Copyright TechTarget - All rights reserved https://cyber.law.harvard.edu/rss/rss.html Techtarget Feed Generator en Mon, 27 Apr 2026 04:07:49 GMT https://www.techtarget.com/searchitchannel editor@techtarget.com <p>In the information technology (<a href="https://www.techtarget.com/searchdatacenter/definition/IT">IT</a>) ecosystem, a reseller is a company that purchases products or services from manufacturers, vendors or distributors and then sells them to customers. These transactions can be business-to-business (<a href="https://www.techtarget.com/searchcio/definition/B2B">B2B</a>) or business-to-consumer (<a href="https://www.techtarget.com/searchcustomerexperience/definition/B2C">B2C</a>). Resellers play a key role in the indirect sales channel, helping to streamline procurement, offer better pricing and deliver added services for customers.</p> <section class="section main-article-chapter" data-menu-title="Purpose of resellers in the IT channel"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Purpose of resellers in the IT channel</h2> <p>Resellers serve as intermediaries in the technology <a href="https://www.techtarget.com/whatis/definition/supply-chain">supply chain</a>, helping bridge the gap between product creators and end users. Their main objectives include the following:</p> <ul class="default-list"> <li><b>Simplifying procurement.</b> Businesses can source multiple IT solutions -- hardware, software, <a href="https://www.techtarget.com/searchitchannel/feature/Accenture-Channel-partner-ecosystem-taps-cloud-innovation">cloud services</a>, etc. -- from a single reseller instead of managing multiple vendor relationships.</li> <li><b>Fulfilling orders efficiently.</b> Resellers typically handle product sourcing, order processing, billing and delivery, which removes logistical burdens from the buyer.</li> <li><b>Offering competitive pricing</b>. Through vendor partnerships and bulk purchasing, resellers can offer bundled deals or better prices than those available when buying directly from original equipment manufacturers, or <a href="https://www.techtarget.com/searchitchannel/definition/OEM">OEMs</a>.</li> </ul> <p>Many companies, especially small to midsize businesses (<a href="https://www.techtarget.com/whatis/definition/SMB-small-and-medium-sized-business-or-small-and-midsized-business">SMBs</a>), prefer resellers for convenience, consultative selling and local presence.</p> </section> <section class="section main-article-chapter" data-menu-title="How resellers operate"> <h2 class="section-title"><i class="icon" data-icon="1"></i>How resellers operate</h2> <p>Resellers usually work within <a href="https://www.techtarget.com/searchitchannel/definition/partner-program">partner programs</a> offered by vendors or distributors. These programs provide the following:</p> <ul class="default-list"> <li><b>Discounted pricing.</b> Vendors offer tiered discounts (10% to 50% or more) depending on the reseller's purchase volume, specialization or partnership level.</li> <li><b>Deal registration and incentives.</b> Resellers can protect sales opportunities via <a href="https://www.techtarget.com/searchitchannel/definition/deal-registration">deal registration</a> and earn rebates or performance-based incentives.</li> <li><b>Marketing and technical support. </b>Vendors may supply resellers with co-branded <a href="https://www.informatechtarget.com/blog/3-steps-to-make-the-most-of-your-partner-marketing-budget-in-2024/">marketing</a> materials, training and sales support.</li> </ul> <p>Resellers make a profit by buying at a discount and selling at a markup, while managing fulfillment and customer support responsibilities.</p> </section> <section class="section main-article-chapter" data-menu-title="Common types of resellers"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Common types of resellers</h2> <p></p> <h3>1. Value-added reseller (VAR)</h3> <p>A <a href="https://www.techtarget.com/searchitchannel/definition/VAR">VAR</a> is a reseller that adds services such as installation, configuration, training, support or consulting to the core product. For example:</p> <ul class="default-list"> <li>An IT VAR might bundle networking equipment with on-site setup and integration.</li> <li>A software VAR might include licensing, implementation and <a href="https://www.techtarget.com/searchitoperations/feature/Configuration-management-vs-asset-management-simplified">asset management services</a>.</li> </ul> <p>VARs are common in industries where custom solutions are needed, such as enterprise IT, <a href="https://www.techtarget.com/searchsecurity/feature/Why-effective-cybersecurity-is-important-for-businesses">cybersecurity</a> and healthcare tech.</p> <h3>2. Direct market reseller (DMR)</h3> <p>DMRs sell IT products directly to customers online or via telephone without operating brick-and-mortar stores. This model is popular for high-volume, low-margin consumer and business tech. Examples include: CDW and Newegg.</p> <p>DMRs often compete on price, product range and fast delivery.</p> <h3>3. Web hosting and infrastructure resellers</h3> <p>In the hosting sector, resellers purchase server space or services from providers and resell them to smaller clients. A <a href="https://www.techtarget.com/whatis/definition/hosting-Web-site-hosting-Web-hosting-and-Webhosting">web hosting</a> reseller may rebrand services from a larger hosting firm or <a href="https://www.techtarget.com/searchdatacenter/How-to-design-and-build-a-data-center">data center</a> operator.</p> <h3>4. Virtual internet service providers (VISPs)</h3> <p>These are resellers that offer internet services under their own brand while using the infrastructure of a larger <b><a href="https://www.techtarget.com/whatis/definition/ISP-Internet-service-provider">ISP</a></b>. VISPs are particularly common in underserved or niche markets.</p> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineImages/channel-distribution_channels.jpg"> <img data-src="https://www.techtarget.com/rms/onlineImages/channel-distribution_channels_mobile.jpg" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineImages/channel-distribution_channels_mobile.jpg 960w,https://www.techtarget.com/rms/onlineImages/channel-distribution_channels.jpg 1280w" alt="Info box describing the two types of distribution channels." height="252" width="560"> <figcaption> <i class="icon pictures" data-icon="z"></i>Resellers or VARs may operate within one-tier or two-tier distribution channels. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> </section> <section class="section main-article-chapter" data-menu-title="Common industries that rely on resellers"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Common industries that rely on resellers</h2> <p>Resellers are integral to numerous segments of the IT industry:</p> <ul class="default-list"> <li><b>Enterprise software.</b> Large software vendors like <a href="https://www.techtarget.com/searchwindowsserver/definition/Microsoft">Microsoft</a>, Adobe and <a href="https://www.techtarget.com/searchitchannel/definition/IBM-International-Business-Machines">IBM</a> rely heavily on reseller networks to reach businesses of all sizes.</li> <li><b>Cybersecurity.</b> Companies like Fortinet, Sophos and Palo Alto Networks use VARs to implement and support complex cybersecurity solutions.</li> <li><b>Cloud services.</b> Resellers often partner with cloud providers (e.g., <a href="https://www.techtarget.com/searchaws/definition/Amazon-Web-Services">AWS</a>, <a href="https://www.techtarget.com/searchcloudcomputing/definition/Google-Cloud-Platform">Google Cloud</a>, <a href="https://www.techtarget.com/searchcloudcomputing/definition/Windows-Azure">Microsoft Azure</a>) to help clients onboard and manage services.</li> <li><b>IT hardware.</b> Servers, laptops, printers, networking gear and storage devices are commonly sold through resellers.</li> <li><b>Telecommunications and ISPs.</b> Many small ISPs rely on resellers to reach end users, particularly in regional or rural markets.</li> </ul> </section> <section class="section main-article-chapter" data-menu-title="Reseller vs. distributor vs. dealer"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Reseller vs. distributor vs. dealer</h2> <p>Understanding the distinctions between different channel partner types is critical. A reseller buys from vendors or <a href="https://www.techtarget.com/whatis/definition/distributor">distributors</a> and sells to end customers, and might add services. A distributor buys in large quantities from manufacturers and sells to resellers or dealers. A dealer, often a small retail-oriented entity, sells directly to consumers. Resellers often work with distributors to gain access to a broader inventory and better pricing.</p> </section> <section class="section main-article-chapter" data-menu-title="Trends and challenges in the reseller model"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Trends and challenges in the reseller model</h2> <p>The reseller model is evolving rapidly in response to market demands:</p> <h3>Trends</h3> <ul class="default-list"> <li><b>Shift to recurring revenue models.</b> Resellers are increasingly selling subscriptions (<a href="https://www.techtarget.com/searchcloudcomputing/definition/Software-as-a-Service">SaaS</a>, <a href="https://www.techtarget.com/searchcloudcomputing/definition/Infrastructure-as-a-Service-IaaS">IaaS</a>) instead of one-time purchases.</li> <li><b>Vertical specialization.</b> Many are focusing on specific industries (e.g., healthcare, education) to provide tailored solutions.</li> <li><b>Partner ecosystems.</b> Resellers are forming alliances with other service providers to create bundled offerings.</li> </ul> <div class="youtube-iframe-container"> <iframe id="ytplayer-0" src="https://www.youtube.com/embed/WEqXH4PuF8c?si=a1tekP7rYmfwiren?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> <h3>Challenges</h3> <ul class="default-list"> <li><b>Margin pressure.</b> Cloud and direct-to-consumer sales channels have eroded traditional hardware resale margins.</li> <li><b>Vendor competition.</b> Some vendors now sell directly to customers, bypassing resellers and increasing channel conflict.</li> <li><b>Technical complexity. </b>Clients expect strategic guidance, forcing resellers to invest in certifications, engineering talent and managed services.</li> </ul> <p>To remain competitive, many resellers are transforming into managed service providers (MSPs) or consultative solution providers.</p> <p>As businesses demand end-to-end solutions and expert guidance, modern resellers are evolving into value-driven advisors and service providers. Whether through traditional product resale, added services or recurring cloud models, resellers continue to be a crucial part of the IT channel -- connecting vendors with customers and ensuring technology is delivered effectively, securely and strategically.</p> </section> In the information technology (IT) ecosystem, a reseller is a company that purchases products or services from manufacturers, vendors or distributors and then sells them to customers. These transactions can be business-to-business (B2B) or business-to-consumer (B2C). https://cdn.ttgtmedia.com/visuals/digdeeper/3.jpg https://www.techtarget.com/searchitchannel/definition/reseller Tue, 14 Oct 2025 09:00:00 GMT <p>Deal registration is a key feature of many vendors' channel partner programs, enabling a partner -- such as a value-added reseller (<a href="https://www.techtarget.com/searchitchannel/definition/VAR">VAR</a>), system integrator (SI) or managed services provider (<a href="https://www.techtarget.com/searchitchannel/definition/managed-service-provider">MSP</a>) -- to register a sales opportunity with the vendor before actively pursuing it. Once approved, the partner gains exclusive rights or priority access to that deal for a specified time, protecting them from competition with other partners or the vendor's own sales team.</p> <p>This process helps reduce channel conflict, increases visibility into the indirect <a href="https://www.techtarget.com/searchcustomerexperience/tip/How-to-manage-your-sales-pipeline">sales pipeline</a> and ensures that partners are rewarded for identifying and developing new opportunities.</p> <figure class="main-article-image half-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/itchannel-partner_program.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/itchannel-partner_program_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/itchannel-partner_program_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/itchannel-partner_program.png 1280w" alt="Info box outlining the five key elements of a partner program."> <figcaption> <i class="icon pictures" data-icon="z"></i>Deal registration is one of the 5 key elements of a partner program. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <section class="section main-article-chapter" data-menu-title="How the deal registration process works"> <h2 class="section-title"><i class="icon" data-icon="1"></i>How the deal registration process works</h2> <p>While deal registration processes vary by vendor, they typically follow a standardized flow designed to protect partner investments and streamline vendor support:</p> <ul class="default-list"> <li><b>Opportunity identification.</b> A channel partner identifies a qualified sales opportunity -- often a lead with a defined budget, authority, need and timeline (<a href="https://www.techtarget.com/searchcustomerexperience/definition/BANT">BANT</a>).</li> <li><b>Submission via portal.</b> The partner submits the opportunity using the vendor's <a href="https://www.techtarget.com/searchitchannel/definition/partner-portal">partner portal</a> or deal registration form. Modern portals often include dashboards, lead tracking and automated approval workflows.</li> <li><b>Evaluation and approval. </b>The vendor reviews the submitted opportunity to ensure it meets registration criteria (e.g., it's a net-new deal, not already in the pipeline, and the partner is in good standing). Approval timelines can range from 24 hours to several business days.</li> <li><b>Deal protection period. </b>If approved, the partner is granted deal protection -- a temporary exclusivity window where no other partner (or internal sales team) might pursue the same opportunity. Protection periods vary based on the <a href="https://www.techtarget.com/searchitchannel/feature/Key-concepts-of-the-MSP-sales-process">sales cycle's length</a> or partner tier.</li> <li><b>Support and collaboration. </b>Vendors might assist partners with technical pre-sales support, product demos, co-selling or marketing enablement to help close the deal.</li> <li><b>Closure and compensation. </b>Once the deal closes, the partner receives margin benefits or incentives based on their partner program status <strong>--</strong> often structured in <a href="https://www.channelfutures.com/channel-sales-marketing/is-partner-tiering-useful-many-partners-doubt-it">tiered programs</a> (e.g., Silver, Gold, Platinum).</li> </ul> </section> <section class="section main-article-chapter" data-menu-title="Key benefits of deal registration"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Key benefits of deal registration</h2> <p>Deal registration offers strategic benefits to both vendors and partners.</p> <p>For partners, lead protection minimizes the risk of other partners or vendor reps hijacking deals. The partner might also gain access to technical experts, pricing discounts and <a href="https://www.techtarget.com/searchcustomerexperience/tip/5-digital-sales-enablement-tools-to-boost-productivity">sales enablement tools</a>. When it comes to margins, registered deals often yield better pricing, rebates or financial incentives for partners. And deal registration builds a stronger relationship with the vendor through demonstrated deal activity.</p> <p>On the vendor side, deal registration<b> </b>encourages proactive partner behavior and pipeline development, or improved partner engagement. At the same time, it mitigates channel conflict by reducing internal competition and confusion among multiple partners. It also<b> </b>increases pipeline visibility by providing early insights into market demand and partner performance <a href="https://www.techtarget.com/searchcustomerexperience/definition/business-metric">metrics</a>. And deal registration streamlines partner management by aligning marketing, sales and support resources with committed opportunities.</p> </section> <section class="section main-article-chapter" data-menu-title="Common challenges in deal registration"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Common challenges in deal registration</h2> <p>Despite its advantages, deal registration can present hurdles if poorly implemented. For example, clunky registration platforms can frustrate partners and discourage use. Some channel partners are deterred by slow approvals or delayed vendor responses that might cause them to lose momentum or confidence. While improvements to deal registration systems have eased the partner burden, disputes over lead ownership -- if two partners claim the same lead -- can lead to tension or disengagement. And vendors have been known to occasionally override registration to meet strategic goals or customer requests, eroding partner trust.</p> <p>However, with modern partner relationship management (<a href="https://www.techtarget.com/searchcustomerexperience/definition/partner-relationship-management-PRM">PRM</a>) software and clear policies, many of these issues have been reduced.</p> </section> <section class="section main-article-chapter" data-menu-title="Deal registration and channel conflict"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Deal registration and channel conflict</h2> <p>Channel conflict arises when multiple sales entities -- partners or vendor reps -- compete for the same customer. Deal registration helps to prevent or manage this by clearly assigning ownership of a lead, setting ground rules for competing bids, and protecting early-stage partner investments in lead nurturing.</p> <p>When properly enforced, deal registration aligns incentives and fosters partner <a href="https://www.techtarget.com/searchcustomerexperience/tip/4-types-of-loyalty-programs-and-their-benefits">loyalty</a> by rewarding the entity that brought the opportunity to the table.</p> </section> <section class="section main-article-chapter" data-menu-title="Best practices for successful deal registration programs"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Best practices for successful deal registration programs</h2> <p>To maximize the success of deal registration, vendors should follow these proven best practices:</p> <ol type="1" start="1" class="default-list"> <li><b>Define clear eligibility criteria.</b> Ensure partners know what qualifies as a valid registration (e.g., deal size, opportunity type, new logo vs. upsell).</li> <li><b>Automate and simplify.</b> Invest in an intuitive, automated portal to ease partner workflows and approval processes.</li> <li><b>Set transparent rules.</b> Document protection timeframes, escalation processes and what happens in overlapping lead scenarios.</li> <li><b>Provide timely feedback.</b> Respond quickly to partner submissions and communicate approvals or rejections clearly.</li> <li><b>Reward performance.</b> Tie deal registration to tangible benefits like better pricing, co-selling support or market development funds (<a href="https://www.techtarget.com/searchitchannel/definition/market-development-funds-MDF">MDF</a>).</li> <li><b>Audit and resolve disputes fairly.</b> Implement review mechanisms for contested registrations or override scenarios.</li> </ol> </section> <section class="section main-article-chapter" data-menu-title="Trends and innovations in deal registration tools"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Trends and innovations in deal registration tools</h2> <p>Modern deal registration programs are evolving with the help of technology. For example, <a href="https://www.techtarget.com/searchenterpriseai/definition/AI-Artificial-Intelligence">AI</a>-powered opportunity scoring<b> </b>or predictive algorithms help vendors assess deal viability more accurately. Mobile access and real-time notifications, allow partners to register deals via <a href="https://www.techtarget.com/whatis/definition/mobile-app">mobile apps</a> while in the field and receive real-time alerts to keep them informed of status changes, approvals or expiring protection windows.</p> <p>Seamless integration with customer relationship management (CRM) software, such as <a href="https://www.techtarget.com/searchcustomerexperience/definition/Salesforcecom">Salesforce</a>, HubSpot or <a href="https://www.techtarget.com/searchcustomerexperience/definition/Microsoft-Dynamics-365">Microsoft Dynamics</a>, enables better pipeline tracking. And tools automatically calculate and distribute partner rewards based on registration success.