For most resellers, whether they chose to deliver services or not is no longer a matter of choice - it is what is expected. Harry Rice, head of business development at Bailey Telcom, says customer attitudes have changed over the past 12 months. "Customers want to deal with a com-pany that can deliver all of their needs. A lot of our customers want us to own the problem for them - not just fix it." He says there is no real demand for packaged services in the market Bailey Telecom serves - mostly the lower end of the corporate market. "We can offer packages but each customer wants something different. You have got to have core services such as remote management and health checks now - these things are becoming mandatory - but there is always a requirement to tailor the services specifically." Leslie Sharp, technical services director at Lynx Technology, paints a similar picture. "Clients will try to minimise risk and enhance their buying power by using as few suppliers as possible. You also tend to find specialist organisations will be more expensive than someone who is raking it in." It is only the larger organisations that tend to cherry pick specialist suppliers to perform specific functions, says Sharp. Further down the market, customers are looking for more value, although they still expect high quality. "At the SME level I think they have to compromise to a certain degree but they try to get a consistent level of service. Customers feel that they can get better value by going to one supplier for everything," he adds. But there are limits to what each reseller can offer. Where the customer wants to go outside those capabilities, many resellers are looking to bring in third parties with other skills. It's getting easier to do this, says Rice. "Customers are becoming more receptive to partnerships and we are starting to see that as a definite requirement. Our expertise is in infrastructure - hubs and routers - and in a number of cases we have contracts with other companies for the desktop services," he adds. Both Bailey Telecom and Lynx form partnerships with other third parties. Lynx has started its own formal partner programme, which Rice expects to form more partnerships over the next few months. There is concern that control of the account may be lost as a result. Some resellers are concerned about the implications. One small, specialist dealer says: "They're not partnerships, they're marriages of convenience - if they could do it themselves they would." Ultimately though, Sharp believes partnering is a good strategy to follow for services. It can work the other way as well. "It widens the scope of the customers we deal with and we see strong benefits when companies start to outsource big parts of their business. "The need to partner is being driven by the demands for an all-round service from larger customers where the shift back to core activities has already taken place. Although outsourcing has been popular, many companies are stopping short of putting the IT responsibility completely in the hands of a third party. They may look at the option but often find the prospect daunting and turn to their normal resellers," he adds. But this is also difficult to manage and Sharp acknowledges that it could get out of hand. "Everyone is looking to partner with everyone else. We have approached it by looking to be focused in key areas. We think that is the best way to get into the door, get good value and then expand within." It is also important to consider the confidence of the customer - or lack of it - when outsourcing services. Many are in it for the first time and don't like the idea of the service moving offsite - even if it is only monitoring of network performance or technical support. The approach can't be aggressive, says Paul Jenkins, sales director of services reseller, Partners in IT. "You can't leap straight in and say you have someone at home who is now going to manage the network for you. You have to start with non-vital areas so the risk is minimal," he says. It is often necessary to put staff onsite to manage processes before taking them offline and managing them remotely when they feel confident, says Jenkins. Skills are key to resellers in the services market but with so many companies competing for market share, retaining skilled staff is a problem. It's important, Jenkins points out, to avoid being dependent on individual staff. This does not mean you simply have to pay them more though - the key is developing a services methodology within the business. "It is the way we deploy the technologies, not the technologies we deploy that counts," he says. Although skill is important, it is not that easy for anyone to replicate the model, Jenkins adds. "It is not easy to build a methodology and we have copyrighted that as well. Developing it is probably the biggest investment we have made." It is also important to understand that a services business needs a completely different infrastructure to one that is product-sales led. "In a service organisation a lot of the effort goes into managing time. It is a very simple model and more profitable. You also have to become more objective in terms of the client - as individuals and as a company. We have to give everyone an interest in realising the value of the business." The need to adopt this different structure is one reason why there may be some consolidation in the market over the next few months. It is important to get into the services market now and many companies may do it through acquisi-tion