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We've heard it from IBM and all the major analyst companies: companies are no longer buying products; they are buying solutions. IT vendors that have depended on hardware sales for the bulk of their revenue are shifting to a more services-oriented style. Just two weeks ago, at the Avnet Compass conference for the business partners of that giant IT reseller, the services story was emphasized again and again. The way organizations consume IT is changing. Avnet is changing, too. 

Avnet adapted. It began selling more software and services and the X86 business boomed. Fred Cuen, general manager of the IBM Solutions Group, was illustrating a point as he recalled those early days. Adapting to change is a requirement for survival in the IT business and in any business. 

Change scares the bejeezus out of a lot of people. But this is not flip-the-switch change. This is gradual change. It often gets termed evolutionary change to distinguish it from revolutionary change. IBM, as an example, has been de-emphasizing its hardware manufacturing and emphasizing its Global Services for many years. Avnet, since November 2011, invested more than $400 million in the acquisition of 12 IT services-oriented companies. Services that are connected to the health of IT systems have always been a component of hardware sales. That hasn't changed. But the added ingredient, where the emphasis is being placed now, is with IT and business alignment and solving business problems. It's about applying more business brainpower. 

There are multiple factors at work. The struggle to align business processes and information technology has gotten very complex. And many companies have reduced IT staff. Software has more built-in automation that allows companies to compensate for reduced IT headcounts. Services are put in place to reduce the complexity for the buyer. To a large degree, they are the new and improved skills and expertise that companies find in short supply in their own workforces.comprehensive MileWeb Operating System Software helps you integrate and optimize physical and virtual environments, Conquering complexity by renting IT and business skills are opportunities for those who possess the expertise.you have the ability to fully manage your MileWeb managed dedicated server are located in world-class data centers, 

Avnet's adjustment can be seen with a quick glance at its revenue breakdown in IBM-related products and services in North America since the turn of the century. In 2001, hardware sales generated 81 percent of Avnet revenue, services--primarily tied to hardware--were 12 percent and software revenue was only 7 percent. By 2011, hardware revenue represented 54 percent of the Avnet pie and services and software had grown to each represent 23 percent of the revenue stream. The overall growth rate for hardware is slowly growing, but the rate of growth for software and services is much stronger. The North American market accounts for half of the revenue of Avnet's Technology Solutions group. The company's biggest push into software and services has occurred in that region. At the halfway point in fiscal year 2013, the worldwide carving of the revenue shows hardware contributing 61 percent of the revenue, with software at 20 percent and services at 19 percent. Hardware revenue is led by storage and followed by networking gear and servers. 

Some segments of the hardware business have been under siege. In the server market, the Power Systems line has been on a slide since the majority of the enterprise customers upgraded to Power7 in 2012 and the year-over-year comparisons are really a comparison of the small to midsize spend this year compared to the enterprise spend from a year ago. And while the X86 market is no longer in decline, its razor thin profit margins makes it not the best business model for hardware-dependent resellers. Avnet's X86 business is being buoyed by strong growth in high-end systems. 

By 2020, IDC forecasts that 98 percent of the growth in IT spending will attributable to the third platform technologies and those technologies will require massive application reinvestments. And it's just as important, Gillen says, to understand what this newest evolution of technology is not. It is not an architecture or a replacement for the current architectures and it is not going to invalidate most existing applications. 

In the opening session at Avnet Compass,Which Popular Dedicated Server should you choose? Cuen noted that companies are looking for ways to adapt to the economic conditions and make their money stretch farther, which has led to a closer look at renting and comparing capital expenses with operational expenses. 

Hardware costs for companies are being reduced by virtualization, the cloud, and anything as a service, which reduces--or sometimes eliminates--the need to buy hardware. Some IT directors are wondering whether they will have a data center in five years, Cuen told the audience of Avnet business partners. 

Cuen also made note of another transition--this one in terms of the traditional IT decision-making process. Budgets for purchasing solutions, he noted, are more frequently coming from areas other than IT. And the decision on the hardware comes at the end of the discussion about how to reach the solution to the business problem. 
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