</p> <div class="youtube-iframe-container"> <iframe id="ytplayer-0" src="https://www.youtube.com/embed/hBotLYIPibc?si=-Awlwm8tQPWk0fXG?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> <p>Vendors are increasingly using partner ecosystems with centralized platforms that combine deal registration, enablement, training and support in a single user-friendly interface. When backed by clear policies and modern tools, deal registration programs can <a href="https://www.computerweekly.com/microscope/feature/Generative-AI-hits-the-channel-are-partners-ready?">strengthen vendor-partner collaboration</a> and accelerate sales growth across indirect channels.</p> </section> Deal registration is a key feature of many vendors' channel partner programs, enabling a partner -- such as a value-added reseller (VAR), system integrator (SI) or managed services provider (MSP) -- to register a sales opportunity with the vendor before actively pursuing it. https://cdn.ttgtmedia.com/visuals/digdeeper/1.jpg https://www.techtarget.com/searchitchannel/definition/deal-registration Fri, 10 Oct 2025 12:00:00 GMT <p>A distributor agreement -- also referred to as a distribution agreement -- is a legally binding contract between a vendor or manufacturer and a <u><a href="https://www.techtarget.com/whatis/definition/distributor">distributor</a></u>. This agreement outlines the terms under which the distributor may market, sell and sometimes service the vendor's products or services within a defined territory or market segment. It serves as the framework for managing the business relationship, ensuring clarity on the expectations, rights and responsibilities of both parties.</p> <p>These agreements are commonly used in business-to-business (<a href="https://www.techtarget.com/searchcio/definition/B2B">B2B</a>) commerce and global <a href="https://www.techtarget.com/whatis/definition/supply-chain">supply chains</a>, where indirect sales models and partner networks play a critical role in product distribution.</p> <section class="section main-article-chapter" data-menu-title="Why distributor agreements matter"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Why distributor agreements matter</h2> <p>In today's global and <a href="https://www.techtarget.com/searchcio/definition/digital-economy">digitally connected economy</a>, companies often rely on third parties to reach broader markets. A well-structured distributor agreement facilitates the following:</p> <ul class="default-list"> <li><b>Market penetration and efficiency.</b> Vendors can scale more effectively without directly managing every market.</li> <li><b>Brand consistency.</b> The agreement governs how products are marketed, priced and supported to ensure a consistent brand image.</li> <li><b>Risk mitigation.</b> Clear contractual terms help reduce misunderstandings and litigation risk.</li> <li><b>Compliance.</b> Distributors are held to local <a href="https://www.techtarget.com/searchcio/definition/regulatory-compliance">regulatory standards</a> and can be contractually required to follow ethical or legal guidelines.</li> </ul> <p>Without a proper agreement, vendors might face challenges such as unauthorized sales practices, poor customer experiences, pricing conflicts and loss of <a href="https://www.techtarget.com/whatis/definition/intellectual-property-IP">intellectual property</a> control.</p> </section> <section class="section main-article-chapter" data-menu-title="Typical elements of a distributor agreement"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Typical elements of a distributor agreement</h2> <p>A comprehensive distributor agreement typically includes these core components:</p> <ul class="default-list"> <li><b>Contract term.</b> Start and end dates, as well as renewal conditions.</li> <li><b>Territorial scope.</b> Regions, countries or market segments the distributor is authorized to serve.</li> <li><b>Product scope.</b> Specific products or product categories covered by the agreement.</li> </ul> <ul class="default-list"> <li><b>Exclusivity clause:</b></li> </ul> <ul class="default-list"> <li style="list-style-type: none;"> <ul style="list-style-type: circle;" class="default-list"> <li><i>Exclusive</i>. The distributor is the sole representative in a defined area.</li> <li><i>Nonexclusive</i>. Multiple distributors may operate in the same region.</li> </ul> </li> </ul> <ul class="default-list"> <li><b>Sales and marketing rights.</b> Guidelines for advertising, trade shows, online sales and <a href="https://www.techtarget.com/whatis/definition/lead-generation">lead generation</a>.</li> <li><b>Trademark and IP licensing.</b> How logos, trademarks and promotional assets may be used.</li> <li><b>Pricing and payment terms.</b> Wholesale pricing structure, volume discounts, invoicing and payment timelines.</li> <li><b>Performance obligations.</b> Sales targets, <a href="https://www.techtarget.com/searcherp/definition/inventory-management">inventory levels</a> and service requirements.</li> <li><b>Reporting and analytics.</b> Metrics, frequency and methods of reporting performance or market data.</li> <li><b>Termination clauses.</b> Circumstances under which the agreement may be canceled (e.g., breach of contract, insolvency or mutual consent).</li> <li><b>Dispute resolution.</b> Arbitration or legal processes to resolve disagreements</li> </ul> <p>These terms are designed to promote <a href="https://www.techtarget.com/whatis/definition/accountability">accountability</a>, reduce ambiguity and create a mutually beneficial relationship.</p> </section> <section class="section main-article-chapter" data-menu-title="Types of distribution strategies"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Types of distribution strategies</h2> <p>Before entering into distributor agreements, vendors must determine which distribution strategy aligns with their business goals:</p> <ul class="default-list"> <li><b>Selective distribution.</b> Involves working with a small number of vetted distributors to maintain brand control and protect pricing integrity -- common in B2B and luxury markets.</li> <li><b>Intensive distribution.</b> Broad placement through as many outlets as possible to maximize visibility and sales -- typically used for consumer goods.</li> <li><b>Exclusive distribution.</b> Assigns a single distributor per territory, usually with higher expectations for performance, training and brand alignment.</li> </ul> <p>Each strategy affects the legal structure and expectations outlined in the agreement.</p> </section> <section class="section main-article-chapter" data-menu-title="International distributor agreements"> <h2 class="section-title"><i class="icon" data-icon="1"></i>International distributor agreements</h2> <p>Many multinational companies sign international distributor agreements to expand into new markets. These contracts must address the following:</p> <ul class="default-list"> <li>Import/export compliance.</li> <li>Currency and tax implications.</li> <li>Local laws and dispute jurisdictions.</li> <li>Language and translation accuracy.</li> <li>Cultural considerations in sales and marketing.</li> </ul> <p>Distributors like Arrow Electronics, Ingram Micro and Tech Data often maintain subsidiaries in multiple countries to provide global <a href="https://www.techtarget.com/searcherp/definition/logistics">logistics</a>, market expertise and compliance support.</p> </section> <section class="section main-article-chapter" data-menu-title="Distributor agreement vs. dealer agreement"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Distributor agreement vs. dealer agreement</h2> <p>While similar, distributor agreements and dealer agreements serve different roles in the supply chain:</p> <table class="main-article-table"> <thead> <tr style="height: 25.0pt;"> <td valign="top" style="width: 53.3pt;"> <p><span style="color: #ecf0f1;"><b>Aspect</b></span></p> </td> <td valign="top" style="width: 234.95pt;"> <p><span style="color: #ecf0f1;"><b>Distributor Agreement</b></span></p> </td> <td valign="top" style="width: 179.65pt;"> <p><span style="color: #ecf0f1;"><b>Dealer Agreement</b></span></p> </td> </tr> </thead> <tbody> <tr style="height: 38.5pt;"> <td valign="top" style="width: 53.3pt;"> <p><b>Role</b></p> </td> <td valign="top" style="width: 234.95pt;"> <p>Middleman between vendor and dealers/resellers</p> </td> <td valign="top" style="width: 179.65pt;"> <p>Sells directly to end customers</p> </td> </tr> <tr style="height: 25.0pt;"> <td valign="top" style="width: 53.3pt;"> <p><b>Partner</b></p> </td> <td valign="top" style="width: 234.95pt;"> <p>Manufacturer/vendor</p> </td> <td valign="top" style="width: 179.65pt;"> <p>Distributor</p> </td> </tr> <tr style="height: 25.0pt;"> <td valign="top" style="width: 53.3pt;"> <p><b>Focus</b></p> </td> <td valign="top" style="width: 234.95pt;"> <p>Logistics, warehousing, bulk sales</p> </td> <td valign="top" style="width: 179.65pt;"> <p>Retail sales, end-user support</p> </td> </tr> <tr style="height: 38.5pt;"> <td valign="top" style="width: 53.3pt;"> <p><b>Payment</b></p> </td> <td valign="top" style="width: 234.95pt;"> <p>Bulk pricing and inventory management</p> </td> <td valign="top" style="width: 179.65pt;"> <p>End-user pricing and service margins</p> </td> </tr> </tbody> </table> <p>In a two-tier distribution model, a vendor supplies products to a distributor, which then provides goods to dealers, such as retailers, value-added resellers (<a href="https://www.techtarget.com/searchitchannel/definition/VAR">VARs</a>) or managed service providers (<a href="https://www.techtarget.com/searchitchannel/definition/managed-service-provider">MSPs</a>). Dealer agreements are essential in this model to define reseller behavior and end-user engagement terms.</p> </section> <section class="section main-article-chapter" data-menu-title="Legal considerations and compliance"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Legal considerations and compliance</h2> <p>Distributor agreements must be drafted carefully to ensure they comply with national and international trade laws, especially in these areas:</p> <ul class="default-list"> <li><b>Antitrust and competition law.</b> To prevent unfair monopolies or price fixing.</li> <li><b>Export control regulations.</b> Compliance with embargoes, sanctions and restricted goods.</li> <li><b>Anti-bribery and corruption policies.</b> Particularly important when operating in high-risk jurisdictions.</li> <li><b>Data privacy and cybersecurity clauses.</b> When customer or transaction data is shared between parties, agreements must ensure <a href="https://www.techtarget.com/searchcio/definition/data-privacy-information-privacy">data privacy</a>.</li> </ul> <p>Engaging legal counsel familiar with the relevant jurisdictions is critical during contract negotiation and periodic reviews.</p> </section> <section class="section main-article-chapter" data-menu-title="How to negotiate a distributor agreement"> <h2 class="section-title"><i class="icon" data-icon="1"></i>How to negotiate a distributor agreement</h2> <p>Negotiating an effective distributor agreement involves careful collaboration. Key tips for success include:</p> <ul class="default-list"> <li><b>Define goals upfront. </b>Clarify revenue targets, expansion timelines and territory priorities.</li> <li><b>Vet the distributor.</b> Assess financial stability, market knowledge and cultural fit.</li> <li><b>Involve stakeholders.</b> Include all <a href="https://www.techtarget.com/searchcio/definition/stakeholder">stakeholders</a> -- legal, marketing, finance and operations teams.</li> <li><b>Balance control and autonomy.</b> Ensure brand protection without micromanaging.</li> <li><b>Draft with clarity.</b> Use precise, plain language and clearly defined terms.</li> <li><b>Plan for audits and accountability. </b>Build in regular performance reviews, reporting and training expectations.</li> <li><b>Future-proof the contract. </b>Account for pricing adjustments, product updates and changes in local law.</li> </ul> <p>A distributor agreement is more than a contract. It's a foundation for sustainable growth in indirect sales models. With the right strategy, structure and partner alignment, companies can extend their reach, maintain brand integrity and drive consistent revenue across regions and industries. Successful agreements are collaborative, flexible and enforceable.</p> </section> A distributor agreement -- also referred to as a distribution agreement -- is a legally binding contract between a vendor or manufacturer and a distributor. https://cdn.ttgtmedia.com/visuals/digdeeper/5.jpg https://www.techtarget.com/searchitchannel/definition/distributor-agreement Thu, 09 Oct 2025 09:00:00 GMT <p>Customer acquisition cost (CAC) is the cost associated with convincing a consumer to buy your product or service, including research, marketing and advertising costs. Basically, it is the total cost incurred and the resources expended by the company to acquire a new customer.</p> <p>An important&nbsp;<a href="https://www.techtarget.com/searchcustomerexperience/definition/business-metric">business metric</a>, the cost of customer acquisition should be considered along with other data, especially the customer's value to the company and the resulting <a href="https://www.techtarget.com/searchcio/definition/ROI">ROI</a> of acquisition.</p> <p>Calculating <a href="https://www.techtarget.com/searchcustomerexperience/tip/7-key-customer-experience-metrics-to-measure">customer lifetime value</a> (CLV) helps a company determine how much revenue a particular account (customer) will bring in over its lifetime. Together, CAC and CLV enable firms to measure the value generated by a new customer and, accordingly, implement strategies to gain and <a href="https://www.techtarget.com/searchcustomerexperience/tip/Tips-to-improve-customer-retention">retain high-value customers</a>.</p> <section class="section main-article-chapter" data-menu-title="How to calculate customer acquisition cost"> <h2 class="section-title"><i class="icon" data-icon="1"></i>How to calculate customer acquisition cost</h2> <p>Customer acquisition cost is a numerical value calculated using a mathematical formula. Two such formulas are available: a simple formula and a complex formula.</p> <p>The first step in calculating CAC is to determine the reporting period. Businesses typically calculate customer acquisition cost monthly, quarterly or annually.</p> <p>However, firms with <a href="https://www.techtarget.com/searchcustomerexperience/tip/Ways-to-measure-sales-enablement-metrics">long sales cycles</a> can calculate CAC over a longer period. For example, a business with an 18-month sales cycle can calculate CAC over a two-year horizon. If it takes the company an average of 18 months to close a sale, then the <a href="https://www.techtarget.com/searchitchannel/feature/5-ways-to-improve-MSP-marketing-and-sales">sales and marketing</a> expenses incurred this month -- and possibly this quarter and this year -- will not influence a sale until later. Using a longer time period ensures that sales and marketing expenses are correctly associated with the customers acquired in that period.</p> <p>After determining the reporting period, the next step is to calculate the total sales and marketing spend for that period.</p> <p>The final step is to note the number of customers acquired in that period.</p> <p>These three steps are sufficient to calculate CAC using the simple formula.</p> <h3>Simple formula for CAC</h3> <p>The simplest formula for calculating CAC is the following:</p> <pre style="margin: 0in; line-height: 130%; font-size: 11pt; font-family: Calibri, sans-serif;"><span style="font-family: Cambria, serif;"><strong>CAC</strong> = <u>Sum total of all sales and marketing expenses </u></span><br><span style="font-family: Cambria, serif;"> Number of customers acquired </span></pre> <p>The values in the numerator and denominator must use the same reporting period.</p> <p>For example, if the total monthly sales and marketing expenses are $15,000 and a business acquires 150 customers in the same month, the customer acquisition cost is $100.</p> <p>This method provides an easy way to calculate CAC since it doesn't consider the costs of other parameters like software, external consultants, overhead, etc. Ignoring these parameters can skew the CAC and result in unsound <a href="https://www.techtarget.com/searchbusinessanalytics/definition/decision-making-process">decision-making</a> regarding marketing strategies and investments.</p> <h3>Complex formula for CAC</h3> <p>A complex formula for calculating CAC accounts for additional expenses plus total sales and marketing expenses.</p> <p>To calculate CAC using this formula, these additional parameters are considered:</p> <p><b>SMS</b>: Sum total of all sales and marketing expenses</p> <p><b>W</b>: Marketing and sales wages/salaries</p> <p><b>S</b>: Cost of sales and marketing software</p> <p><b>PS</b>: Cost of any additional <a href="https://www.techtarget.com/searchitchannel/definition/professional-services">professional services</a> used in sales and/or marketing</p> <p><b>O</b>: Total overheads</p> <p><b>CA</b>: Number of customers acquired in a specific period</p> <p>The complex formula can be stated as follows:</p> <pre style="margin: 0in; line-height: 130%; font-size: 11pt; font-family: Calibri, sans-serif;"><b><span style="font-family: Cambria, serif;">CAC</span></b><span style="font-family: Cambria, serif;"> = <span style="text-decoration: underline;">SMS + W + S + PS + O</span></span><br><span style="font-family: Cambria, serif;"> CA</span></pre> <p>Continuing the previous example, SMS remains $15,000, and CA remains 150. The additional costs are as follows:</p> <p><b>W</b> = $5,000</p> <p><b>S</b>&nbsp; = $500</p> <p><b>PS</b>: $1,500</p> <p><b>O</b>: $3,000</p> <p>Now, the CAC can be calculated as:</p> <p style="margin: 0in; line-height: 130%; font-size: 11pt; font-family: Calibri, sans-serif;"><b><span style="font-family: Cambria, serif;">CAC</span></b><span style="font-family: Cambria, serif;"> = <u>15,000 + 5,000 + 500 + 1,500 + 3,000</u> = $167</span></p> <p style="margin: 0in 0in 10pt 1in; text-indent: 0.5in; line-height: 130%; font-size: 11pt; font-family: Calibri, sans-serif;"><span style="font-family: Cambria, serif;">&nbsp;&nbsp; 150</span></p> <p>Formula 2 is more complex than Formula 1. However, it also yields a more accurate CAC calculation. The difference in the CAC calculated with the two formulas can be significant for high-value products and customers. Relying on the less accurate number can adversely affect decision-making.</p> <p>In addition to the two formulas above, another CAC formula is also available. Known as <i>Paid CAC</i>, it only considers the <a href="https://www.techtarget.com/searchcustomerexperience/tip/Let-customer-acquisition-costs-steer-marketing-service-plans">total marketing</a> and sales spend and the number of customers gained through paid channels (CAP).</p> <p>It can be expressed as:</p> <pre style="margin: 0in; line-height: 130%; font-size: 11pt; font-family: Calibri, sans-serif;"><b><span style="font-family: Cambria, serif;">CAC</span></b><span style="font-family: Cambria, serif;"> = <u>SMS + W + S + PS + O</u></span><br><span style="font-family: Cambria, serif;"> CA</span></pre> <p>This calculation enables marketing teams to plan ways to reduce SMS and optimize ad spend in order to increase CAP.</p> <h3>What does customer acquisition cost include?</h3> <p>When calculated using the complex (and more granular and accurate) formula, customer acquisition cost includes the sum total of all sales and marketing expenses incurred to acquire a customer. These costs include the following:</p> <ul class="default-list"> <li><b>Salaries</b>. The wages paid to sales and marketing personnel;</li> <li><b>Cost of equipment</b>. Any equipment used by sales and marketing personnel, such as computers, phones and printers, should be accounted for in the CAC calculation.