System houses need the digital transformation now

Just because information technologies are undergoing change, this does not automatically mean that traditional IT business, including its system houses, has come to the end of its useful life. That being said, companies today do need to address the issue of further development. Otherwise, the specifically German channel model will be in serious trouble in 18 months at the latest.

Last month at the Hosting and Service Provider Summit 2014 I met with an interesting group of distribution, manufacturer and system house representatives to discuss the future of the classical IT business model. Traditional IT business is broken down into three areas: manufacturers, distributors and system houses. Whilst the core business of manufacturers is the development and production of computer systems, distributors and system houses operate as the point of contact between manufacturers and consumers. The distributors assume the retail and wholesale function while the system houses look after customers. This means that they assemble, store and service and sometimes even transport the devices. In this context, a system house is a service provider between the user and the manufacturer and offers either partial or complete solutions.

In light of recent developments, the following questions were put to the panel:
•    What future lies ahead for the channel model, the three-part business model with different distribution channels?
•    Is there any future at all for system houses?
•    And how will distribution develop?

Distribution

In light of the fact that Ingram Micro, one of the major distributors in IT business, now also wants to become a provider of cloud solutions, it quickly became clear that this was the wrong approach. That’s because manufacturing is not something for distribution. Admittedly opinions did differ when it came to the question as to whether the cloud is simply a further development of managed services (managed services are services which are provided for a certain period of time under framework agreements and which can be called as needed). This is definitely not the case because the cloud must be regarded and assessed as a completely new, independent IT concept. However, it is understandable that some classical manufacturers do not want to threaten their traditional core business.

System houses

Since traditional IT business in Germany is still doing very well, system houses, in particular, are enjoying good business today. This good news, however, is misleading because IT business is undergoing change. If system houses fail to take on the digital transformation today – in analogy to technical progress and the related social, economic and political changes – they will find themselves facing serious problems in 18 months from now at the latest. The only way to maintain Germany’s very own “channel” ecosystem is to deliberately launch internal company change.

The “channel” ecosystem

In order to achieve this goal, it is important that manufacturers, distributors and system houses do not operate on the market as traditional competitors – something that also became very clear in our group. Instead, they must act as allies and stand up to the big foreign providers who neither understand nor accept the German “channel” model. The common task now is to protect this ecosystem.

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Author: Andre Kiehne

Director Solution Sales, Microsoft Germany GmbH

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