Services Take Center Stage

The thinning out of hardware margins is nothing new, but the situation has begun to take on some urgency, according to Larry Walsh, CEO and chief analyst of The 2112 Group. In a Webinar earlier this week, “Breathing New Life Into Hardware With Services,” Walsh discussed trends in the hardware and services markets, and what vendors can do to address the eroding value of boxes.

Vendors that have traditionally led with hardware and software are having to reinvent themselves. Cisco, for example, can no longer rely on the networking gear that made it a titan in the technology industry. And Microsoft’s board of directors has started putting pressure on the software behemoth’s management team to put more emphasis on services.

It’s services, in fact, which will carry both vendors and their channel partners forward into the future. “We’re moving away from hardware – from speeds and feeds – as the center of experience and toward value and outcomes,” Walsh said. “The customer doesn’t want to own hardware. They don’t want to own processes either. They want to pay someone else to manage [it all].”

Walsh, who refers to managed services as the “cornerstone of today’s channel,” says that up to two-thirds of partners’ gross revenue comes from some kind of managed service, according to 2112 research.

With a number of alternative business models to choose from – including hardware-as-a-service, leasing, and subsidy systems – vendors have a lot of decisions to make when it comes to infusing new value into legacy hardware. They need to redefine their channel partnerships; make sales and account management a priority; focus on outcomes and results; and sunset legacy business models.

Yesterday, it may have been all about technology; tomorrow, it’s all about the experience.

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Breathing New Life into Hardware with Services
Most hardware is commoditized, and end users are increasingly more interested in moving applications and workloads to cloud environments. Hardware is getting devalued even while it’s still foundational technology; after all, there are no clouds without hardware. Services – particularly next-generation business process and analytics services – may provide the antidote to hardware commoditization and enhance profitability for both vendors and solution providers.

In this special Webinar from The 2112 Group, Chief Analyst Larry Walsh reviewed the current state of hardware sales and profitability, existing and emerging services models that can revive hardware sales, and tips for vendors and solution providers looking to adopt new services-based hardware-sales models.