You’ve heard it many times before, and probably even once today in the office: the channel is changing – and fast. IT providers are now being forced to step out of the box they may have fit into in the past and diversify their offerings, mostly to service the changing needs of their current customers, while also working to attract a broader range of customers moving forward. They are experiencing new found internal pressures, such as generating new customers, managing vendor relationships and figuring out how to convert their current clients into managed service contracts that are profitable and sustainable.
In my last blog, we discussed how the channel has evolved into more of an ecosystem, with all partners working together, in order to solve for those challenges. Today, I want to add on to that discussion further and talk about the overarching change that solution providers are facing: adopting the alternative payment models their customers are demanding.
The Rise of Alternative Business Models
Customers today have more choices than ever, and their options will only continue to grow – which I’m sure you also hear pretty regularly too. They are demanding an option of a managed service, which doesn’t necessarily mean the customer will choose a managed service, but they typically want the option to get the same performance, the same level of service and pay for it by the month.
For example, cloud options are almost always a consideration when exploring new technology investments. Perhaps your customers won’t choose cloud over traditional IT deployments, but they want options to consider. Quite simply, customers know they have options and alternatives and they want the freedom of choice. This tendency is commonly referred to as “Cloud First”.
The most common alternative business models are consumption and subscription models – only paying for what the consumer needs, wants or uses in a given time period. These new models offer tremendous flexibility, predictability, adoptability, and speed time to deployment and production. Additionally, minimizing or alleviating ancillary costs to support IT such as overhead burden, property costs, utility expenses – and the list goes on.
Subscription Model: Subscription refers to a pricing model for cloud services in which you purchase or “subscribe” to a service for a specific period of time or number of users for a pre-defined price. The service is designed as a turnkey solution for cloud workloads with predictable pricing. Subscription models advance beyond typical consumption models and are most frequently used for software applications. A customer may choose to own their infrastructure and acquire their software applications, like CRM, based on a subscription model.
With budget constraints, capacity challenges, skills shortages and dynamic market demands on customers’ minds, many are exploring and adopting subscription models.
Consumption Model: Very similar to how you pay your utility bills for your home, the consumption describes a pricing model for access to IT delivered “as a service” in which you pay only for the services used (also referred to as “consumed”). Yes, it’s really that simple.
Partners of today must diversify their business. Diversity may come from expansion through organic investment, partnering, or acquisition (“build, buy or partner”) to meet customer’s dynamic technology needs. This new business paradigm shift will build a healthy and sustainable technology ecosystem.
Being able to support all business models – including traditional end user ownership – allows for more flexibility and neutrality, providing the customer with the consumption model that best fits their business needs. Avnet serves the ecosystem as a negotiator, advisor, and aggregator to build and nurture the best relationships possible, to deliver the best solutions. With our ability to lead from the point of solutions to deliver business outcomes by leveraging our first-of-a-kind focused SolutionsPath practice, our differentiated industry leading Avnet Cloud Marketplace – and of course our ability to design, build, integrate and deliver anywhere in the globe – we are a pure Solutions Distributor. We are best positioned right at the center of the ecosystem.