Most people know the story about NASA’s “Anti-Gravity” Pen from the 1960’s. The story is part myth but supposedly NASA spent $1 million attempting to build a pen that would work in outer space whereas the Russians simply handed their cosmonauts pencils.
True or not, I think about this story when marvelling at the success of Amazon Web Services, the public cloud pioneer. When most of the tech titans were navel-gazing, myopically focused on technology, Amazon focused on what the customer actually wanted – better business outcomes.
I am worried for many IT channel businesses. Despite Amazon showing them the way, most are still obsessed by technology. Why do some of us do this and why is it a problem?
Part of the reason is because an obsession with technology is what worked in the past. In the halcyon days of the channel, technology was not sold to line of business, it was owned and operated by the IT department. Today however, the digital transformation imperative is blowing up not just traditional architectures but also relationships and processes. Business leaders are looking to IT to be an agile provider of service outcomes rather than simply the owner of the infrastructure. To add value in this new model, channel players must get out of their technology bubbles and comfort zones and start obsessing about service design.
Sooner or later, if left unanswered, these trends will impact the balance sheets of today’s VARs (see CRN’s VAR 2017 profit analysis). When business leaders think of cloud they imagine lower IT costs, more funds for innovation, better customer insights and fewer data centres, not more irrelevant technology. Gartner predicts that 41% of workloads will be in the public cloud by 2020, driven by the desire of companies to focus on outcomes not technology.
Despite this, the trend in recent years for the IT channel has been to expand the number of technology partners in their portfolio. Globalisation combined with an abundance of private equity and venture capital has caused commoditised markets to become even more fractured, reducing the marginal gains available for the channel. The channel’s constant search for the next breakthrough start-up can be a big distraction since it is often motivated by the pursuit of short-term profits, rather than the needs and wants of customers.
Instead of searching for monopolistic positions or obsessing over technology, VARs who want to evolve their business models, should focus instead on delivering the right outcomes for their customers, with great service, for a fair price. In this hyper competitive and commoditised market, the only way for a VAR or MSP to differentiate is through service.
So ask yourself this question – “how much of our time, money and resources goes into improving our service in comparison to obsessing over the technology of our suppliers?”
Most channel CEOs know this, which is why most of their web sites are full of such statements around the great people they employ, or the great customer service they deliver, being their unique selling proposition. What customers really want to know is can you prove your words with clear outcomes and metrics?
Take Backup-as-a-service (BaaS) as an example. Nearly every IT hosting company or service provider has BaaS in their portfolio of offerings and so they should. Customers loss aversion bias towards their data, now more tightly linked to revenues than ever, has fostered a global business worth more than $65 billion per year. The emergence of ransomware, added to ever more punitive regulation (e.g. GDPR) will keep Optimism Bias (the tendency to think it won’t happen to you) in check and expenditure in this sector high for years to come.
What’s surprising is the poor service offered by so many “service” providers. One cause of this poor service is the tendency to measure and track the wrong metrics. If we want to focus on good outcomes the only good outcome for a backup service is a timely and completely successful restore of a piece of data, or application. Yet 99% of service providers track only the “backup success rate” metric which has only a partial correlation to the desired outcome and I think I know why. They default to the easy to measure, quantitative elements, not what’s most closely linked to ensuring good outcomes. If regular testing is required to ensure RPO and RTO metrics are the standard, even though it’s harder to do, then find a way to automate it.
Technology cycles are speeding up and using technology alone as a point of differentiation is not sustainable in the long-term. If you want to accelerate your evolution from VAR to MSP, my advice is to take a leaf out of the Russians 1960’s space manual and focus on service outcomes, not technology.
As a next step, to compliment the technology metrics your CTO needs, the commercial metrics your CFO needs, take the time to craft the metrics that align to the desired outcomes of your most important stakeholders, your customers.
