Latest IDC Report Demonstrates Necessity of Evolving from Traiditional Reseller to Trusted Advisor

If traditional resellers servicing small to mid-size businesses (SMBs) needed more evidence that it’s past time to start incorporating services into their portfolio offerings, IDC just provided some. On Monday, the research firm released the first Worldwide Semiannual Small and Medium Business Spending Guide, which forecasts that hardware will be the slowest growing category of business IT spend over the next four years.

Hardware is still the biggest line item on businesses’ annual IT budgets, but spending on devices such as PCs, laptops and printers will grow show only a 1.1 percent compound annual growth rate (CAGR) between now and 2020. In comparison, the report predicts a 6.6 percent growth rate for software. Most of that consists of enterprise resource management, customer relationship management and content management applications.

But the report also demonstrates the opportunities VARs can leverage by moving into services. Over the next four years, IDC says there will be 3.8 percent growth in IT services. Most promising, it classifies business services as the fastest growing category, predicting a 7.4 percent CAGR over the next four years.

Traditional VARs with experience selling servers, network devices, switches, routers and other hardware necessary for organizations to conduct business can supplement their offerings with software and applications. By bundling these items with customized configuration and mapping, then offering these elements with a service-driven approach, they can position themselves well for a future in which customers demand line of business-specific solutions on a subscription basis.

"The Third Platform has disrupted traditional IT markets and how large organizations deliver IT services. For SMBs, the result has been largely positive: a stronger ability to compete with larger firms, more easily enter new markets, more quickly develop new products, and drive higher levels of employee productivity. Over the next three years, we expect IT solutions to drive business outcomes, and in turn further close the competitive gap between SMBs and enterprises," said Chris Chute, vice president, Customer Insights and Analysis at IDC.

Overall, the report forecasts small and medium businesses (SMBs – businesses with less than 1,000 employees) will spend $564 billion on IT hardware, software, and services, including business services, in 2016. This amount is expected to increase at a compound annual growth rate (CAGR) of 4.2%, reaching $668 billion in 2020.