</li> <li><b>Software</b>. The cost of all applications used by the sales and marketing teams, such as customer relationship management (<a href="https://www.techtarget.com/searchcustomerexperience/definition/CRM-customer-relationship-management">CRM</a>) platforms and&nbsp;<a href="https://www.techtarget.com/searchcustomerexperience/definition/marketing-automation">marketing automation</a> tools, should be included in the CAC formula;</li> <li><b>Professional services</b>. Any third-party consultants and <a href="https://www.techtarget.com/searchitchannel/feature/In-house-vs-outsourced-marketing-for-MSPs">agencies used for marketing</a>, advertising or creative needs are part of CAC;</li> <li><b>Advertising spend</b>. The total advertising cost incurred, including the cost of online ads, <a href="https://www.techtarget.com/searchcustomerexperience/definition/direct-email-marketing">direct mail</a>, television advertising, out-of-home advertising, and event and conference sponsorships; and</li> <li><b>Price discounting. </b>If a product's list price is discounted to attract and acquire a customer, the discount amount is added to the customer acquisition cost.</li> </ul> <p>Some businesses may incur additional sales and marketing expenses not listed above. All sales and marketing expenses must be added to the numerator to calculate customer acquisition cost accurately. Omitting sales and marketing expenses, whether intentional or accidental, leads to an inaccurate CAC number that may be artificially favorable to the company and therefore not show the true cost of acquiring that customer.</p> <h3>Why is calculating customer acquisition cost important?</h3> <p>Calculating the customer acquisition cost is important to businesses for several reasons:</p> <ul class="default-list"> <li><b>Improve ROI</b>. A clear CAC number is essential to calculate and analyze marketing ROI. How many customers did the company gain by sponsoring social events? How many were gained through paid <a href="https://www.techtarget.com/whatis/definition/social-media-marketing-SMM">social media</a> ads? And how many through TV advertising? By calculating the CAC for each of these channels, firms can determine which channel is yielding the most bang for their buck. They can then focus their efforts and money on utilizing the most cost-effective channels to acquire customers.</li> <li><b>Optimize the sales and marketing budget. </b>By reviewing the CAC, decision-makers can determine whether they have allocated enough budget for sales and marketing activities. If a particular activity is more effective at acquiring customers, they can allocate a bigger budget to it and reduce the budget allocated to less effective activities.</li> <li><b>Improve profitability</b>. A lower CAC means the company spends less money to acquire a new customer. By identifying and leveraging cost-effective acquisition strategies, companies can keep the CAC low and increase profit margins and profitability. Another way to boost profitability is to compare CAC with customer lifetime value. Suppose the CAC is much higher than the CLV (a 3:1 CLV CAC ratio is a healthy benchmark to follow). In that case, it indicates excessive <a href="https://www.techtarget.com/searchcustomerexperience/answer/Revenue-operations-vs-sales-operations-Whats-the-difference">spending on customer acquisition</a> that may adversely affect the bottom line.</li> <li><b>Financial planning</b>. Businesses can calculate a CAC payback period to assess their financial health and plan future strategies. The CAC payback period is calculated by dividing the CAC per customer by the monthly revenue generated per customer. This period shows how long it will take for the firm to break even and start earning a profit from each new customer. If the period is too high (undesirable), acquisition strategies or the product price may need to be adjusted.</li> </ul> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineImages/salesforce-customer_journey_map.jpg"> <img data-src="https://www.techtarget.com/rms/onlineImages/salesforce-customer_journey_map_mobile.jpg" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineImages/salesforce-customer_journey_map_mobile.jpg 960w,https://www.techtarget.com/rms/onlineImages/salesforce-customer_journey_map.jpg 1280w" alt="four stages of a customer journey diagram" height="333" width="520"> <figcaption> <i class="icon pictures" data-icon="z"></i>Companies must nurture potential customers throughout the process, from their first inquiry through the end of the service cycle and beyond. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <h3>How to reduce customer acquisition cost</h3> <p>If the CAC is too high, particularly concerning the CLV, it can negatively affect the organization's profitability. This is why it's important to reduce the CAC. Some strategies to reduce the CAC include the following:</p> <ul class="default-list"> <li><b>Create customer segments</b>. To maximize CLV and reduce CAC, it's crucial to sell the product or service to the <i>right</i> customers. These are the customers with specific pain points or needs that can be satisfied by the firm's offerings. Customer segmentation can help organizations to identify the right audience and focus their sales and marketing efforts on them. Additionally, creating <a href="https://www.techtarget.com/searchcustomerexperience/definition/buyer-personas-customer-personas">buyer personas</a> and an ideal customer profile can help prevent the allocation of sales/marketing budgets to ineffective channels.</li> <li><b>Don't rely only on paid channels</b>. Paid channels can be effective but also expensive. Reliance on paid channels increases the CAC. Stopping payments doesn't help reduce CAC if the organization has not invested time and effort in acquiring customers through alternate, organic channels. Organic channels like <a href="https://www.techtarget.com/searchcontentmanagement/tip/How-to-incorporate-social-media-into-SEO-strategies">SEO</a> and content marketing may not generate results as fast as paid channels; however, they can bring in more customers over time, leading to consistent and sustainable CAC reduction.</li> <li><b>Deliver positive customer experiences. </b>In general, acquiring a new customer costs more than retaining an existing customer. By providing a quality product, personalized experience and excellent support, companies can optimize <a href="https://www.techtarget.com/searchcustomerexperience/definition/customer-journey-map">the customer journey</a> and increase CLV. Also, asking for feedback fosters trust in the brand and keeps existing customers returning. The better the <a href="https://www.techtarget.com/searchcustomerexperience/definition/customer-retention">customer retention</a>, the more the customer base grows, and the lower the CAC will be.</li> <li><b>Use marketing automation. </b>Marketing automation platforms can perform many tasks that would otherwise require expensive human resources. The software can lower resource costs and aid in optimizing marketing expenses, which eventually positively affects the CAC.</li> <li><b>Optimize conversion rates on your website. </b><a href="https://www.techtarget.com/whatis/definition/conversion-rate-optimization">Conversion rate optimization (CRO)</a> includes practices to maximize value from traffic to the company website. For example, clear calls to action guide visitors on what action to take, such as a purchase or sign-up. This can boost conversions and reduce CAC. Other CRO practices that can bring CAC down include <a href="https://www.techtarget.com/whatis/feature/Best-practices-to-make-a-mobile-friendly-website">improving site loading speed</a>, page layout, displaying testimonials and customer reviews, optimizing the site for mobile and improving site accessibility for differently abled users.</li> </ul> <div class="youtube-iframe-container"> <iframe id="ytplayer-0" src="https://www.youtube.com/embed/ccHxYt7js5E?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> </section> <section class="section main-article-chapter" data-menu-title="Examples of customer acquisition cost"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Examples of customer acquisition cost</h2> <p>Here are a couple of examples of customer acquisition costs in the real world:</p> <h3>Example 1: How to achieve a favorable CAC using simple means.</h3> <p>Let's consider a fictional company, Creatif, Inc., that makes car stickers and decals.</p> <p>One of their popular bumper stickers includes a link to the company's online store. The sticker's popularity means it grabs more eyeballs, leading to more website visits and, ultimately, more purchases.</p> <p>Creatif, Inc. does not employ sales and marketing personnel. The only costs associated with acquiring new customers are the website's design, hosting and <a href="https://www.techtarget.com/searchcio/definition/e-commerce">e-commerce</a> transaction fees. This example shows that large teams and fancy marketing strategies are not always required to lower CAC; sometimes, simple word-of-mouth marketing or&nbsp;<a href="https://www.techtarget.com/searchcustomerexperience/definition/buzz-marketing">buzz marketing</a> can be equally or more effective.</p> <h3>Example 2: How to reduce an unfavorable CAC.</h3> <p>Now let's consider <i>Novo Ltd.</i>, which sells ERP solutions to medium and large businesses.</p> <p>Suppose Novo Ltd spends $8,000 to acquire a new customer. However, the customer's CLV is only about $2,000. Basically, the company spends 4X as much on acquiring the customer as the value that the customer will bring to the company in return. This 4:1 ratio pulls down profitability, so Novo Ltd. must look at strategies to optimize marketing spend. They can do this by creating <a href="https://www.techtarget.com/searchcustomerexperience/definition/customer-segmentation">customer segments</a>, marketing through organic channels, delivering positive <a href="https://www.techtarget.com/searchcustomerexperience/definition/customer-experience-CX">customer experiences</a> and optimizing website conversions.</p> <p><i>Learn about different&nbsp;</i><a href="https://www.techtarget.com/searchcustomerexperience/tip/7-customer-segmentation-methods-to-help-connect-the-dots"><i>customer segmentation methods</i></a><i>&nbsp;to help organizations identify their customers better. Also, customer experience plays a part in retaining customers and driving revenue and profit. Master the&nbsp;<a href="https://www.techtarget.com/searchcustomerexperience/tip/10-customer-success-KPIs-and-metrics-to-track">top 10 customer success key performance indicators and metrics</a>&nbsp;you should track.</i></p> </section> Customer acquisition cost (CAC) is the cost associated with convincing a consumer to buy your product or service, including research, marketing and advertising costs. https://cdn.ttgtmedia.com/visuals/digdeeper/5.jpg https://www.techtarget.com/searchcustomerexperience/definition/customer-acquisition-cost Mon, 22 Sep 2025 09:00:00 GMT <p>A channel partner is a person or organization that partners with a manufacturer or producer to market, sell, and deliver their products or services to the end customer. They form part of a company's <a href="https://www.techtarget.com/searchitchannel/definition/distribution-channel">distribution channel</a>, which is the path a product takes from producer to consumer.</p> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/distribution_channel_levels-f.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/distribution_channel_levels-f_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/distribution_channel_levels-f_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/distribution_channel_levels-f.png 1280w" alt="A chart comparing three distribution channel levels and the types of entities, such as channel partners, involved at each level." height="324" width="560"> <figcaption> <i class="icon pictures" data-icon="z"></i>Distribution channels range from simple to complex; channel partners help advance a producer's goals at any of the three distribution channel levels shown here. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <p>While channel partner is a term perhaps most familiar in the tech industry, the idea of using intermediaries to reach customers is ubiquitous and seen in many industries such as food and beverage, apparel, and automobiles.</p> <p>Bridging gaps between vendors and end customers, channel partners help extend market reach, provide localized support, and deliver specialized services. Channel partners often receive <a href="https://www.computerweekly.com/microscope/feature/Rewarding-the-value-add">incentives</a>, training, and technical resources from the manufacturer or producer (commonly called the vendor) to support their efforts.</p> <p>Channel partners can be a wide variety of entities, including:</p> <ul class="default-list"> <li><b>Retailers.</b> An example is a large supermarket chain selling a food producer's products.</li> <li><b>Distributors.</b> These companies buy products in bulk from manufacturers/vendors and sell them to retailers or other businesses.</li> <li><b>Value-added resellers (VARs).</b> These partners sell a product but also add their own services to it, like a company that sells software and also offers implementation and training.</li> <li><b>Affiliates.</b> Individuals or businesses that earn a commission for referring customers to a company's products.</li> </ul> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/how_a_value_added_reseller_works-f.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/how_a_value_added_reseller_works-f_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/how_a_value_added_reseller_works-f_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/how_a_value_added_reseller_works-f.png 1280w" alt="A chart describing the functions of a value-added-reseller (VAR) in a distribution channel." height="258" width="560"> <figcaption> <i class="icon pictures" data-icon="z"></i>VARs often add more features or repackage products that can make them more compelling to customers, advancing the producer's sales goals. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <section class="section main-article-chapter" data-menu-title="Channel partners in technology"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Channel partners in technology</h2> <p>In technology, channel partner <a href="https://www.techtarget.com/searchitchannel/news/252525643/Channel-partner-programs-evolve-amid-digital-transformation">models have evolved</a>. Each plays a distinct role:</p> <ul class="default-list"> <li><b>VARs</b>. These partners resell hardware, software, or services with additional value, such as custom configuration, installation, training, or support. Initially prominent in the minicomputer era of the 1970s, <a href="https://www.techtarget.com/searchitchannel/definition/VAR">VARs</a> <a href="https://www.computerweekly.com/microscope/opinion/AI-plans-gather-pace-but-expert-partners-are-the-key-to-success">remain influential</a> in networking and cloud services today.</li> <li><b>Systems integrators (SIs)</b>. These partners specialize in connecting and customizing IT systems from different vendors to meet complex business needs. SIs became especially prominent during the 1980s as enterprise IT environments grew more complex.</li> <li><b>Consultants</b>. IT <a href="https://www.techtarget.com/searchitchannel/news/366627818/Consultants-SIs-back-AWS-agentic-AI-marketplace-launch">consultants</a> provide expert advice and planning services without necessarily reselling products. Some focus on strategic digital transformation, cloud adoption, cybersecurity, or compliance.</li> <li><b>Managed service providers (MSPs)</b>. <a href="https://www.techtarget.com/searchitchannel/Guide-to-building-and-executing-an-MSP-business-model">MSPs</a> remotely manage a customer's IT infrastructure and end-user systems. Many VARs have transitioned into or added MSP services as recurring revenue models have gained popularity.</li> <li><b>Distributors</b>. Distributors act as intermediaries between vendors and resellers, supplying a wide range of products. They often provide logistics, credit services, and partner enablement.</li> <li><b>Original equipment manufacturers (OEMs) and independent software vendors (ISVs)</b>. <a href="https://www.techtarget.com/searchitchannel/definition/OEM">OEM</a>s build hardware that includes a vendor's product, while <a href="https://www.techtarget.com/searchitchannel/definition/ISV">ISV</a>s develop software that can be bundled with or enhance the vendor's offering.</li> </ul> <div class="youtube-iframe-container"> <iframe id="ytplayer-0" src="https://www.youtube.com/embed/jdZ7xqNENbA?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> <p>Many channel partners today combine multiple roles, providing consulting, integration, resale, and managed services.</p> </section> <section class="section main-article-chapter" data-menu-title="Partnering among channel partners"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Partnering among channel partners</h2> <p>Channel partners frequently form alliances with one another to:</p> <ul class="default-list"> <li>Expand into new <a href="https://www.techtarget.com/searchitchannel/definition/vertical-market">vertical market</a>s or regions.</li> <li>Fill gaps in service offerings or expertise.</li> <li>Leverage joint solutions to address larger or more complex client needs.</li> </ul> <p>For example, a VAR might partner with a specialized security consultant to deliver a bundled offering. Likewise, multiple MSPs may join forces to provide 24/7 support across different time zones.</p> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineImages/channel-distribution_channels.jpg"> <img data-src="https://www.techtarget.com/rms/onlineImages/channel-distribution_channels_mobile.jpg" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineImages/channel-distribution_channels_mobile.jpg 960w,https://www.techtarget.com/rms/onlineImages/channel-distribution_channels.jpg 1280w" alt="A chart that compares channel partner relationships in one-tier and two-tier distribution models." height="252" width="560"> <figcaption> <i class="icon pictures" data-icon="z"></i>Channel partner relationships work differently in one-tier and two-tier distribution models. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <p>VAR-to-VAR partnerships also occur when firms collaborate to bid on large projects, exchange services, or take advantage of one another's certifications or compliance capabilities. <a href="https://www.computerweekly.com/microscope/opinion/Key-considerations-to-prepare-for-a-partner-first-power-play">Successful partnerships</a> typically depend on mutual benefit and trust.</p> </section> <section class="section main-article-chapter" data-menu-title="Optimizing channel partner relationships"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Optimizing channel partner relationships</h2> <p>Vendor-partner relationships are often formalized through a channel partner program. Leading IT vendors such as AWS, Microsoft, Cisco, Dell Technologies, Oracle, HPE and IBM all operate formal channel partner programs to engage with and support their partners. These programs offer a variety of resources to attract, enable, and retain partners, such as:</p> <ul class="default-list"> <li>Training and certification programs;</li> <li>Product and marketing support;</li> <li><a href="https://www.techtarget.com/searchitchannel/definition/deal-registration">Deal registration</a> and lead sharing tools;</li> <li>Incentives, rebates, and co-selling opportunities;</li> <li>Access to beta programs or early product releases; and</li> <li>Co-branding and joint marketing campaigns.</li> </ul> <p>Vendor channel managers (also called channel account managers) help onboard new partners and maintain active relationships. Many vendors also deploy partner portals and use partner relationship management (<a href="https://www.techtarget.com/searchcustomerexperience/definition/partner-relationship-management-PRM">PRM</a>) platforms to centralize tools, metrics, and communication.</p> <p>Clear expectations, transparency in sales engagement, and accessible technical support are key to strong vendor-partner collaboration. Getting all that right requires developing and applying a <a href="https://www.computerweekly.com/microscope/news/366611840/HPE-unifies-channel-team-to-improve-experiences">sensible strategy</a>.</p> </section> <section class="section main-article-chapter" data-menu-title="Channel partner certifications"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Channel partner certifications</h2> <p>Certification programs validate that a channel partner has met specific technical and business requirements to represent a vendor's products or services. These certifications benefit both the vendor and partner:</p> <ul class="default-list"> <li><b>Vendors</b> gain assurance that <a href="https://www.computerweekly.com/microscope/news/252499727/Palo-Alto-emphasises-channel-specialisations">certified partners</a> can deliver high-quality deployments.</li> <li><b>Partners</b> can differentiate themselves in the market and qualify for exclusive program tiers.