From offering data center services to recognizing the value in the similarities between Windows 7 and Windows 8 hardware, there are still opportunities for solution providers in the hardware space. Dave Sobel, founder and CEO of Evolve Technologies, talks about how to take advantage of current hardware trends, such as converged architectures, and discusses the tablet market.
What is the hardware scene like at the moment for solution providers? Is it getting harder to make money from hardware?
Dave Sobel: Is it difficult to make money on hardware? Yes. Margins on raw hardware continue to drop, but services margins are steady. Solution providers who are focused on delivering total package value can charge a premium for their services.
A recent call with some colleagues wandered into a discus about margins and hardware. Solution providers who are adding high-value consulting services (i.e. helping identify the right hardware and helping customers match to their needs) are charging a healthy margin on top of that.
Of course the margin on hardware is dropping, but solution providers that are building a whole solutions practice continue to be able to protect that margin. A solution provider could, in theory, offer power consumption analysis, bandwidth usage analysis, disaster recovery analysis, monitoring and management services, etc…
Sobel: We talked about how converged architectures are the "next step" beyond server virtualization back in our January Q&A. How is that space progressing and are solution providers making money off of it yet?
Bringing architectures together – particularly as we talk about cloud computing becoming part of everything that we do – there’s a lot of complexities that customers need to address in their own businesses, and they need answers for how to do that from VARs. Again, these high-value services are where solution providers are finding their niche and value.
As we talk about converged architectures, we also have to talk about hybrid architectures – the idea of linking on-premise to cloud computing -- and that’s not a simple thing to do. So this is an area where solution providers are finding real opportunity.
Sobel: What type of opportunities will there be to upgrade your customer’s software and hardware together with Windows 8? Are there any “package deals” that VARs could capitalize on?
Windows 8 is going to be an interesting proposition for a lot of solution providers. One of the directions that we saw at the Microsoft Worldwide Partner Conference was that Microsoft indicated that they’re anticipating that the hardware requirements for Windows 8 will be in line with the existing Windows 7 hardware requirements. So the hardware opportunity now [with Windows 7] and with Windows 8 is going to continue to be pretty consistent.
We can actually focus on doing hardware refreshes as earlier with Windows 7 and continue that implementation into Windows 8. The big opportunity is that because there’s been so much delay with customers in doing any upgrades at all, so there’s a vast amount of upgrades that can be done now, which is going to continue with the push to Windows 8 next year.
The fact that they’re going to be equivalent means that we can sell hardware now without customers fearing that there’s going to be a problem later with upgrades to another OS. That’s always a potentially confusing message to send to the market where you’ve got an in-market OS and we start talking about the next one. So many customers say “I’ll just wait for that.” By explaining that hardware requirements are going to remain consistent, that opportunity opens up a lot.
I also think that there’s going to be some new hardware form factors, particularly with the new Windows 8 UI enhancements that are going to be of interest to solution providers as well.
Sobel: Is there work for VARs in consulting on data center energy consumption? What new technologies are out there that VARs can implement to help save on customer power bills?
Is there a workaround with data center energy consumption usage? Yes, but it’s going to be specialized and targeted. We’re definitely seeing data centers being deployed by much larger organizations – so VARs that specialize in that kind of engagement are going to find those kinds of specialized opportunities.
I wouldn’t say this is a mass-market opportunity available to all VARs, but there are energy-monitoring opportunities out there that can be used to help with that analysis.
Sobel: With HP’s announcement that it’s dropping its webOS platforms, what does this mean for the tablet market? Is it consolidating around Apple, Android and Windows?
The tablet market is one of the most interesting markets to watch. If we jump into our DeLoreans and go back 2-3 years, the space wasn’t even there. And now it’s the hottest market and we all want to talk about it. Clearly, tablets are going to be viewed as a subsection of mobile. What’s interesting is they have a clear overlap with netbooks and laptops. So that’s why we’re seeing Apple and Android both make good progress into tablets, but we’re also going to see a strong push from Microsoft around Windows, particularly with Windows 8.
I think we’re going to have this interesting hybrid space where those three players are playing. Is there room for someone else? There’s always room for someone else because this isn’t a new space. Apple created it with their product. Someone could jump in with a new, innovative approach that could change the game again. But right now, we’re certainly seeing Apple, Android and Windows be the three leaders in the tablet space.
This was first published in August 2011