Gartner: Service vendors buddy up in tough times

Friendship is up among IT service providers, as they lean more on each other to deal with the tough economy and changes in the market.

A Gartner Inc. survey of IT services companies found that the volume of sales they make via other IT service providers is clearly on the rise. Three main factors are at work here, 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 (CIOs) want to deal with fewer IT vendors. Thus, CIOs choose a select group of primary providers with whom they deal directly and delegate upon them the hiring and supervision of secondary IT vendors.

-- The important market of small and medium-size businesses (SMBs) is too large and fragmented. IT service providers can't 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 vendors is good news for CIOs, because it makes vendors 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 that there's an increased level of partnering for services, which should be a good indication that the kinds of collaboration that 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 better figure out how to go and 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 percent) currently sell some of their services to, through or with other IT service companies. Moreover, respondents said that they expect, on average, to generate 26 percent of their service revenues from selling via other IT service providers in 2002. That's already a significant percentage, but it's expected to keep climbing and reach 40 percent 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 vendors of all sizes and types. For example, it included vendors that provide only services and vendors that provide both products and services. It also included both original manufacturers of products and services as well as resellers.

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