</li> </ul> <p>For example:</p> <ul class="default-list"> <li>Cisco offers tiered certifications (Select, Premier, Gold, etc.) with increasing levels of training, rebates and support.</li> <li>AWS grants benefits such as <a href="https://www.techtarget.com/searchitchannel/definition/market-development-funds-MDF">market development funds</a> to consulting partners who meet specific technical and staffing benchmarks.</li> </ul> <p>Certification levels often influence deal access, service margins, and partner directory visibility.</p> </section> <section class="section main-article-chapter" data-menu-title="Channel partners vs. direct sales"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Channel partners vs. direct sales</h2> <p>Technology vendors often balance both direct sales and channel sales strategies. Here's how the two approaches differ:</p> <ul class="default-list"> <li><b>Direct sales</b>. Internal sales representatives engage directly with end customers, often focusing on large or strategic accounts.</li> <li><b>Channel sales</b>. Third-party partners manage the sales and delivery process, often for SMBs or regional markets.</li> </ul> <p>To prevent channel conflict (where both sales teams compete for the same account), vendors typically publish <a href="https://www.techtarget.com/searchitchannel/definition/channel-partner-rules-of-engagement-ROE">rules of engagement</a> that outline:</p> <ul class="default-list"> <li>Which team owns specific types of leads</li> <li>How deal registration protects a partner's opportunity</li> <li>Incentive structures for each channel</li> </ul> <p>Some vendors prioritize a <a href="https://www.computerweekly.com/microscope/news/366575553/Goldilock-makes-move-to-channel-first-model">channel-first model</a>, relying almost entirely on partners to generate and close sales, while others maintain a hybrid approach.</p> </section> <section class="section main-article-chapter" data-menu-title="Benefits of using channel partners"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Benefits of using channel partners</h2> <p>Engaging with channel partners offers several strategic benefits to vendors:</p> <ul class="default-list"> <li><b>Scalability</b>. Partners extend sales and service capabilities without requiring internal hiring or infrastructure, such as an extensive sales force, retail locations or a distribution network.</li> <li><b>Market penetration</b>. Local partners bring market knowledge and access to niche industries or underserved regions.</li> <li><b>Faster time to market</b>. Established channel networks accelerate product adoption and deployment. This can be <a href="https://www.techtarget.com/searchitchannel/news/366624477/Partner-marketing-for-startups-gets-specialized-integrated">especially important for a tech startup</a>.</li> <li><b>Customer trust</b>. Many end users prefer working with local or specialized firms they already know.</li> <li><b>Cost efficiency</b>. Channel sales often reduce the vendor's cost of customer acquisition.</li> </ul> <p>For partners, benefits include revenue diversification, recurring revenue opportunities, access to new technologies, and additional marketing support (by leveraging the vendor's brand and resources).</p> </section> <section class="section main-article-chapter" data-menu-title="Trends shaping the future of channel partnerships"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Trends shaping the future of channel partnerships</h2> <p>The channel landscape is evolving rapidly as IT consumption patterns shift. Emerging trends include:</p> <ul class="default-list"> <li><a href="https://www.techtarget.com/searchcloudcomputing/definition/XaaS-anything-as-a-service"><b>XaaS (Everything as a Service)</b></a>. As businesses adopt subscription-based models, partners are adapting to sell and manage <a href="https://www.techtarget.com/searchcloudcomputing/definition/Software-as-a-Service">SaaS</a>, <a href="https://www.techtarget.com/searchcloudcomputing/definition/Platform-as-a-Service-PaaS">PaaS</a>, and <a href="https://www.techtarget.com/searchcloudcomputing/definition/Infrastructure-as-a-Service-IaaS">IaaS</a> services.</li> <li><b>Ecosystem orchestration</b>. Vendors are encouraging partners to collaborate and co-innovate, rather than compete.</li> <li><b>AI and automation</b>. Partners are building service offerings around AI-powered solutions and automating service delivery.</li> <li><b>Partner marketplaces</b>. Vendors now offer digital marketplaces where partners can publish, sell, or bundle their solutions.</li> <li><b>Security and compliance focus</b>. With increasing cyber threats, partners with strong security and regulatory expertise are in <a href="https://www.computerweekly.com/microscope/news/366627782/OT-security-a-channel-opportunity">high demand</a>.</li> </ul> <p>Vendors must continue to invest in tools that enable channel partners and flexible program models to meet partners where they are in their journey.</p> <p><i>Having a working go-to-market strategy with trustworthy distribution partners is important in supply chain management. Learn about the</i><a href="https://www.techtarget.com/searcherp/feature/Supply-chain-risks-can-be-costly-if-companies-fall-behind"><i>risks that come with the supply chain</i></a><i>, and what companies can do to avoid falling behind.</i></p> </section> A channel partner is a person or organization that partners with a manufacturer or producer to market, sell, and deliver their products or services to the end customer. https://cdn.ttgtmedia.com/visuals/digdeeper/3.jpg https://www.techtarget.com/searchitchannel/definition/channel-partner Thu, 04 Sep 2025 09:00:00 GMT <p>A channel strategy is a vendor's plan for delivering a product or service to end customers through direct or indirect sales channels. It defines the structure, partners, and tactics used to distribute offerings, support customers, and maximize market reach.</p> <p>Channel strategy is an essential component of a company's broader <a href="https://www.techtarget.com/searchitchannel/definition/go-to-market-strategy-GTM-strategy">go-to-market (GTM) approach</a>, ensuring products reach their intended audience efficiently and competitively.</p> <section class="section main-article-chapter" data-menu-title="The purpose of a channel strategy"> <h2 class="section-title"><i class="icon" data-icon="1"></i>The purpose of a channel strategy</h2> <p>In <a href="https://www.techtarget.com/searchcio/definition/B2B">B2B</a> and <a href="https://www.techtarget.com/searchcustomerexperience/definition/B2C">business-to-consumer</a> contexts alike, a channel strategy helps companies:</p> <ul class="default-list"> <li>Identify the most effective sales and distribution channels.</li> <li>Engage partners appropriate for specific product and service needs.</li> <li>Expand into new geographic or vertical markets.</li> <li>Optimize resource allocation for marketing and sales.</li> </ul> <p>For example, a company selling low-complexity software may rely on self-service digital sales, while one selling enterprise infrastructure may need help from <a href="https://www.techtarget.com/searchitchannel/definition/systems-integrator">systems integrators</a> or <a href="https://www.techtarget.com/searchitchannel/definition/VAR">value-added resellers (VARs)</a> to implement and support customer deployments.</p> <figure class="main-article-image half-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/it_channel-building_better_distro_relations-h.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/it_channel-building_better_distro_relations-h_half_column_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/it_channel-building_better_distro_relations-h_half_column_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/it_channel-building_better_distro_relations-h.png 1280w" alt="A chart describing what's needed to build a successful relationship with a distributor." height="201" width="279"> <figcaption> <i class="icon pictures" data-icon="z"></i>As part of their channel strategy, companies typically identify partners who can help them optimize their distribution channel through a mutually beneficial relationship. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> </section> <section class="section main-article-chapter" data-menu-title="Types of channel strategies"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Types of channel strategies</h2> <p>Organizations can pursue a variety of channel strategies depending on product type, target market, and their growth objectives:</p> <h3>Direct sales</h3> <p>A direct channel strategy involves the vendor selling products or services directly to customers. Common direct sales methods include:</p> <ul class="default-list"> <li>In-house sales teams engaging with enterprise buyers</li> <li><a href="https://www.techtarget.com/searchcontentmanagement/tip/How-to-make-a-successful-e-commerce-website">E-commerce websites</a> supporting online self-service purchases</li> <li>Catalog or phone-based sales for niche or legacy markets.</li> </ul> <p>Direct sales provide vendors with complete control over pricing, messaging, and customer relationships.</p> <h3>Indirect sales</h3> <p>An indirect strategy uses intermediaries such as channel partners to sell and support products. Common partner types include:</p> <ul class="default-list"> <li>Retailers and e-tailers</li> <li>VARs that bundle solutions and offer services</li> <li>Distributors that supply products to a network of resellers</li> <li>Managed Service Providers (<a href="https://www.techtarget.com/searchitchannel/definition/managed-service-provider">MSPs</a>)</li> <li>Consultants</li> <li><a href="https://www.techtarget.com/searchitchannel/definition/OEM">Original Equipment Manufacturers</a></li> <li><a href="https://www.techtarget.com/searchitchannel/definition/ISV">Independent software vendors</a></li> </ul> <p>In a one-tier distribution model, vendors sell directly to VARs. In a two-tier model, vendors sell to distributors, who then sell to VARs or retailers.</p> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/how_a_value_added_reseller_works-f.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/how_a_value_added_reseller_works-f_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/how_a_value_added_reseller_works-f_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/how_a_value_added_reseller_works-f.png 1280w" alt="A chart describing the core functions of a Value-Added Reseller (VAR) as channel strategy partners." height="258" width="560"> <figcaption> <i class="icon pictures" data-icon="z"></i>VARs can be valuable channel strategy partners; they are often called on to provide bundled services that may include product implementation and training. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <p>Channel partner programs often support these relationships with training, marketing support, <a href="https://www.techtarget.com/searchitchannel/definition/deal-registration">deal registration</a>, and <a href="https://www.techtarget.com/searchitchannel/news/252506556/Cisco-partner-program-aims-to-cut-complexity-via-portal">partner portals.</a></p> <h3>Consumer channels</h3> <p>In consumer markets, companies may deploy:</p> <ul class="default-list"> <li>Multichannel strategies, combining direct methods (e.g., catalogs, email) and indirect ones (e.g., social media, retail).</li> <li><a href="https://www.techtarget.com/searchcustomerexperience/tip/How-to-create-an-omnichannel-marketing-strategy">Omnichannel strategies</a>, delivering <a href="https://www.techtarget.com/searchcustomerexperience/tip/7-benefits-of-customer-experience-management">seamless customer experiences</a> across all digital and physical touchpoints.</li> </ul> <div class="youtube-iframe-container"> <iframe id="ytplayer-0" src="https://www.youtube.com/embed/sG9PRsvfr5Q?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> <p>These models are used in B2B contexts increasingly as well, especially for <a href="https://www.techtarget.com/searchcloudcomputing/definition/Software-as-a-Service">SaaS</a> and digital-first offerings.</p> </section> <section class="section main-article-chapter" data-menu-title="How to create a channel strategy"> <h2 class="section-title"><i class="icon" data-icon="1"></i>How to create a channel strategy</h2> <p>Developing a channel strategy requires a structured approach:</p> <ol class="default-list"> <li><b>Define the GTM objectives.</b> Align the strategy with broader company goals such as market expansion, revenue growth, or <a href="https://www.techtarget.com/searchcustomerexperience/definition/customer-retention">customer retention</a>.</li> <li><b>Segment the market.</b> Identify key customer types and their buying preferences.</li> <li><b>Assess product complexity.</b> Simpler products may suit digital channels; complex solutions often need expert partners.</li> <li><b>Evaluate potential channel types.</b> Consider direct vs. indirect and the specific partner roles required.</li> <li><b>Design incentives and support.</b> Create a partner program with onboarding, enablement, and <a href="https://www.computerweekly.com/microscope/feature/Rewarding-the-value-add">performance incentives</a>.</li> <li><b>Establish rules of engagement. </b>Avoid <a href="https://www.techtarget.com/searchitchannel/definition/channel-conflict">channel conflict</a> by <a href="https://www.techtarget.com/searchitchannel/definition/channel-partner-rules-of-engagement-ROE">clarifying roles</a> and lead ownership.</li> </ol> <p>For example, a vendor may use direct sales for large enterprise clients while assigning SMB accounts to channel partners.</p> </section> <section class="section main-article-chapter" data-menu-title="Channel conflict and segmentation"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Channel conflict and segmentation</h2> <p>When vendors use both direct and indirect channels, conflicts can arise if boundaries are not clear. Common causes of channel conflict include:</p> <ul class="default-list"> <li>Direct sales teams targeting accounts already served by partners</li> <li>Unclear or overlapping sales territories</li> <li>Competition over pricing or discounts.</li> </ul> <p>To mitigate these issues, companies may:</p> <ul class="default-list"> <li>Segment accounts by size, industry, or geography</li> <li>Define lead ownership and sales stages in partner agreements</li> <li>Use deal registration tools to protect partner opportunities</li> <li>Publish rules of engagement to guide internal and partner behavior.</li> </ul> <p>Successful <a href="https://www.techtarget.com/searchcustomerexperience/definition/market-segmentation">segmentation</a> ensures partners feel supported rather than undercut. This careful approach encourages long-term loyalty and performance.</p> </section> <section class="section main-article-chapter" data-menu-title="Channel strategy in digital transformation"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Channel strategy in digital transformation</h2> <p>As organizations shift toward subscription-based and <a href="https://www.techtarget.com/searchcio/tip/How-to-build-a-digital-transformation-roadmap-in-6-steps">digital-first business models</a>, channel strategies must align accordingly:</p> <ul class="default-list"> <li><b>SaaS distribution</b>. Cloud marketplaces (e.g., AWS Marketplace, Microsoft Azure Marketplace) enable partners to resell SaaS offerings.</li> <li><b>Self-service onboarding</b>. Partners increasingly help customers onboard and adopt products using digital tools.</li> <li><b>Recurring revenue models</b>. Channel programs must support <a href="https://www.techtarget.com/searchitchannel/definition/monthly-recurring-revenue-MRR">monthly recurring revenue</a> tracking, upselling and renewals.</li> <li><b>Data-driven partner management</b>. As part of <a href="https://www.techtarget.com/searchcustomerexperience/definition/partner-relationship-management-PRM">partner relationship management</a>, vendors can use analytics to assess partner performance, optimize incentives, and forecast channel ROI.</li> </ul> <p>A modern channel strategy emphasizes agility, automation and customer lifetime value over one-time product sales.</p> </section> <section class="section main-article-chapter" data-menu-title="Metrics to measure channel strategy effectiveness"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Metrics to measure channel strategy effectiveness</h2> <p>Vendors use a variety of metrics to evaluate and refine their channel strategies:</p> <ul class="default-list"> <li><b>Channel revenue contribution</b>. The percentage of overall revenue that channel partners generate</li> <li><b>Partner performance.</b> Sales volume, deal size, win rate, and customer satisfaction by partner</li> <li><b>Onboarding success rate</b>. Speed and effectiveness of partner enablement</li> <li><b>Channel conflict resolution time</b>. Average time to resolve disputes between direct and indirect teams</li> <li><b>Market coverage</b>. Breadth of customer segments, industries, or geographies that partners serve.</li> </ul> <p>These <a href="https://www.techtarget.com/searchbusinessanalytics/definition/key-performance-indicators-KPIs">key performance indicators</a> help vendors gauge the success of their partner mix, investment priorities, and support programs and can guide them in making necessary adjustments.</p> <p><i>Learn how </i><a href="https://www.techtarget.com/searchcustomerexperience/feature/Customer-communications-management-key-to-CX-success"><i>customer communications management</i></a><i>, facilitated by generative AI and other technologies, is key to improving customer experience success for B2B and B2C businesses alike. </i></p> </section> A channel strategy is a vendor's plan for delivering a product or service to end customers through direct or indirect sales channels. https://cdn.ttgtmedia.com/visuals/digdeeper/2.jpg https://www.techtarget.com/searchitchannel/definition/channel-strategy Thu, 04 Sep 2025 09:00:00 GMT <p>An ISV (independent software vendor) makes and sells software products that work with computer hardware, operating systems (<a href="https://www.techtarget.com/whatis/definition/operating-system-OS">OSes</a>) or software <a href="https://www.techtarget.com/searchitoperations/definition/platform">platforms</a> made by another company.</p> <p>An ISV's products are often sold and <a href="https://www.techtarget.com/searchcio/definition/software-license">licensed</a> separately from the underlying programs. They can be offered as perpetual licenses, limited-term licenses or even fully managed software as a service (<a href="https://www.techtarget.com/searchcloudcomputing/definition/Software-as-a-Service">SaaS</a>).</p> <p>ISVs typically provide software in conjunction with the hardware, software or cloud platform provider as a package or from an official app store. In the case of hardware, an ISV producer builds software to run on a particular vendor's hardware platform and the OSes the platform supports. An ISV may also incorporate software from a software platform provider into its offering by embedding <a href="https://www.techtarget.com/searchdatamanagement/definition/database">database</a> technology from Microsoft or Oracle, for example.</p> <p>As the <a href="https://www.techtarget.com/searchcloudcomputing/definition/cloud-computing">cloud computing</a> model has grown more pervasive, ISVs have increasingly targeted the cloud as a vehicle for delivering software by offering products on a SaaS basis. With this delivery method, an ISV may sell its software through a <a href="https://www.techtarget.com/searchcloudcomputing/definition/public-cloud">public cloud</a> or cloud marketplace. Examples include Amazon Web Services (<a href="https://www.techtarget.com/searchaws/definition/Amazon-Web-Services">AWS</a>) Marketplace, <a href="https://www.techtarget.com/searchcloudcomputing/definition/Microsoft-Azure-Marketplace">Microsoft Azure Marketplace</a> and Salesforce AppExchange.</p> <div class="youtube-iframe-container"> <iframe id="ytplayer-0" src="https://www.youtube.com/embed/pLsdKM57CP8?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> <p>Additionally, an independent software maker may provide the software in the form of virtual appliances that run on <a href="https://www.techtarget.com/searchitoperations/definition/virtual-machine-VM">virtual machines</a> or <a href="https://www.techtarget.com/searchitoperations/definition/container-containerization-or-container-based-virtualization">containers</a>.</p> <p>Typically, ISVs focus on a single market segment. Some have a general or horizontal focus with a broad market appeal, such as <a href="https://www.techtarget.com/searchcustomerexperience/definition/CRM-customer-relationship-management">customer relationship management</a> or <a href="https://www.techtarget.com/searcherp/definition/ERP-enterprise-resource-planning">enterprise resource planning</a>.