or merger as they will not be able to change their business sufficiently or quickly enough. There is some concern about resellers, vendors, specialist services companies, systems houses and consultancies all vying for a share of services business. This may be heightened by the millennium slowdown. "It is difficult to predict where the market will go after that. There is a risk it won't spring back to where it was and customers are going to reconsider how many companies they want to work with. There is a need to compress the market in some way or another and I think that's most likely to happen through acquisition," Sharp says. The situation is most difficult for the largest resellers and there is some acknowledgement of this among corporate dealers. Steven Caunce, services marketing manager at Computacenter, says: "The competitors now are IBM Global Services, ICL, Unisys, Bull, Cap Gemini and so on - they are the organisations that we are starting to play against." But facing up to competitors that are also partners is nothing new to Computacenter. Caunce believes the situation can be managed. Computacenter, he claims, is already the number two services supplier in the UK behind Compaq, one of its biggest partners. "Compaq is a great partner and a great competitor. The situation is similar with IBM. It is a challenge but it is something we have faced before," he says. There are also key differences in what is on offer, he adds. Partnerships are being struck at this level as well. "If you look at IBM Global Services and EDS, they will talk about complete outsourcing - right up to the mainframe. We don't get involved in that." It is competitive, Caunce says, but the buoyancy of the services sector and the scale at which Computacenter operates convinces him there will be room for everyone. "With services it depends on how far you want to go. If you are getting involved in value-added opportunities, you're higher up the value chain for the customer. But if your investments are massive, not many people can afford that." However, the perspective from service specialists is very different. Darrell Riddell, product marketing manager at Synstar International, one of the big independent providers of maintenance and general IT services in the UK, says the market is beginning to look lucrative to many companies, including some large US players, and the jostling for position in acquisitions and mergers has already started. With distributors and resellers also moving in, he envisages a chaotic scenario. "The trend is towards outsourced or managed services where a greater understand-ing of the customer's business is required. There is still a multitude of equipment in the base and knowledge of interoperability is a must. This knowledge can only be gained by experience and exposure - two assets that few dealers have." The whole IT culture is due to change, says Riddell, with a greater dependence on networking and the network infrastructure, but like resellers, partnerships are key. "Higher level services are beyond the scope of most distributors and resellers, so their push into the services market may be short-lived unless they carve a niche in a specialised area," says Riddell. He claims that resellers such as Compel and Computacenter have been struggling to get their services business recognised and both are still regarded as resellers, while manufacturers such as ICL, Wang and DG have changed tack to software and services. On the other hand, Riddell says, companies such as EDS saw the benefits of outsourcing early on, but are now facing the realities of IT ownership. "Costs have been passed down and it is finding it increasingly difficult to provide good cost-effective products," he says. There may be big opportunities in the services market over the next few months, but competition is intense and the market is crowded and confused. It will not be easy to make money. THE KEY PLAYERS COMPUTACENTER Computacenter is moving into services fast but has stopped short of trying to become all things to all customers. For now at least it is focused on the services that can be offered around the hardware it sells. But Computacenter also sells the lifecycle concept and is bound to come into competition with these manufacturers from time to time. It will be worth watching how it deals with these relationships, particularly for other resellers moving into the services area. It also works in partnership with other service providers such as EDS on a regular basis, providing the supply and logistics side of what is required. Separately, the reseller offers services on a modular basis. It has more or less packaged them up and they cover areas such as planning and requisition of appropriate technology, implementation and support and management. It also offers maintenance and post-sales support and training. The latter is increasingly important and Computacenter has 12 education centres throughout the UK. It claims that more than 55 per cent of its 5,000 employees are involved in delivery of services - in practice perhaps one quarter of the total work directly in services areas, but this is still a significant proportion. Computacenter has stopped short of outsourcing and it cannot be expected to move beyond the service management and skills area unless it does so though acquisition. But purchases cannot be ruled out. The company is financially strong but lacks the pedigree in services to sell against some of established houses.
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