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Pedro Pereira  
IT Budget Pressures Spell Opportunity
By Pedro Pereira


Opinion: Channel companies must make a compelling case to take over IT functions to alleviate their clients' budget pressures.


It's good to be an IT analyst these days. A recent study shows that individuals in those jobs earn an average of $83,500 a year and enjoy plenty of employment opportunities.

The study by Money magazine and Salary.com rated IT analyst as the seventh best job in the United States, based on metrics such as pay, stress level, time flexibility, growth potential and creativity. The No. 1 occupation is also IT-related—software engineer, which commands average yearly salaries of $80,500.

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Not bad.

That is, unless you are an employer struggling to pay competitive salaries to professionals who could easily jump ship for a better-paying opportunity. In the case of IT analysts, the opportunities abound, with 67,300 average annual job openings.

It's no wonder that IT budgets at end-user sites are increasingly taken up by salaries. While a high-tech company may not blink at what by some standards would be considered high salaries, companies in other fields feel the pinch. In some cases, they have to make the unenviable budgeting choice of whether to reduce capital expenditures to allocate more money for wages.

Research by CIO Insight, a sister publication of The Channel Insider, shows that companies in 2006 are expecting to spend a bigger chunk of their IT budgets on staffing and less on hardware and software in comparison to last year. Staffing costs on average gobble up almost 40 percent of IT budgets.

In a perfect world, companies would boost not only their spending on staffing, but also on software and hardware, and everybody would be happy. But the laws of corporate economics typically mandate that if you have to spend more in one place, you take it from somewhere else.

The Channel Insider Special: Managed Services in the Channel p>In the past, when channel companies focused primarily on product sales, these trends would be cause for concern.

But unless you remain too dependent on product business, today this trend spells opportunity for VARs, integrators and service providers. Channel companies can make a compelling case to end-user clients that they can reduce staffing costs by taking over the clients' IT functions.

Over the years, savvy channel companies have locked into relationships with customers who would call on them for product refreshes and maintenance work the customers could not handle themselves.

Increasingly, those relationships are evolving into managed services arrangements through which providers take over IT functions at client sites. In the true definition of managed services, providers handle most of the work remotely through Internet connections.

They typically employ technology by managed services platform vendors such as N-able Technologies, SilverBack Technologies and Level Platforms to monitor their clients' computing environments for prevention purposes.

But even for those channel companies that have yet to start offering remote services, the current IT budget pressures on businesses present an opportunity. They still can save customers money by handling IT needs for which the clients otherwise would have to hire expensive IT professionals.

Of course, the ideal situation is to handle as much of the monitoring, maintenance and software updates remotely. This model reduces costs for customers and providers.

The model is undeniably compelling not only for technical but also for business reasons, especially in light of escalating fuel costs. If you can avoid burning fuel to get to a customer site, that is a plus.

Salaries will continue to exert pressure on IT budgets, so as a channel company, if you don't have a plan yet to seize this opportunity, it's time you did. Remember, your competitor across town could be a few steps ahead of you on this.

Pedro Pereira is a contributing editor for The Channel Insider. He covered the channel from 1996 to 2001, took a break, and now he's back. He can be reached at [email protected]

     
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