</p> <p>Others target companies with a <a href="https://www.techtarget.com/searchitchannel/definition/vertical-market">vertical market</a> orientation -- an independent software producer targeting discrete manufacturing companies. There are also many ISVs providing highly specialized niche offerings, such as <a href="https://www.techtarget.com/searchstorage/definition/data-migration">data migration</a> utilities or plugins for specialized industry software.</p> <section class="section main-article-chapter" data-menu-title="Official ISV programs"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Official ISV programs</h2> <p>Companies that make the platforms, such as Apple, AWS, Hewlett Packard Enterprise (HPE), IBM, Microsoft, Oracle, Salesforce and others, are the original equipment manufacturers. The <a href="https://www.techtarget.com/searchitchannel/definition/OEM">OEM</a> often encourages and lends support to ISVs, sometimes through the use of ISV programs. In general, the more applications that run on a platform, the more value it offers to customers. Platform manufacturers, such as IBM and Microsoft, also make applications, but they don't have the resources or, in many cases, the special knowledge required to make applications for every conceivable vertical market or niche requirement. ISVs can fill the gaps in the services provided by the larger product offering.</p> <figure class="main-article-image half-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/it_channel-shadow_channel.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/it_channel-shadow_channel_half_column_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/it_channel-shadow_channel_half_column_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/it_channel-shadow_channel.png 1280w" alt="The shadow channel: Who are the players? list graphic" height="312" width="279"> <figcaption> <i class="icon pictures" data-icon="z"></i>ISVs are one component of the shadow channel, according to Jay McBain, chief analyst at Canalys. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <p>An ISV program generally offers a mix of technical and marketing support for a software maker. Specific benefits may include technology training, briefings on product development roadmaps, ISV-specific pricing and licensing terms, product discounts and comarketing initiatives. A platform provider may also offer ISV partners a seal of approval using software validation programs.</p> <p>At times, an ISV program may operate within a platform vendor's umbrella business <a href="https://www.techtarget.com/searchitchannel/definition/partner-program">partner program</a>. Such programs aim to cover a spectrum of partner relationships and interactions.</p> </section> <section class="section main-article-chapter" data-menu-title="What is the difference between ISVs and other providers?"> <h2 class="section-title"><i class="icon" data-icon="1"></i>What is the difference between ISVs and other providers?</h2> <p>ISVs make and sell software that is added to platforms. They create software that is used by another platform. OEMs make computer hardware that software made by an ISV runs on.</p> <p>Some OEMs bundle software from an ISV into their product. For example, Dell or HPE might make a server as an OEM, and Microsoft is the ISV to them to provide the Windows OS. Interestingly, another ISV, such as Adobe, might make software for Microsoft, itself an ISV, showing the complex web of dependencies that can occur among vendors and products.</p> <p><a href="https://www.techtarget.com/searchitchannel/definition/VAR">Value-added resellers</a> incorporate platform software into software product packages. They add additional training and configuration support. <a href="https://www.techtarget.com/searchitchannel/definition/systems-integrator">Systems integrators</a> go one step further. They might take products from several OEMs and ISVs and combine them into a single system sold as a unit. Managed service providers (<a href="https://www.techtarget.com/searchitchannel/definition/managed-service-provider">MSPs</a>) remotely monitor and manage hardware and software platforms installed at the customer's location and may also keep tabs on the public cloud platforms a customer uses.</p> <div class="youtube-iframe-container"> <iframe id="ytplayer-1" src="https://www.youtube.com/embed/WEqXH4PuF8c?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> </section> <section class="section main-article-chapter" data-menu-title="Blurring lines: Software products in the channel"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Blurring lines: Software products in the channel</h2> <p>One development in the ISV space is the convergence of the independent service provider business model with other IT channel business models, such as managed services and <a href="https://www.techtarget.com/searchcloudcomputing/definition/What-is-cloud-consulting-Everything-you-should-know">cloud consulting</a> services.</p> <p>As the MSP and cloud services markets become more crowded and competitive, companies are looking for new ways to differentiate their services. Some companies have turned to software development as a way to stand out from rivals. An MSP or cloud consultant that creates its own <a href="https://www.techtarget.com/whatis/definition/intellectual-property-IP">intellectual property</a> is less likely to become commoditized than a company that offers readily duplicated services, such as server management, or one that resells the same public cloud service that many other companies can supply.</p> <p>On the other hand, software development calls for skills that may be difficult for a <a href="https://www.techtarget.com/searchitchannel/definition/channel-partner">channel partner</a> to acquire and maintain.</p> </section> <section class="section main-article-chapter" data-menu-title="ISVs and traditional channel partners"> <h2 class="section-title"><i class="icon" data-icon="1"></i>ISVs and traditional channel partners</h2> <p>A vendor's channel partner base has traditionally comprised resellers of hardware, software and services. However, with the more recent growth of new channel business types, such as ISVs, the makeup of the IT channel is in flux. High-profile vendors are increasingly looking to incorporate more ISVs and other nontraditional partners into their <a href="https://www.techtarget.com/searchitchannel/definition/channel-strategy">channel strategies</a>.</p> <p>According to Jay McBain, chief analyst at Canalys, this emergent shadow channel includes ISVs, <a href="https://www.techtarget.com/searchcloudcomputing/definition/XaaS-anything-as-a-service">anything-as-a-service</a> consultants, industry-based professional services firms and born-in-the-cloud companies.</p> <p>The number of ISV businesses has seen significant growth. In 2018, McBain noted approximately 100,000 ISVs in play worldwide, compared to the roughly 10,000 ISV partners doing business in 2008. He forecasted that number would reach 1 million by 2027, fueled by the ability of ISVs to provide highly customized software to their clients. Mordor Intelligence, a marketing intelligence firm, <a href="https://www.mordorintelligence.com/industry-reports/independent-software-vendors-market" target="_blank" rel="noopener">estimated</a> that the ISV market is at $2.35 billion in 2025 and predicted it to grow to $5.5 billion by 2030.</p> </section> <section class="section main-article-chapter" data-menu-title="ISVs for AI"> <h2 class="section-title"><i class="icon" data-icon="1"></i>ISVs for AI</h2> <p>ISVs can take advantage of the rise of <a href="https://www.techtarget.com/searchenterpriseai/definition/generative-AI">generative AI</a> and <a href="https://www.techtarget.com/whatis/definition/large-language-model-LLM">large language models</a>. These forms of AI are powerful but are often quite siloed and limited in what they can accomplish; they require additional software to interact with outside resources and data.</p> <p>An ISV might provide a plugin or a software package that integrates another commercial AI application to expand its capabilities. For example, an ISV might make software that plugs a <a href="https://www.techtarget.com/searchcustomerexperience/definition/chatbot">chatbot</a> into a website's customer chat feature or makes a connector for a vision recognition software and a warehouse management platform.</p> <p><em>Discover key factors to <a href="https://www.techtarget.com/searchsecurity/opinion/What-to-consider-when-creating-a-SaaS-security-strategy">consider when crafting a SaaS security policy</a>. Look into attributes that focus on effective SaaS strategy, such as visibility, user experience and workflow, for enhanced protection.</em></p> </section> An ISV (independent software vendor) makes and sells software products that work with computer hardware, operating systems (OSes) or software platforms made by another company. https://cdn.ttgtmedia.com/visuals/digdeeper/5.jpg https://www.techtarget.com/searchitchannel/definition/ISV Wed, 27 Aug 2025 09:00:00 GMT <p>The break/fix model is a traditional method of providing IT support in which services are rendered only when needed, typically after something breaks.</p> <p>Companies or individuals contact an IT service provider when they encounter an issue, and pay based on the time and materials required to resolve it. Fees may be billed hourly or at a flat rate for specific services such as <a href="https://www.techtarget.com/searchcustomerexperience/tip/How-to-avoid-and-remove-malvertising">virus remova</a>l or <a href="https://www.techtarget.com/searchdisasterrecovery/tip/Open-source-data-recovery-software-options-to-consider">data recovery</a>.</p> <p>This reactive approach contrasts with modern proactive service models, and while it is still relevant in some scenarios, its popularity has declined in favor of more comprehensive IT support strategies.</p> <section class="section main-article-chapter" data-menu-title="Break/fix vs. managed services"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Break/fix vs. managed services</h2> <p>The rise of <a href="https://www.techtarget.com/searchitchannel/definition/managed-IT-service">managed IT services</a> has reshaped how businesses handle their technology needs. Unlike break/fix providers who step in only when issues occur, managed service providers (<a href="https://www.techtarget.com/searchitchannel/definition/managed-service-provider">MSPs</a>) offer <a href="https://www.techtarget.com/searchitoperations/definition/continuous-monitoring">continuous IT monitoring</a>, maintenance and support under a service-level agreement.</p> <p>Managed services typically operate on a monthly subscription basis, helping clients budget more effectively while minimizing downtime through proactive problem prevention. MSPs use tools such as remote monitoring and management software and professional services automation (<a href="https://www.techtarget.com/searchitchannel/definition/Professional-services-automation-PSA">PSA</a>) platforms to maintain systems efficiently and predictably.</p> <p>In contrast, break/fix services offer no such ongoing engagement or preventive care, leaving clients vulnerable to unexpected disruptions and costs.</p> </section> <section class="section main-article-chapter" data-menu-title="Decline in the popularity of break/fix"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Decline in the popularity of break/fix</h2> <p>While the break/fix model was once the standard, it has declined sharply due to its inherent limitations:</p> <ul class="default-list"> <li>Reactive nature. It addresses issues only after they've occurred, often leading to prolonged <a href="https://www.techtarget.com/whatis/definition/uptime-and-downtime">downtime</a>.</li> <li>Unpredictable costs. Clients may face unexpectedly high bills during critical failures.</li> <li>Lack of accountability. Since break/fix providers profit from problems, there's little incentive to prevent them.</li> </ul> <p>Businesses today prioritize <a href="https://www.techtarget.com/searchdisasterrecovery/tip/Business-continuity-roles-and-responsibilities">continuity</a> and security, especially as cyberthreats and remote work demands increase. As a result, the managed services model has become the preferred approach for long-term IT stability and growth.</p> </section> <section class="section main-article-chapter" data-menu-title="When break/fix still makes sense"> <h2 class="section-title"><i class="icon" data-icon="1"></i>When break/fix still makes sense</h2> <p>Despite its drawbacks, break/fix services remain useful in certain cases:</p> <ul class="default-list"> <li>Small businesses with minimal IT infrastructure and low budgets.</li> <li>Short-term projects or one-off IT repairs and upgrades.</li> <li>Startups or solopreneurs needing occasional help without long-term contracts.</li> </ul> <p>For these situations, break/fix can be a cost-effective way to access technical expertise without committing to monthly fees.</p> </section> <section class="section main-article-chapter" data-menu-title="Transitioning from break/fix to managed services"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Transitioning from break/fix to managed services</h2> <p>For IT companies operating under a break/fix model, <a href="https://www.techtarget.com/searchitchannel/feature/What-are-the-popular-pricing-models-for-managed-services-providers">transitioning to managed services</a> offers the potential for stable revenue and long-term client relationships. However, the shift requires operational and cultural changes:</p> <ul class="default-list"> <li><b>Switch to recurring revenue.</b> Establish monthly pricing packages that deliver consistent value to clients.</li> <li><b>Emphasize preventive care.</b> Use monitoring tools to identify and resolve problems before they affect the business.</li> <li><b>Train sales and support staff.</b> Equip teams with knowledge about <a href="https://www.techtarget.com/searchitchannel/definition/solution-selling">consultative selling</a> and long-term client success.</li> <li><b>Invest in PSA tools</b>. Streamline back-end operations to improve efficiency and scale client services.</li> </ul> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineImages/it_channel-msp_pricing_steps.png"> <img data-src="https://www.techtarget.com/rms/onlineImages/it_channel-msp_pricing_steps_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineImages/it_channel-msp_pricing_steps_mobile.png 960w,https://www.techtarget.com/rms/onlineImages/it_channel-msp_pricing_steps.png 1280w" alt="A chart detailing three steps that break/fix shops must make to become managed services providers." height="304" width="520"> <figcaption> <i class="icon pictures" data-icon="z"></i>To become managed services providers, break/fix shops must shift to recurring revenue. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <p>Over time, this shift boosts profitability and builds trust with clients seeking more predictable, responsive and secure IT support.</p> <div class="youtube-iframe-container"> <iframe id="ytplayer-0" src="https://www.youtube.com/embed/JBPpO_yupnQ?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> <p><em>Learn about the <a href="https://www.techtarget.com/searchitchannel/Guide-to-building-and-executing-an-MSP-business-model">managed service business model and explore key insights</a> for starting and managing a service provider business.</em></p> </section> The break/fix model is a traditional method of providing IT support in which services are rendered only when needed, typically after something breaks. https://cdn.ttgtmedia.com/visuals/digdeeper/4.jpg https://www.techtarget.com/searchitchannel/definition/break-fix-model Thu, 24 Jul 2025 09:00:00 GMT <p>Consulting and systems integration companies are among the hundreds of launch partners backing the new AWS agentic AI cloud marketplace, which the hyperscaler rolled out today.</p> <p>Partners such as Accenture, Cognizant, Deloitte, Presidio, PwC, Tata Consultancy Services and Wipro provide offerings on AWS' AI Agents and Tools marketplace, which functions within the flagship AWS Marketplace. <a href="https://www.techtarget.com/searchenterpriseai/definition/agentic-AI">Agentic AI</a> products and services have been available on the AWS Marketplace, but the new agentic AI one differs as a distinctly branded category and for its integration with Amazon Bedrock AgentCore services. <a href="https://www.techtarget.com/searchenterpriseai/news/366627853/AWS-launches-AgentCore-system-and-agentic-marketplace">AgentCore</a>, also announced today, lets customers deploy and run AI agents.</p> <p>AWS' agentic AI marketplace move tracks with the broader trend toward fulfilling customer demand for <a href="https://www.techtarget.com/searchitchannel/news/366627020/Partners-begin-to-target-agentic-AI-marketplace-platforms">agentic AI in marketplaces</a>, where IT service providers play a growing role. Google Cloud Marketplace, Microsoft's Azure Marketplace and Salesforce's AppExchange also offer subsections that focus on agentic AI.</p> <p>Chris Sullivan, vice president of AWS channels and alliances for the Americas, cited an "incredible increase" in demand and opportunity for agentic AI as influencing the timing of the new marketplace's launch.</p> <p>To meet that demand, Sullivan anticipates that partners will be able to build complex offerings that combine professional services and software in the AI Agents and Tools marketplace. In the AWS Marketplace, partners often use the platform's Channel Partner Private Offer, or CPPO, feature to bundle and <a href="https://www.techtarget.com/searchitchannel/news/366623839/AWS-Marketplace-channel-partners-rev-software-service-sales">sell software and services</a>.</p> <p>AWS specifically cites professional services as one of the types of "agent solutions" available in the AI Agents and Tools marketplace. The <a target="_blank" href="https://aws.amazon.com/marketplace/solutions/ai-agents-and-tools/" rel="noopener">company said</a> customers will be able to "develop and implement an AI strategy with specialized professional services from AWS Partners." The other categories include embedded agents, prebuilt agents, agent tools and agent development offerings.</p> <p><i>John Moore is a writer for Informa TechTarget covering the CIO role, economic trends and the IT services industry.</i></p> Accenture, Cognizant and Deloitte are among the partners with offerings on AWS' AI Agents and Tools marketplace, which is expected to combine professional services and software. https://cdn.ttgtmedia.com/rms/onlineimages/iot_g1182604383.jpg https://www.techtarget.com/searchitchannel/news/366627818/Consultants-SIs-back-AWS-agentic-AI-marketplace-launch Wed, 16 Jul 2025 18:09:00 GMT <p>A property management system (PMS) is a software application that supports the operations of hospitality accommodations and commercial or residential rental properties. Though sometimes referred to as a hotel operating system or hotel OS, a PMS transcends that industry; manufacturers, hospitals and government agencies also use them.</p> <p>A PMS provides a centralized system to organize, schedule and perform the daily functions and transactions involved in accommodation businesses. Computer record-keeping and PMS applications have significantly increased the efficiency of hospitality industries by making it possible to update and consult <a href="https://www.techtarget.com/searchcontentmanagement/definition/records-management-RM">centralized records</a> from multiple computers and devices. Enhancements targeted to hospitality industry needs have increased the ease of those operations.</p> <section class="section main-article-chapter" data-menu-title="Capabilities of a property management system"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Capabilities of a property management system</h2> <p>A PMS facilitates the automation of many common tasks, including the following:</p> <ul class="default-list"> <li><b>Bookings.</b> Automatically update availability and room occupancy.</li> <li><b>Check-in and checkout.</b> Assign rooms and mark for cleaning.</li> <li><b>Telephone system integration.</b> Manage phone calls from guests and charges for outbound calls.</li> <li><b>Point-of-sale integration.</b> Handle credit card and sales transactions.</li> <li><b>Event planning.</b> Schedule event spaces and other services.</li> <li><b>Food and beverage costing.</b> Manage hospitality orders.</li> <li><b>Hotel inventory supply management.