New IT technology and capabilities arise daily, and the demand for ever more innovative services is at an all-time high. Opportunities for service providers seem endless. But there are also big changes. The shift to the cloud is unstoppable, competition is fierce, IT professionals are scarce.
In a world that is changing so fast, service providers have to make new choices. Today, business models must be customer-centric and no longer just support the business but substantially contribute to business success. What does that mean for your company? Which strategy fits your ambitions and financial business model: specialisation, growth, acquisition, sale?
In the last few years, the number of mergers and acquisitions (M&A) has taken off in the traditional SP market. Companies are searching for economies of scale to meet developments of more technological capabilities and the increasing demand for IT services. Others see acquisitions as a great opportunity to fill knowledge gaps in the form of valuable and experienced IT professionals.
As a service provider, you are faced with a fundamental choice: do you go on the acquisition trail yourself or do you prepare your company for sale. Sale or merger can be an interesting strategy for service providers who are currently facing major long-term investments with associated depreciation and a direct impact on the value of your business. For example, if the technology in your data centre needs to be refreshed or replaced on a large scale.
Another thing to consider when it comes to sale is how the value of your business compares to born-in-the-cloud companies. With all their IT assets in the cloud, cloud-native tech companies have a lean cost structure without physical servers and other data centre costs affecting their value. As the cloud matures, more and more new SPs will be born-in-the-cloud, so the valuations of these companies will always be higher and therefore more remunerative.
However, mergers and acquisitions are not the only way to keep your business financially healthy. If you want your company to remain independent, you can also explore the path of specialisation. Smaller SPs can team up to broaden their scale, for instance to expand into new industries or other geographical areas. Other companies may abandon the one-size-fits-all scenario to specialise in specific verticals, offering a unique approach to individual sectors, such as banking, education, telecom, education or any other sector.
You see, for example, new collaborations emerging in ecosystems, in which partners work together on an equal basis and develop a unique product or service for a specific customer need. The combination of more brains and hands means more capabilities, more capacity and more growth, and is also a way out of the IT staff shortage. And don't think that this is only lucrative for large companies. It is precisely the expertise that you have developed as a small or medium-sized service provider that can prove extremely valuable in a partnership, but too difficult to maintain as an independent company.
The need for IT services is higher than ever. At the same time, this rise comes with many challenges. A new era is dawning for business owners who want to transform their business from offering customer support to delivering customer success. Every business has its own, unique value. Now is the time to think about how you invest this value in a healthy, sustainable future.
At Insight, we help service providers in realizing their business ambitions in a multi-cloud world. As a multi-vendor software licensing, workload, and cloud platform specialist, we can guide you through all stages of your strategic cloud journey. No matter where you are in your journey, we help you to find new ways forward and accelerate your business. Contact one of our cloud specialists for a talk.