Service suppliers team up in tough times

Partnerships are increasing among IT service providers as they lean on each other to deal with the tough economy and changes in...

Partnerships are increasing among IT service providers as they lean on each other to deal with the tough economy and changes in the market.

A survey of IT services companies by analyst Gartner found that the volume of sales they make via other IT service providers is increasing. Three main factors are at work, according to the study's lead analyst, Michael Haines.

The tough economy and resulting tight IT budgets are forcing these companies to seek every possible revenue avenue. "One way is to leverage other IT services companies to expand your sales reach," Haines said.

Chief information officers want to deal with fewer IT suppliers. Thus, CIOs choose a select group of primary providers with which they deal directly and delegate upon them the hiring and supervision of secondary IT suppliers.

The important market of small and medium-sized enterprises is too large and fragmented. IT service providers cannot reach their addressable market by themselves. They need partners that know the different market segments and have relationships there. "There are too many potential customers," he said.

This increasing level of collaboration among IT service suppliers is good news for CIOs, because it makes suppliers much more receptive to teaming up to meet a client's demands, he said.

"CIOs are looking for companies that can aggregate multiple components of a solution on their behalf," Haines said. "This research shows there is an increased level of partnering for services, which should be a good indication that the kinds of collaboration CIOs are looking for are on the increase."

For IT service providers, the message is clear: partner or suffer the consequences. "If you want to survive in a tough economy and in a competitive market, you had better figure out how to partner with others and use other companies as your conduit to get your services to the marketplace," he said.

For the report, titled "Selling IT services via other IT services providers", Gartner polled 40 IT services companies and found that 32 of them (80%) sell some of their services to, through or with other IT service companies.

Respondents said they expected, on average, to generate 26% of their service revenues from selling via other IT service providers in 2002. That is already a significant percentage, but it is expected to continue climbing and reach 40% in 2006.

Another sign that collaboration is increasing is in the types of services being sold via others. Traditionally, IT services companies sold low-level operational and support services, such as help desk and maintenance, via other companies, Haines said. But now there is an increase in collaboration for more sophisticated professional services, such as consulting, project management, outsourcing and managed services, he said.

Gartner's survey sample included suppliers of all sizes and types. For example, it included suppliers that provide services and suppliers that provide both products and services. It also included both original manufacturers of products and services as well as resellers.

Juan Carlos Perez writes for IDG News Service

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