</b> <a href="https://www.techtarget.com/searcherp/definition/inventory-management">Inventory supply management</a> tracks availability and costs of supplies and eases ordering.</li> <li><b>Reporting of key performance indicators.</b> Monitor <a href="https://www.techtarget.com/searchbusinessanalytics/definition/key-performance-indicators-KPIs">KPIs</a> such as occupancy and sales rates.</li> <li><b>Security and room locks.</b> Assign key cards and door access.</li> <li><b>Guest satisfaction.</b> Advance insight on guests' experiences with a goal of improving customer retention.</li> </ul> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/custex-%20collect_customer_data.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/custex-%20collect_customer_data_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/custex-%20collect_customer_data_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/custex-%20collect_customer_data.png 1280w" alt="A chart listing ways customers knowingly or unknowingly produce data that companies use."> <figcaption> <i class="icon pictures" data-icon="z"></i>A PMS typically encompasses data that can help companies better serve customers. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> </section> <section class="section main-article-chapter" data-menu-title="Cloud property management systems"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Cloud property management systems</h2> <p>Hosting a PMS on-premises can be costly because managing the systems requires maintaining servers and software expertise. Many PMS platforms are now software as a service, or <a href="https://www.techtarget.com/searchcio/definition/Vertical-SaaS-Software-as-a-Service">SaaS</a>, and hosted as a cloud service.</p> <div class="youtube-iframe-container"> <iframe id="ytplayer-0" src="https://www.youtube.com/embed/4oQjPlS2gSg?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> <p>Besides potentially lower costs, a centrally managed cloud PMS can offer advantages over on-premises deployments in the following areas:</p> <ul class="default-list"> <li>Guest mobile apps and services can address self check-in and checkout.</li> <li>Customer relationship management, or <a href="https://www.techtarget.com/searchcustomerexperience/definition/CRM-customer-relationship-management">CRM</a>, integration can advance automated campaigns based on guest and reservation data.</li> <li>Employee mobile apps give housekeepers and maintenance workers timely data, enhancing efficiency and morale.</li> <li>Centralized records can help unify sales, forecasting, occupancy and pricing data across several properties and support data-driven business decisions.</li> </ul> </section> <section class="section main-article-chapter" data-menu-title="Property management systems in other industries"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Property management systems in other industries</h2> <p>Local governments sometimes use a PMS to manage numerous properties under their care. Centralized, electronic record-keeping helps to more efficiently manage diverse facilities such as schools, sports and recreational centers, or community gardens and parks.</p> <p>In manufacturing, a PMS helps companies monitor materials and supplies, as well as employee-owned property and equipment. Electronic maintenance logs can reduce unscheduled <a href="https://www.techtarget.com/whatis/definition/uptime-and-downtime">downtime</a>.</p> <p>Hospitals and medical facilities can use a hospital management system, or HMS, as a comprehensive tool to manage their facilities. This might encompass <a href="https://www.techtarget.com/searcherp/Guide-to-supply-chain-management">supply chain management</a> and inventory management for all hospital equipment.</p> <p><em>The integration of AI tools and systems is significantly shaping the real estate industry, offering valuable benefits for numerous ventures. Explore <a href="https://www.techtarget.com/searchenterpriseai/feature/How-AI-is-changing-the-real-estate-market">seven use cases for AI in real estate</a> as well as the challenges that might accompany its adoption.</em></p> </section> A property management system (PMS) is a software application that supports the operations of hospitality accommodations and commercial or residential rental properties. https://cdn.ttgtmedia.com/visuals/digdeeper/5.jpg https://www.techtarget.com/whatis/definition/property-management-system-PMS Tue, 01 Jul 2025 14:00:00 GMT <p>Market concentration refers to how a market is distributed among competing companies. Also known as seller concentration or industry concentration, market concentration plays a vital role in determining the level of competition in a market.</p> <p>A highly concentrated market indicates limited competition and more control by fewer companies; a low concentration reflects a <a href="https://www.computerweekly.com/opinion/How-AI-agents-will-reshape-telecoms">competitive landscape</a> with many players.</p> <section class="section main-article-chapter" data-menu-title="How market concentration is measured"> <h2 class="section-title"><i class="icon" data-icon="1"></i>How market concentration is measured</h2> <p>Market concentration can be expressed using either the concentration ratio (CR) or the Herfindahl-Hirschman Index (HHI).</p> <h3>Concentration ratio</h3> <p>The concentration ratio, a common method of calculating market concentration, shows the combined market share of the top N companies in the market:</p> <ul class="default-list"> <li>CR4 refers to the market share of the four largest companies.</li> <li>CR8 measures the top eight companies.</li> </ul> <p>A higher concentration ratio indicates less competition. If the CR4 is over 70%, it means the top four companies control most of the market -- suggesting oligopolistic or monopolistic conditions.</p> <h3>Herfindahl-Hirschman Index</h3> <p>The Herfindahl-Hirschman Index, also widely used, is calculated by summing the squares of each company's market share. The HHI gives more weight to larger organizations. Regulatory agencies like the U.S. Federal Trade Commission (FTC) and Department of Justice (DOJ) favor it when assessing mergers. HHI indicates the following:</p> <ul class="default-list"> <li>Under 1,500: unconcentrated or competitive market.</li> <li>Between 1,500 and 2,500: moderately concentrated market.</li> <li>Over 2,500: highly concentrated market.</li> </ul> <p>Understanding these measurements helps to identify the types of market structures commonly influenced by concentration.</p> </section> <section class="section main-article-chapter" data-menu-title="Types of market structures"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Types of market structures</h2> <p>Market concentration influences and reflects these market structures:</p> <ul class="default-list"> <li><b>Monopoly.</b> One company <a href="https://www.computerweekly.com/blog/Computer-Weekly-Editors-Blog/When-tech-firms-get-too-big-will-Facebook-Google-follow-the-cycle-of-IBM-Microsoft">dominates the market</a> entirely, e.g., some utility providers.</li> <li><b>Duopoly.</b> Two dominant companies control most of the market, e.g., Boeing and Airbus in commercial jet manufacturing.</li> <li><b>Oligopoly.</b> A few companies hold significant market share, potentially leading to limited competition, e.g., smartphone manufacturers.</li> <li><b>Fragmented market.</b> <a href="https://www.techtarget.com/iotagenda/feature/IoT-market-fragmentation-complicates-device-deployment">Many small companies compete</a>, making the market highly competitive and dynamic, e.g., local restaurants or retail boutiques.</li> </ul> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/types_of_market_structures-f.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/types_of_market_structures-f_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/types_of_market_structures-f_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/types_of_market_structures-f.png 1280w" alt="Diagram illustrating types of market structures." height="213" width="560"> <figcaption> <i class="icon pictures" data-icon="z"></i>Market concentration is a powerful indicator of various market structures, including monopolies, duopolies, oligopolies and fragmented markets. It not only shapes these structures, but also reveals the underlying dynamics of competition within an industry. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> </section> <section class="section main-article-chapter" data-menu-title="Why market concentration matters"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Why market concentration matters</h2> <p>Market concentration plays a crucial role in business strategy, economic policy and consumer welfare.</p> <h3>Business implications</h3> <p>For entrepreneurs and startups, knowing how concentrated a market is helps determine entry barriers and competitive risks. High concentration could require differentiation, innovation or niche targeting for the business to succeed.</p> <h3>Government regulation</h3> <p>Governments and <a href="https://www.techtarget.com/whatis/definition/antitrust">antitrust</a> authorities monitor market concentration to ensure fair competition. High concentration can lead to the following:</p> <ul class="default-list"> <li>Price fixing and collusion.</li> <li>Reduced innovation.</li> <li>Fewer choices for consumers.</li> <li>Barriers to market entry.</li> </ul> <p>Agencies like the FTC, DOJ and European Commission use concentration metrics to evaluate mergers, acquisitions and anticompetitive behavior. The FTC's Merger Guidelines were updated in 2023 to more closely scrutinize deals that could stifle competition.</p> <p>In recent years, rising digital market consolidation has brought market concentration back into the spotlight, especially in tech and healthcare.</p> </section> <section class="section main-article-chapter" data-menu-title="Examples of market concentration"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Examples of market concentration</h2> <p>Here are several real-world examples of varying market concentration:</p> <ul class="default-list"> <li><b>Search engines.</b> Google holds over 90% of the global market share, indicating a near monopoly.</li> <li><b>Mobile operating systems.</b> Android and iOS together account for almost 100% of the mobile OS market -- a classic duopoly.</li> <li><b>Airlines.</b> In the U.S., the top four airlines control nearly 70% of the domestic market, making it an oligopoly.</li> <li><b>Streaming services.</b> While Netflix, Disney+, Amazon Prime Video and a few others dominate, the market is still evolving and could be considered moderately concentrated.</li> </ul> <p>Although some concentrated markets arise naturally due to efficiency or innovation, unchecked dominance can lead to unfair practices. To address these risks, governments and regulatory bodies implement measures aimed at preserving competition and protecting consumers.</p> <div class="youtube-iframe-container"> <iframe id="ytplayer-0" src="https://www.youtube.com/embed/KhZlwGMPNfs?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> </section> <section class="section main-article-chapter" data-menu-title="Negative effects of high market concentration"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Negative effects of high market concentration</h2> <p>To address the risks, governments and regulatory bodies implement measures such as the following:</p> <ul class="default-list"> <li>Stronger antitrust enforcement.</li> <li>Increased scrutiny of mergers and acquisitions.</li> <li>Support for small businesses and startups.</li> <li>Laws that <a href="https://www.techtarget.com/healthcarepayers/feature/Key-Regulations-and-Policies-That-Will-Impact-Payers-in-2024">prevent predatory pricing</a> or exclusive contracts.</li> </ul> <p>In summary, market concentration is a key indicator of an industry's competitiveness. Understanding whether a market is fragmented, oligopolistic or monopolistic helps businesses plan strategically and helps regulators protect consumer interests. Tracking market concentration is more important than ever to prevent unfair dominance and make sure that innovation thrives.</p> <p><em>The stronghold that major tech companies have on cloud computing is poised to extend to the AI market, as they possess the financial and computational resources necessary to scale this technology effectively. Explore how <a href="https://www.computerweekly.com/feature/Big-techs-cloud-oligopoly-risks-AI-market-concentration">Big Tech's cloud oligopoly risks AI market concentration</a>.</em></p> </section> Market concentration refers to how a market is distributed among competing companies. https://cdn.ttgtmedia.com/visuals/digdeeper/2.jpg https://www.techtarget.com/whatis/definition/market-concentration Tue, 17 Jun 2025 14:00:00 GMT <p>An <a href="https://www.techtarget.com/searchdatacenter/definition/IT">IT</a> strategic plan is a document that details the comprehensive technology-enabled business management processes an organization uses to guide operations. It serves as a guide to IT-related decision-making, with IT tasks prioritized and implemented using the plan as a <a href="https://www.techtarget.com/whatis/definition/framework">framework</a>.</p> <p>The plan also helps guide an organization as it formulates its overall <a href="https://www.techtarget.com/searchcio/definition/IT-strategy-information-technology-strategy">IT strategy</a>. While an IT strategy focuses on how IT will help the business succeed, an IT strategic action plan is an IT roadmap to help the business implement those strategies.</p> <section class="section main-article-chapter" data-menu-title="Why an IT strategic plan is useful"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Why an IT strategic plan is useful</h2> <p>The plan outlines areas where IT can contribute business value and where an organization can gain a <a href="https://www.techtarget.com/searchcio/definition/competitive-advantage">competitive advantage</a> by making the best use of technology resources.</p> <p>The objectives outlined in an organization's IT strategic plan should align with the <a href="https://www.techtarget.com/searchcio/definition/organizational-goals">organization's strategic goals</a> and mission, but accommodate new business priorities and technologies that could drive business growth.</p> <p>It's also important for an IT organization's teams to know their priorities and identify the IT projects that the business should invest in. The plan outlines what has to be done in what priority and how the plan's success will be measured.</p> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/benefits_and_challenges_of_it_business_alignment-f.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/benefits_and_challenges_of_it_business_alignment-f_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/benefits_and_challenges_of_it_business_alignment-f_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/benefits_and_challenges_of_it_business_alignment-f.png 1280w" alt="A chart listing the benefits and challenges IT faces in aligning to business goals." height="336" width="560"> <figcaption> <i class="icon pictures" data-icon="z"></i>Figure 1. Developing an IT strategic plan requires alignment to business goals, which is beneficial but challenging. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> </section> <section class="section main-article-chapter" data-menu-title="Pros and cons of IT strategic plans"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Pros and cons of IT strategic plans</h2> <p>While it is certainly possible to manage an IT organization without the use of strategic plans, senior company leaders typically expect such plans to be developed and presented. Among their many benefits is that they provide a roadmap for how IT will evolve during the current and upcoming calendar years.</p> <p>Since IT is often one of the largest budgetary items, strategic plans help identify where funding will be needed and how the company can benefit. Plans can identify how resources will be used, potential risks and threats to IT operations, costs that are expected and possibly unplanned, opportunities for innovation, communications among different stakeholders, and metrics for measuring performance.</p> <p>Conversely, developing IT strategic plans can be time-consuming, complex and costly, requiring many different resources. They might face resistance to change from within the organization, and might not always be able to anticipate changes and developments in technology. Strategic plans are also living documents; they must be regularly reviewed and updated, which can again require time and resources.</p> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineImages/cio_IT-strategic-plan_checklist.jpg"> <img data-src="https://www.techtarget.com/rms/onlineImages/cio_IT-strategic-plan_checklist_mobile.jpg" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineImages/cio_IT-strategic-plan_checklist_mobile.jpg 960w,https://www.techtarget.com/rms/onlineImages/cio_IT-strategic-plan_checklist.jpg 1280w" alt="A chart explaining key components in an IT strategic plan." height="365" width="560"> <figcaption> <i class="icon pictures" data-icon="z"></i>Figure 2. Components of an IT strategic plan. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> </section> <section class="section main-article-chapter" data-menu-title="Components of an IT strategic plan"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Components of an IT strategic plan</h2> <p>As noted in Figure 2, an IT strategic plan should outline a mission statement that includes what it plans to achieve and how the IT strategy relates to the organization's overall business and strategic objectives. Often, creating an effective IT strategic plan starts with reviewing the organization's <a href="https://www.techtarget.com/searchcio/definition/strategic-planning">strategic plan</a>, which identifies areas where technology use can improve operations.</p> <p>The IT strategic plan should include a <a href="https://www.techtarget.com/searchcio/definition/SWOT-analysis-strengths-weaknesses-opportunities-and-threats-analysis">SWOT analysis</a> of its strengths, weaknesses, opportunities and threats to identify both internal and external factors that can affect IT's ability to contribute to an organization's success.</p> <p>The strategic planning process helps organizations analyze the IT department's progress in <a href="https://www.techtarget.com/searchcio/feature/Examples-of-IT-department-goals">achieving its goals</a> and next steps to fulfill them. The department can then identify barriers and the resources needed for this process.</p> <p>The SWOT analysis also helps organizations identify any existing technological assets that might be obscuring a previously unknown competitive advantage and that the organization should consider investing in to capitalize on the benefit.</p> <p>The IT strategic plan must be clear about its goals, including a list of technology investments that the IT department deems a priority to contribute to the organization's success. Finally, the plan should also include evaluating the company's current <a href="https://www.techtarget.com/searchcio/definition/IT-budget-information-technology-budget">IT budget</a> and allocating project-specific resources and responsibilities to meet targeted objectives.</p> <div class="youtube-iframe-container"> <iframe id="ytplayer-0" src="https://www.youtube.com/embed/T0U0qxpxUCw?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> </section> <section class="section main-article-chapter" data-menu-title="Outline of an IT strategic plan"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Outline of an IT strategic plan</h2> <p>Many different strategic plan structures and formats are available. Each plan must be tailored to the organization's business requirements and how IT supports them. Here is a starting point.</p> <ol class="default-list"> <li><b>Executive summary.</b> Provides an overview of the plan, its aims and what is needed to achieve them.</li> <li><b>Mission and vision statements.</b> Provides a high-level view of the plan that addresses both business and technology issues.</li> <li><b>Situation analysis.</b> Examines the business issue, how it is currently managed and where it needs to be to satisfy management; assesses the financial, operational, competitive, risk, security, people and reputational issues.</li> <li><b>Business needs assessment.</b> Focuses on the business unit that has the requirement and what it needs to achieve its specific business goals.</li> <li><b>IT resources assessment.</b> Examines resources currently available to determine if they are sufficient to achieve the defined goals; if not, identifies the resources needed.