Evolution of the Trusted IT Adviser
Cloud services present both opportunities and threats for those who aspire to add significant value for their clients.
By Scott Barlow
Successful IT Solution Providers earn the distinction of becoming the trusted IT adviser for their clients. All solution providers strive for this status, virtually all claim it, many have truly earned it. However, if solution provider skills—and business practices—fail to evolve with our ever-changing industry, “trusted IT adviser” can become a trite label that loses meaning.
As the IT industry has changed, solution providers have navigated numerous transitions, continually adapting their skills to the “next big thing.” Cloud computing, software as a service (SaaS), and the emergence of the “IT utility” represent another major wave of change—one that offers both opportunities and threats for those who aspire to add significant value for their clients.
Technology practitioners increasingly recognize that we are moving toward a purchase/delivery model in which, as former Gartner Group VP Craig Baty observed, customers are shifting from the “acquisition of assets to the acquisition of access.” Of course, what’s driving this shift are the compelling advantages of the model, such as avoiding the time and expense of deploying and maintaining on-premises software and hardware, swapping capital budget dollars for operating budget dollars, and potentially freeing up internal resources for other priorities, even “going green.”
However, while potentially desirable for customers, there is a very real downside for solution providers. As the one-time charge and maintenance model with cash up front gives way to monthly subscription fees, solution providers may experience significant cash flow issues as well as adverse effects on their financial statements. This creates a tension between long-term profitability and customer satisfaction, and short-term cash management to meet payroll.
Forward-thinking, adaptive solution providers can overcome these issues by driving upsell services that help their clients comply with the growing set of state and federal regulations regarding data security and privacy. Today’s trusted IT adviser should be conversant with regulations concerning email security, archiving, encryption, and data leakage prevention. The bits-and-bytes expert needs to become up to date in risk management and corporate governance, learn new “protocol stacks” such as the Federal Rules of Civil Procedure (FRCP) and the Gramm-Leach-Bliley Act (GLBA), and provide the counsel of a chief compliance officer.
This approach provides a path to solving the financial dilemma posed by cloud services. If you’re currently delivering email security for your clients, as most solution providers are, upgrade your offering to bundle in archiving, encryption, and business continuity to maximize the average revenue per subscriber (ARPS). Given the size of your user base, determine the monthly margin that you need in year one to offset the margin loss from the one-time sale of a server and annual maintenance, and adjust your bundled pricing accordingly.
If necessary to cover cash flow requirements, consider structuring an annual up-front payment at a discount, followed by monthly payments starting in year two. With this approach, you may be able to overcome the short-term financial issues, and find that your long-term margins substantially exceed those achievable in the traditional model.
Solution providers that continue to earn the trusted adviser label will adapt their skills, and their business practices, to catch the “everything-as-a-service” wave early, deliver exceptional value to their clients, and build a recurring revenue stream for a predictable financial baseline and expanded long-term profitability.
SCOTT BARLOW is vice president of sales and product management at Reflexion Networks Inc., a provider of hosted email services for security, archiving, encryption, and continuity—including Reflexion Total Control—based in Woburn, Mass.
