Are Business Application VARs frogs in boiling water?

I have been traveling around the United States working with some top flight Microsoft Dynamics Partners, and debating about the topic of how Partners deliver services and value to their customers.

I am challenging the thinking of Partners today, forcing them to evaluate how and why they have fundamentally stayed with the same business model for more than 19 years.

Very little has changed in the way they sell and estimate their offering to prospects, or how they deliver services and add business value to the customers.

This scares me.

The rest of the world has changed in innumerable ways, so why haven’t Partners kept up?

I can’t image banking in the same way I did in the early 90’s, or driving around in a 1988 Oldsmobile, stopping to use a pay phone, or getting on an airplane filled with cigarette smoke.

Things have changed and so have I.

And I am left wondering how the infinitely intelligent, highly educated business Partners out there continue to think that the status quo will remain the same.

I saw this as a major risk before we entered 2009 (not to mention the economic storm clouds) and of course, it appears more vivid now.  Any of you who know me will realize I am likely worried at least 18 months ahead of when I should be, and this time it’s no different.

Despite my warnings in the past, I have seen many excellent business partners washed out to sea when they didn’t see the big wave heading their way.

I feel a tsunami coming on…

Let me get to the point here.  Today’s customers want to buy software that fits their business (vertical, industry), and they want to go about it in a different way than they did the last time.

While some customers want solutions that are “tailor fit” and customized exactly to their business needs, others are willing to change their internal processes in order to reduce total cost of ownership over time. Some see the value in services from Partners, while others don’t.

The dynamics of customer behavior are changing under our feet.

The Yellow Pages have all but been replaced by Google and other search engines, customers increasingly reject traditional interrupt marketing, and they are underwhelmed by proposals that have 50 line items specifying products and hours, but fail to identify what’s in it for them.

They are more concerned about total project cost and less about per hour rates, and they want to see and understand the real value before they buy.

This is of course exacerbated by the recession, which has people clinging to their dollars, idling in indecision.  The sentiment of most people these days is, “if you can’t identify what is in it for me, then I will wait and see if and when I want to go through the pain of changing my system.”

This is a hard sell for your sales force. It just becomes a waiting game.

More customers are looking at the off balance sheet potential of software plus services.  This is disruptive for most Partners who need the license margin spike associated with on-premise solutions.

This is forcing Partners to re-shape the professional services compliment from the super application consultant, to an increased emphasis on remote team based support and training.

Monetizing Service Businesses

An important and often challenging issue faced by business owners today, is figuring out how to monetize these service businesses.

This remains a mystery for many. And as the entrepreneurs who built these practices age, and the era of the consolidator has run its course, what is next in the way of an exit strategy or succession?

Now it is interesting that a reputable franchise of any type is easy to buy and finance through traditional sources, as they have proven to be money generating machines for those that can reasonably operate them.  It is also interesting that many franchise owners hold multiple locations, and are happy with the business they are in.

I have heard the argument from Partners before that I am comparing two different types of businesses. Fundamentally, I agree.  However, what is most important in this comparison is that unlike most Partners, these business owners have found a way to scale their business and not make it completely dependent on the super hero.

You can argue all you want that you can’t compare those two, however, I would then argue you should compare Partner businesses to a CPA firm or something like that.

They scale, they have world wide scope, they have a more complex environment with more skill intensive work than the average Partner, and they are readily sold when the business partners decide to.

Are you prepared?

At the end of the day, I liken this to the bit Al Gore does on the boiling frog – if you put a frog into a pot of boiling water they jump out right away recognizing the danger, however, if you place them in a pot of tepid water, they will sit there as the heat rises and boils them to death, not noticing the changes around them.

As I consider the Partner Channel as it stands today and those reluctant to consider the way things are changing, I am left wondering if the business applications Partners out there are aware of this impending wave, or if they are complacent enough to just let the water boil around them.

What are you doing to change? Post your comments below.