</li> <li><b>SWOT analysis.</b> The strengths, weaknesses, opportunities and threats analysis provides a more detailed analysis of what IT needs to achieve the business requirements.</li> <li><b>IT strategy definition.</b> Describes the technology, procedures and staffing needed to achieve the business goals; ideally, defines the final results that the plan aims to achieve.</li> <li><b>Processes needed to achieve the strategy.</b> Details the actions needed to move from strategic plan approval to plan execution and delivery.</li> <li><b>Summary of next steps.</b> Describes what is needed once management has approved the plan, including staffing, resources, funding and the development of a project plan.</li> </ol> <p>The preceding outline is a suggestion. Many tools and resources are available to prepare an IT strategic plan. One way to proceed quickly is to search for existing IT strategic plans. Plan templates and software applications are also available to help facilitate plan development. If the organization already has a format and structure for strategic plans, that template should be used.</p> <p>Figure 3 shows the fundamental activities in developing a strategic plan, beginning with understanding the business and its specific requirements.</p> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/key_steps_in_an_it_strategic_plan-f.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/key_steps_in_an_it_strategic_plan-f_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/key_steps_in_an_it_strategic_plan-f_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/key_steps_in_an_it_strategic_plan-f.png 1280w" alt="A timeline of key steps in an IT strategic plan." height="241" width="560"> <figcaption> <i class="icon pictures" data-icon="z"></i>Figure 3. Fundamental activities in the development of an IT strategic plan. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <p>Knowledge of the business and how IT supports it represents the starting point. In discussions with business leaders and subject matter experts, the IT planning team identifies a specific business need, such as <a href="https://www.techtarget.com/whatis/feature/Top-customer-experience-conferences-to-attend">providing a better customer experience</a> when using online access to company resources.</p> <p>IT leaders, engineers, research and development staff, software designers, network engineers and others collaborate on ways to achieve business requirements. Existing resources must be evaluated for their utility, and new resources must be identified that can be added.</p> <p>The IT strategic planning team gathers all preliminary data on existing and anticipated resources, funding requirements, staffing, and other factors to prepare a strategy for achieving the business requirement. Assuming management approves the plan, a project plan is subsequently created and approved to execute the activities integral to the business results.</p> <p>Once the plan has been completed, <a href="https://www.techtarget.com/searchsoftwarequality/definition/performance-testing">performance testing</a> and validation occur to make sure that the results are satisfactory to the business units. Each of the activities in this sequence must be carefully documented as part of the strategic plan and subsequent project plans.</p> </section> <section class="section main-article-chapter" data-menu-title="Examples of IT strategies"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Examples of IT strategies</h2> <p>Consider three examples of how a business need is turned into an IT strategy:</p> <ol class="default-list"> <li>An organization that sells a variety of products in brick-and-mortar stores wants to transition some of those activities to online customer interaction. A <a href="https://www.techtarget.com/searchcustomerexperience/tip/What-are-the-benefits-and-challenges-of-CRM">customer relationship management system</a> is recommended to facilitate the desired transition.</li> <li>A university decides to have its students interact with university services entirely online. Existing online applications are deemed unsuitable; new apps must be developed so that students can log in to all available university services on their smartphones.</li> <li>A manufacturing company handles most of its warehouse activities with legacy technology supporting inventory, order processing, parts location, packing and shipping. A <a href="https://www.techtarget.com/searcherp/tip/WMS-vs-IMS-Learn-the-differences-between-the-two-systems">warehouse management system</a> that interfaces with existing business systems is an option that will satisfy the business requirements.</li> </ol> <p>Once the specific business need is identified, IT teams examine various options that can provide a solution. These initiatives and many others are consolidated into a formal IT strategic plan.</p> </section> <section class="section main-article-chapter" data-menu-title="Who is responsible for an IT strategic plan?"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Who is responsible for an IT strategic plan?</h2> <p>When examining how the entire IT organization operates and what it might need to better support the business, the chief information officer and possibly the chief technology officer will take the lead. While the <a href="https://www.techtarget.com/searchcio/tip/CIO-vs-CTO-Key-differences-in-roles-and-responsibilities">CTO might assist the CIO</a> from a technology perspective, the CIO will examine how information technology holistically supports the entire organization.</p> <p>These individuals typically work closely with business leaders and key departments such as finance, budget, human resources and legal when framing an IT strategy. Completed strategic plans must be agile enough to adapt to changes in business strategy and technology, the industry and marketplace, skill sets of personnel, and financial and budgetary issues.</p> </section> <section class="section main-article-chapter" data-menu-title="Enterprise-wide vs. business unit strategic plans"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Enterprise-wide vs. business unit strategic plans</h2> <p>As noted earlier, IT strategic plans can be structured around a variety of business requirements. Enterprise IT strategic plans are often designed for three- to five-year time frames and include a year-by-year view of what the business is likely to need and the IT resources required to satisfy it.</p> <p>Business unit IT strategic plans typically address specific needs that business units have identified so that they can achieve their business objectives. These might be on an ad hoc basis or included in an overall enterprise IT strategic plan, if knowledge of the business unit requirements is available.</p> <p>Medium to large IT organizations can process dozens of strategic plans during a calendar year. Some might be simple and focused on a specific business issue, while others, including the overall enterprise IT strategic plan, will be ongoing activities. IT senior leadership must determine if a specific business unit's request for assistance requires a strategic plan.</p> </section> <section class="section main-article-chapter" data-menu-title="IT strategic plan development tools"> <h2 class="section-title"><i class="icon" data-icon="1"></i>IT strategic plan development tools</h2> <p>Finding and reviewing existing IT strategic plans can help support plan development, so long as the plans being evaluated can be leveraged into a suitable product. If the organization has its own established strategic plan process, that should be followed.</p> <p>According to research, here is a list of some well-known IT strategic plan development tools:</p> <ul class="default-list"> <li><b>Asana.</b> Project management and strategic planning.</li> <li><b>ClickUp.</b> Project management tools.</li> <li><b> Hive.</b> Project management and strategic planning tools; supports teams.</li> <li><b>Jira.</b> <a href="https://www.techtarget.com/searchsoftwarequality/definition/Jira">Jira</a> is used for project management and strategic planning.</li> <li><b>Miro.</b> IT strategic plan development tools.</li> <li><b>Monday.com.</b> Project management tool that supports strategic planning.</li> <li><b>Planview.</b> Suite of products for strategic planning, project management and other activities.</li> <li><b>Smartsheet.</b> Project and work management support using spreadsheet technology.</li> <li><b>Trello.</b> Project management tool.</li> <li><b>Whatfix.</b> IT strategic plan development tools.</li> <li><b>Wrike.</b> Project management and strategic planning software.</li> </ul> <p>Many of the products listed address project management primarily and strategic planning as a secondary feature. Gartner provides guidance and insights on IT strategic plan development. The major <a href="https://www.techtarget.com/searchcloudcomputing/tip/Top-public-cloud-providers-A-brief-comparison">cloud service providers</a> -- Amazon Web Services, Google Cloud and Microsoft Azure -- are also worth investigating for strategic plan tools.</p> </section> <section class="section main-article-chapter" data-menu-title="The effect of AI on IT strategic planning"> <h2 class="section-title"><i class="icon" data-icon="1"></i>The effect of AI on IT strategic planning</h2> <p><a href="https://www.techtarget.com/searchenterpriseai/definition/AI-Artificial-Intelligence">AI</a> technology can augment IT strategic plan development through enhanced analytics for more insightful planning, better predictive capabilities, improved data gathering, increased automation of various functions and greater focus on risk in the planning process. AI can also <a href="https://www.techtarget.com/searchenterpriseai/feature/How-AI-is-transforming-project-management">enhance project management</a>, a key outcome of strategic planning.</p> <p><em>Information technology is a key part of developing an effective strategic plan. Look at these <a href="https://www.techtarget.com/searchcio/tip/Free-IT-strategic-planning-templates-for-CIOs">eight free IT strategic planning templates</a> that can help make IT a driving force in a business. Learn how to <a href="https://www.techtarget.com/searchcio/tip/How-to-develop-a-technology-strategy">assess an organization's needs and implement a technology strategy</a> and see <a href="https://www.techtarget.com/searchcio/tip/How-to-set-business-goals-step-by-step">how to set business goals</a> in these step-by-step guides.</em></p> </section> An IT strategic plan is a document that details the comprehensive technology-enabled business management processes an organization uses to guide operations. https://cdn.ttgtmedia.com/visuals/digdeeper/3.jpg https://www.techtarget.com/searchcio/definition/IT-strategic-plan-information-technology-strategic-plan Wed, 11 Jun 2025 12:00:00 GMT <p>An original equipment manufacturer (OEM) is a company that produces hardware or software that is later marketed and sold under another company's brand. In the IT and electronics industries, OEMs are foundational to global <a href="https://www.techtarget.com/whatis/definition/supply-chain">supply chains</a>, serving as critical partners for component suppliers, software vendors, <a href="https://www.techtarget.com/searchitchannel/definition/systems-integrator">system integrators</a>, resellers and end-device manufacturers.</p> <p>While OEM originally referred to a company that manufactured the "original" <a href="https://www.techtarget.com/whatis/definition/component">components</a> in a product, the term has evolved. Today, OEM refers to a broad network of business-to-business -- more commonly known as <a href="https://www.techtarget.com/searchcio/definition/B2B">B2B</a> -- relationships across both hardware and software production, including companies that build complete systems or supply parts for others to rebrand and resell.</p> <p>In many cases, a company can function as both an OEM and a <a href="https://www.techtarget.com/searchitchannel/definition/reseller">reseller</a>, or even as a value-added service provider, depending on its role in the distribution chain.</p> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineImages/erp-supply_chain_management.png"> <img data-src="https://www.techtarget.com/rms/onlineImages/erp-supply_chain_management_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineImages/erp-supply_chain_management_mobile.png 960w,https://www.techtarget.com/rms/onlineImages/erp-supply_chain_management.png 1280w" alt="A diagram of the main stages of the supply chain." height="507" width="559"> <figcaption> <i class="icon pictures" data-icon="z"></i>Original equipment manufacturers are crucial to the global supply chain. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <section class="section main-article-chapter" data-menu-title="OEM hardware"> <h2 class="section-title"><i class="icon" data-icon="1"></i>OEM hardware</h2> <p>The use of the term OEM in the hardware segment of the IT industry has several meanings. It can describe companies such as Dell Technologies, HP Inc., Hewlett-Packard Enterprise (HPE), Lenovo and Cisco Systems. These companies source components like microprocessors, memory modules and <a href="https://www.techtarget.com/searchstorage/definition/hard-disk">hard drives</a> from upstream suppliers (such as Intel, AMD and Western Digital) and integrate them into branded products such as PCs, servers, <a href="https://www.techtarget.com/searchstorage/definition/array">storage arrays</a> and networking gear.</p> <p>Some practical examples of OEM hardware supply chains include:</p> <ul class="default-list"> <li>A rugged tablet manufacturer might purchase Dell OEM components and rebrand them with military-grade casing and custom software.</li> <li>A dental imaging company might embed HPE <a href="https://www.techtarget.com/whatis/definition/server">servers</a> into its diagnostic equipment, offering a full solution to healthcare providers.</li> <li>Lenovo OEM Solutions provides partner-ready servers that can be customized for <a href="https://www.techtarget.com/searchdatacenter/definition/edge-computing">edge computing</a>, <a href="https://www.techtarget.com/searchenterpriseai/definition/AI-Artificial-Intelligence">AI</a> and internet-of-things (<a href="https://www.techtarget.com/iotagenda/definition/Internet-of-Things-IoT">IoT</a>) use cases.</li> </ul> <p>OEM partner programs often include branding rights, lifecycle management tools and engineering support for companies looking to embed or repackage enterprise hardware.</p> </section> <section class="section main-article-chapter" data-menu-title="OEM vs. ODM"> <h2 class="section-title"><i class="icon" data-icon="1"></i>OEM vs. ODM</h2> <p>While OEMs and original design manufacturers (<a href="https://www.techtarget.com/whatis/definition/ODM-original-design-manufacturer">ODMs</a>) are both crucial players in the global manufacturing and supply chain ecosystem, their roles differ in key ways.</p> <p>OEMs typically use their customers' product designs, while ODMs both design and manufacture products. OEMs are responsible for building to spec, whereas ODMs often provide end-to-end <a href="https://www.techtarget.com/searchcio/definition/product-development-or-new-product-development-NPD">product development</a>.</p> <p>In some cases, OEMs source fully designed systems from ODMs (like Foxconn or Quanta Computer) and rebrand them. ODMs have also begun selling directly to large-scale enterprise customers, cloud providers and <a href="https://www.datacenterknowledge.com/hyperscalers/hyperscalers-in-2024-where-next-for-the-world-s-biggest-data-center-operators-">hyperscale data center operators</a>, blurring traditional roles in the supply chain.</p> </section> <section class="section main-article-chapter" data-menu-title="OEM software"> <h2 class="section-title"><i class="icon" data-icon="1"></i>OEM software</h2> <p>OEM software refers to licensed <a href="https://www.techtarget.com/iotagenda/definition/embedded-software">software embedded</a> in or bundled with hardware products. Common examples include the following:</p> <ul class="default-list"> <li>Windows <a href="https://www.techtarget.com/whatis/definition/operating-system-OS">operating systems</a> (OS) installed on new laptops and desktops.</li> <li>Android OS bundled with smartphones and tablets.</li> <li>Security suites like McAfee or Norton preloaded on PCs.</li> <li>Firmware or <a href="https://www.techtarget.com/searchenterprisedesktop/definition/device-driver">device drivers</a> from hardware manufacturers.</li> </ul> <p>OEM software deals are typically struck between software publishers and hardware OEMs, ensuring that products ship ready-to-use for the end customer.</p> <p>Some OEM software arrangements also involve embedded or white-labeled software platforms, where independent software vendors (<a href="https://www.techtarget.com/searchitchannel/definition/ISV">ISVs</a>) build on top of an OEM framework. Here are some examples:</p> <ul class="default-list"> <li>VMware partners sometimes embed vSphere or ESXi into their server appliances.</li> <li>Autodesk enables partners to build computer-aided design, i.e., <a href="https://www.techtarget.com/whatis/definition/CAD-computer-aided-design">CAD</a>, extensions for manufacturing solutions.</li> <li>Red Hat provides OEM support for companies embedding Red Hat Enterprise Linux (<a href="https://www.techtarget.com/searchdatacenter/definition/Red-Hat-Enterprise-Linux-RHEL">RHEL</a>) in storage or networking appliances.</li> </ul> </section> <section class="section main-article-chapter" data-menu-title="VAR vs. OEM: What's the difference?"> <h2 class="section-title"><i class="icon" data-icon="1"></i>VAR vs. OEM: What's the difference?</h2> <p>As OEM software continues to play a critical role in bundled solutions, responsibilities of OEMs often overlap with those of other players in the tech ecosystem -- most notably, value-added resellers (<a href="https://www.techtarget.com/searchitchannel/definition/VAR">VARs</a>).</p> <p>An OEM builds or assembles the actual product (hardware or software), usually for wholesale or integration by other companies, while a VAR adds features or services -- like custom configurations, software installation or technical support -- before reselling the product to end customers.</p> <p>However, in practice, OEMs might act as VARs by bundling their hardware with <a href="https://www.techtarget.com/searchsecurity/tip/How-to-create-a-third-party-risk-management-policy">third-party</a> software, while VARs might white-label OEM hardware, blurring the distinction between the two entities.</p> <div class="youtube-iframe-container"> <iframe id="ytplayer-0" src="https://www.youtube.com/embed/WEqXH4PuF8c?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> </section> <section class="section main-article-chapter" data-menu-title="Trademark and licensing considerations"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Trademark and licensing considerations</h2> <p>Because OEMs often allow partners to rebrand or modify their products, trademark and licensing guidelines are essential to maintaining brand integrity and legal <a href="https://www.techtarget.com/searchdatamanagement/definition/compliance">compliance</a>.</p> <p>OEM partner programs often include trademark and branding guidelines, allowing resellers or system builders to use the OEM's logo, design elements or certifications under specific conditions. These programs help protect the integrity of the brand and ensure consistent <a href="https://www.techtarget.com/searchenterprisedesktop/tip/Nine-end-user-experience-monitoring-tools-to-know">end-user experiences</a>.</p> <p>Misuse of OEM branding can lead to trademark infringement. Partners are expected to adhere to strict marketing, documentation and product packaging requirements outlined by the OEM.</p> </section> <section class="section main-article-chapter" data-menu-title="OEMs and AI hardware"> <h2 class="section-title"><i class="icon" data-icon="1"></i>OEMs and AI hardware</h2> <p>Beyond branding and partnerships, OEMs are currently at the forefront of next-generation technologies -- especially as demand for AI-ready hardware surges across industries. Today, OEMs play a growing role in building AI-ready hardware platforms. Key trends include the following:</p> <ul class="default-list"> <li>NVIDIA-powered AI servers from OEM partners like Dell and Supermicro.</li> <li>Edge computing devices embedded with AI chips and IoT-ready firmware.</li> <li>OEM integration of large language model (<a href="https://www.techtarget.com/whatis/definition/large-language-model-LLM">LLM</a>) frameworks into smart appliances, medical devices and security systems.