceOne won’t officially go into effect until November 1, but Archer says HP will start rolling out some elements of the program this summer.
Professional services is actually one of the core tenants of the channel’s value proposition to vendors. The “value-add” of the VAR acronym is supposed to be reflected not in the hardware and software products sold by solution providers, but rather in the professional services they deliver to customers in designing, selecting, implementing and managing integrated technology solutions. Professional services – which are distinctly separate from managed or cloud services – is often the source of solution provider profitability, especially when hardware and software margins are increasingly compressed.
Vendors understand the profitability that comes with professional services, and many have their own services arms to provide consultative and integration support to customers. HP, for instance, booked more than $34 billion through its services division in 2010. IBM Global Services is the world’s largest professional services organization, with more than $56 billion in revenue. And Dell earned more than $11 billion last year through professional services and support.
Many vendors are reluctant to turn over professional services to their partners. The issue is quality and consistency in service delivery. Vendors are concerned that inconsistent service delivery will reflect poorly on their brand and customers will defect to competitors.
Weighing on vendors, though, is the cost of supporting professional services. Having the ability to deliver high-quality support requires having a bench of professionals and the capacity to scale service delivery. That’s an expensive proposition, and not a welcomed one by vendors trying to reduce operating costs and overhead.
HP’s ServiceOne is an example of how vendors are trying to shed costs and scale professional services by turning over consultative and implementation opportunities to qualified partners. Solution providers have distributed technical strength, as well as the ability to reach customers on a local level, which brings down costs for the vendor and opens new sales and revenue opportunities to the channel.
Symantec last year disbanded its professional services division, turning over nearly all of its consultative and professional support to select partners. The transition wasn’t easy, as Symantec imposed rigid requirements on partners to qualify for professional services. Those requirements cost some partners more than $1 million in new hires and training, but solution providers participating in the program say it’s paying off.
“It wasn’t a hard pill to swallow,” says Alex Moss, managing partner at Chicago-based Conventus, a premier Symantec partner. “Our challenge was volume. The investments we had to make were expensive and took six to eight months. It was difficult and expensive because most of it was in human capital.”
Since putting the assets in place, Moss says Conventus has seen its Symantec professional services business skyrocketed. “Recently, I had to ask who two people were in the office because I didn’t recognize them. The growth has been phenomenal, sometimes nerve-wracking.”
Cisco’s professional services strategy is about graduating opportunities to channel partners. Today, Cisco generates about $8.2 billion annually in professional services, of which 81 percent flows through channel partners. However, it wants to pass more of those professional services opportunities to partners as technologies mature.
Raja Sundaram, senior director of world services in the Cisco Partner Organization, says most of the services opportunities retained by Cisco are for new and emerging technologies. For instance, Cisco performed most of the professional services when it launched virtualized servers and telepresence. But those services are being transferred to the channel as Cisco is able to train and enable partners on the products.
“Our goal is to get partners to create solutions around technologies and to create profitable solutions that include services,” Sundaram told Channelnomics. Cisco estimates the addressable market for professional services based on its technology is $41 billion annually.
Vendors may want to turnover professional services to partners, but customers don’t always go along with that plan. Enterprises, in particularly, want direct relationships with their vendors, believing they will get better pricing and quality of service. For that reason, vendors will always have a need for some level of professional services capacity.
But the examples of HP, Symantec and Cisco show that professional services remain profitable and productive pieces of the entire portfolio. Yes, vendors are passing off their overhead costs to partners, but partners are getting new revenue opportunities and deeper customer relationships through their investments. These programs should have solution providers examining their professional services strategy and investments, since they are the bedrock of technology value-add.
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Lawrence M. Walsh is CEO and president of The 2112 Group, a technology business advisory service that specializes in optimizing indirect channels and partner relationships. He’s also the executive director of the Channel Vanguard Council. He is the former publisher of Channel Insider and editor of VARBusiness Magazine. You can reach him at lmwalsh@the2112group.com.
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Larry Walsh:@lmwalsh2112| Channelnomics: @channelnomics
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