</li> </ul> <p>OEMs are deeply involved in the design and customization of <a href="https://www.computerweekly.com/feature/Top-AI-infrastructure-considerations">AI infrastructure</a>, providing tailored platforms to vertical markets like healthcare, manufacturing and retail.</p> <p>Beyond that, OEMs remain an essential force in the modern technology ecosystem, enabling innovation across hardware, software and integrated systems. As the lines continue to blur between OEMs, ODMs, VARs and software vendors, the role of the original equipment manufacturer has expanded beyond basic component assembly to include design collaboration, branding partnerships and cutting-edge AI infrastructure development.</p> <p>Whether building PCs, powering <a href="https://www.techtarget.com/searchdatacenter/definition/data-center">data centers</a> or embedding intelligence into everyday devices, OEMs will continue to be foundational to how technology is created, customized and delivered.</p> <p><i>Servers often include components from many different OEMs. These platforms offer a host of options for small and medium-sized businesses and enterprise IT buyers. However, it's important to learn the essentials before making any purchasing decisions. Check out this </i><a href="https://www.techtarget.com/searchdatacenter/feature/Learn-the-major-types-of-server-hardware-and-their-pros-and-cons"><i>server architecture, products and management hardware guide</i></a><i>.</i></p> </section> An original equipment manufacturer (OEM) is a company that produces hardware or software that is later marketed and sold under another company's brand. https://cdn.ttgtmedia.com/visuals/digdeeper/3.jpg https://www.techtarget.com/searchitchannel/definition/OEM Fri, 09 May 2025 11:15:00 GMT <p>A change agent, or agent of change, is someone who promotes change and enables it to happen within any group or organization.</p> <p>In business, a change agent is an individual who supports and facilitates a new way of doing something within the company. This can be the use of a new process, the adoption of a new management structure or the transformation of an old business model into a new one.</p> <p>A change agent is sometimes also called an agent of change or a change advocate. The terms <i>champion</i>, <i>change champion</i> and <i>change agent</i> are often used interchangeably; however, some see differences between the roles each one plays in supporting change. For example, a change agent is viewed as having more responsibilities and accountability for <a href="https://www.techtarget.com/searchcio/tip/4-examples-of-digital-transformation-success-in-business">making sure that change happens successfully</a> than a change champion does.</p> <div class="youtube-iframe-container"> <iframe id="ytplayer-0" src="https://www.youtube.com/embed/OCqF8LbJYyk?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> <section class="section main-article-chapter" data-menu-title="Internal vs. external change agents"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Internal vs. external change agents</h2> <p>Managers and executives are often expected to be change agents within their organizations. However, internal change agents are not limited to high-ranking, <a href="https://www.techtarget.com/searchcio/definition/C-level">C-level</a> leaders. A change agent can be any employee with the right mix of skills, characteristics and authority to shepherd others through the transformation.</p> <p>A change agent can also be someone outside the organization, such as an external consultant hired to help with a change effort.</p> <p>Although a change agent can come from within or outside an organization, a successful change agent is someone whom people respect and whom <a href="https://www.techtarget.com/searchcio/definition/organizational-change-management-OCM">organizational change</a> affects. They also tend to be well informed about the various facets of the project, the organization and the staff involved.</p> <div class="youtube-iframe-container"> <iframe id="ytplayer-1" src="https://www.youtube.com/embed/1yIl2bVS-kU?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> </section> <section class="section main-article-chapter" data-menu-title="What change agents do"> <h2 class="section-title"><i class="icon" data-icon="1"></i>What change agents do</h2> <p>Regardless of the actual position or job title a change agent holds, an individual who takes on the task of being an agent of change assumes responsibility for the following:</p> <ul class="default-list"> <li>Promoting the <a href="https://www.techtarget.com/searchcio/tip/How-to-measure-and-improve-digital-transformation-ROI">value of the transformation</a>.</li> <li>Formulating how the transformation will happen.</li> <li>Guiding and supporting others through the transformation.</li> <li>Making sure that the new processes, procedures and organizational structures are implemented to deliver the value that the organization expected.</li> </ul> <figure class="main-article-image half-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/4_steps_in_the_change_agent_process-h.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/4_steps_in_the_change_agent_process-h_half_column_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/4_steps_in_the_change_agent_process-h_half_column_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/4_steps_in_the_change_agent_process-h.png 1280w" alt="A graphic lists four steps in the change agent process: propose value, plan, guide others and ensure goals are met." height="234" width="279"> <figcaption> <i class="icon pictures" data-icon="z"></i>Change agents are responsible for preparing, enacting and tracking a transformation plan. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <p>Overall, a change agent <a href="https://www.techtarget.com/searchcio/tip/Building-a-digital-transformation-team-8-essential-roles">serves as a liaison</a> between an organization's leadership that sponsors a change initiative and the people affected by the change.</p> <p>The change agent helps articulate reasons for the change, answers questions and persuades others about the necessity of the initiative. They also escalate concerns to leadership and decision-makers.</p> </section> <section class="section main-article-chapter" data-menu-title="Change agents' roles and responsibilities"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Change agents' roles and responsibilities</h2> <p>To achieve <a href="https://www.techtarget.com/searchcio/definition/change-management">change management</a> objectives, a change agent assumes responsibilities that start once leadership decides to undertake an initiative. That way, the change agent can contribute to the initiative's implementation strategy, action plan and decision-making process.</p> <p>By assigning a change agent at the start of an initiative, their objectives, responsibilities and metrics for success can be incorporated into the <a href="https://www.techtarget.com/searchcio/definition/project-planning">project plan</a>.</p> <p>The following tasks typically become the duty of the change agent:</p> <ul class="default-list"> <li>Explaining why a change is taking place and who will be affected.</li> <li>Advocating for the change initiative.</li> <li>Disseminating information.</li> <li>Highlighting the potential benefits and drawbacks of the proposed initiative.</li> <li>Anticipating and evaluating areas of potential dispute or disruption.</li> <li>Developing strategies to counteract any potential areas of dispute or disruption.</li> <li>Obtaining feedback to share with leadership and conveying responses.</li> <li>Serving as a point person to hear others' concerns, ideas and questions.</li> <li>Advising <a href="https://www.techtarget.com/searchcio/definition/stakeholder">stakeholders</a> and affected individuals.</li> <li>Mediating points of contention.</li> <li><a href="https://www.theserverside.com/tip/OKRs-vs-KPIs-Driving-bold-outcomes-and-measuring-steady-performance">Tracking and managing objectives</a> of the project.</li> </ul> </section> <section class="section main-article-chapter" data-menu-title="Types of change agents"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Types of change agents</h2> <p>There are three primary types of change agents, each focusing on a different aspect of transformation.</p> <h3>People-centric change agents</h3> <p>These agents prioritize employee engagement, motivation and morale. Their work includes these areas of focus:</p> <ul class="default-list"> <li>Helping employees adjust to the change.</li> <li>Providing training and <a href="https://www.techtarget.com/searchhrsoftware/tip/How-to-build-an-effective-upskilling-program-for-employees">upskilling opportunities</a>.</li> <li>Setting clear goals and offering continual support.</li> </ul> <h3>Structure-centric change agents</h3> <p>These agents focus on reshaping organizational infrastructure through more systemic activities:</p> <ul class="default-list"> <li>Researching and implementing new technologies.</li> <li>Performing system analyses to identify process improvements.</li> <li>Restructuring teams and workflows to <a href="https://www.techtarget.com/searchcio/tip/How-to-improve-and-optimize-business-processes-step-by-step">optimize efficiency</a>.</li> </ul> <h3>Process-centric change agents</h3> <p>These agents focus on optimizing business processes and facilitating collaboration among teams. They make sure that the following goals are met:</p> <ul class="default-list"> <li>New workflows are effectively integrated.</li> <li>Teams communicate efficiently throughout the transformation.</li> <li>Operational improvements align with business goals.</li> </ul> <p>Organizations should select change agents based on the type of transformation being undertaken and the skills required for success.</p> </section> <section class="section main-article-chapter" data-menu-title="Change agent characteristics"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Change agent characteristics</h2> <p>To ensure success, leadership should choose a change agent based on characteristics commonly identified as the most effective for positions such as <a href="https://www.techtarget.com/searchcio/definition/Chief-Transformation-Officer">chief transformation officer</a>. Those characteristics include the following:</p> <ul class="default-list"> <li>Diversified knowledge.</li> <li>Experience in the business discipline that the change effort affects.</li> <li>A willingness to ask tough questions.</li> <li>Flexibility, creativity and an openness to new ideas.</li> <li>A strong network.</li> <li>Trustworthiness and credibility.</li> <li>An understanding of the organization's <a href="https://www.techtarget.com/whatis/definition/corporate-culture">corporate culture</a>.</li> <li>Courage.</li> <li>The ability to tell a company narrative.</li> <li>Excitement for new opportunities and potential.</li> <li>Comfort working through uncertainty.</li> </ul> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/change_agent_characteristics-f.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/change_agent_characteristics-f_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/change_agent_characteristics-f_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/change_agent_characteristics-f.png 1280w" alt="Diagram illustrating the essential characteristics of change agents, such as vision, influence and problem-solving abilities." height="221" width="559"> <figcaption> <i class="icon pictures" data-icon="z"></i>Change agents have a wide range of skills, including the ability to communicate effectively with both leadership and staff in an organization. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> </section> <section class="section main-article-chapter" data-menu-title="Important change agent skills"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Important change agent skills</h2> <p>A change agent must have the following skills to be successful:</p> <ul class="default-list"> <li><b>Leadership and influence.</b> The ability to gain support and inspire others.</li> <li><b>Strategic thinking.</b> Identifying opportunities and risks.</li> <li><b>Strong communication.</b> Clearly articulating goals, expectations and benefits.</li> <li><b>Emotional intelligence.</b> Understanding and managing resistance to change.</li> <li><b>Relationship-building.</b> Fostering trust and <a href="https://www.techtarget.com/searchunifiedcommunications/feature/How-to-improve-virtual-collaboration-in-the-enterprise">collaboration across teams</a>.</li> <li><b>Project management.</b> Making sure that the change process stays on track.</li> </ul> <p>A certain level of technical knowledge might also be important. Change agents should be familiar with common <a href="https://www.techtarget.com/searchcio/feature/Tools-for-instilling-a-culture-of-digital-transformation">digital transformation tools</a>.</p> </section> <section class="section main-article-chapter" data-menu-title="Why agents of change are important"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Why agents of change are important</h2> <p>An effective change agent serves a distinct role within a change initiative as a proponent of the change, as well as a conduit between leadership and the rest of the organization. A successful agent of change can help smooth resistance to change.</p> <figure class="main-article-image half-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/change_management_checklist-h.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/change_management_checklist-h_half_column_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/change_management_checklist-h_half_column_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/change_management_checklist-h.png 1280w" alt="Checklist graphic depicting six steps in the change management process." height="285" width="279"> <figcaption> <i class="icon pictures" data-icon="z"></i>Change agents support transformation through change management and project management practices. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <p>Another role of a change agent is problem-solving and addressing issues before they derail an initiative, ultimately ensuring the <a href="https://www.techtarget.com/searchitoperations/tip/Creating-an-effective-change-management-process-for-IT-ops">successful implementation</a> and adoption of a new change project.</p> <p>Change agents are more than just advocates -- they are leaders, facilitators and problem-solvers who help organizations successfully implement change. Whether focusing on people, processes or structure, their influence makes sure that new strategies are adopted smoothly and effectively.</p> <p>For organizations undergoing significant transformations, identifying and empowering the right change agents can make the difference between success and failure.</p> <p><i>Change agents are important to organizations as facilitators of digital transformation. Learn the </i><a href="https://www.techtarget.com/searchcio/tip/3-biggest-digital-transformation-challenges-and-how-to-solve-them"><i>top three challenges that individuals pushing for change face</i></a><i> when implementing a digital transformation.</i></p> </section> A change agent, or agent of change, is someone who promotes change and enables it to happen within any group or organization. https://cdn.ttgtmedia.com/visuals/digdeeper/6.jpg https://www.techtarget.com/searchcio/definition/change-agent Thu, 08 May 2025 11:00:00 GMT <p>Business transformation refers to fundamental changes in an organization's operations, strategy or structure to improve efficiency, competitiveness and financial performance. It can apply to the entire business, a department or a product line.</p> <p>Unlike <a href="https://www.techtarget.com/searchcio/definition/incremental-innovation">incremental improvements</a>, business transformation involves major shifts in processes, technology or business models. Business transformation can involve multiple types of transformational change, such as the following:</p> <ul class="default-list"> <li><b>Digital transformation.</b> Leveraging technology, AI and <a href="https://www.techtarget.com/searchcio/feature/Ultimate-guide-to-digital-transformation-for-enterprise-leaders">automation to enhance operations</a>.</li> <li><b>Cultural transformation.</b> Changing workplace values, behaviors and leadership styles.</li> <li><b>Organizational transformation.</b> Redesigning hierarchies, teams and workflows.</li> <li><b>Management transformation.</b> Adopting new leadership models, decision-making frameworks or governance structures.</li> </ul> <p>Business transformation initiatives can involve mergers and acquisitions (M&amp;As), staff changes, outsourcing, <a href="https://www.techtarget.com/whatis/definition/supply-chain">supply chain</a> reorganization and new business models. The business transformation process typically involves making major changes to an organization's people, processes and technology.</p> <div class="youtube-iframe-container"> <iframe id="ytplayer-0" src="https://www.youtube.com/embed/1yIl2bVS-kU?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> <section class="section main-article-chapter" data-menu-title="Opportunistic vs. responsive business transformation"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Opportunistic vs. responsive business transformation</h2> <p>Business transformation can be opportunistic or responsive.</p> <p><a href="https://www.computerweekly.com/blog/Downtime/Netflix-sawed-us-coming">Netflix adding a streaming movie service</a> to gain a competitive advantage in a new market is an example of opportunistic business transformation.</p> <p>The radical changes some companies had to make to <a href="https://www.techtarget.com/searchstorage/tip/Prevent-the-storage-and-data-security-risks-of-remote-work">support remote work</a> in the wake of COVID-19 restrictions represented responsive business transformation. The reorganization of a supply chain after new trade restrictions is also a responsive approach to business transformation.</p> <p>There are different dimensions of business transformation. Efforts focused on performance improvement include basic business goals such as cost savings and adding new revenue streams. A business portfolio transformation could involve M&amp;As, the creation or termination of product lines, new sales channels and new partnerships.</p> <p>Technology often plays a central role in transformation initiatives. For example, the implementation of a <a href="https://www.techtarget.com/searcherp/feature/ERP-trends-for-this-year-and-beyond">modern enterprise resource planning</a> (ERP) application, <a href="https://www.techtarget.com/searchcustomerexperience/tip/What-are-the-benefits-and-challenges-of-CRM">customer resource management</a> (CRM) platform or <a href="https://www.techtarget.com/searchhealthit/feature/EHR-implementation-challenges-and-how-to-overcome-them">electronic health records</a> system drives major changes to how business gets done.</p> <p>Other kinds of transformation, such as outsourcing a business function or terminating an unproductive product line, might have less impact on existing technology or not require new technology.</p> </section> <section class="section main-article-chapter" data-menu-title="The role of AI in business transformation"> <h2 class="section-title"><i class="icon" data-icon="1"></i>The role of AI in business transformation</h2> <p>AI is no longer a supporting technology; it's at the core of modern transformation efforts. Applications of AI in business transformation include the following:</p> <ul class="default-list"> <li><b>AI-driven automation.</b> Businesses can automate processes beyond traditional robotic process automation (<a href="https://www.techtarget.com/searchcio/definition/RPA">RPA</a>) with <a href="https://www.techtarget.com/searchcio/definition/hyperautomation">hyperautomation</a>, AI copilots and <a href="https://www.techtarget.com/searchenterpriseai/tip/9-top-AI-and-machine-learning-trends">machine learning</a>.</li> <li><b>Predictive analytics.</b> AI forecasts customer demand, optimizes supply chains and improves decision-making.</li> <li><b>Generative AI.</b> <a href="https://www.techtarget.com/searchenterpriseai/feature/How-will-generative-AI-reshape-the-enterprise">GenAI tools like ChatGPT</a> and Gemini generate content, automate customer support and <a href="https://www.techtarget.com/searchbusinessanalytics/feature/Business-intelligence-reporting-What-it-is-how-it-works">enhance business intelligence</a>.</li> </ul> <p>For example, a retail company can use AI to predict product demand, preventing overstocking and reducing supply chain inefficiencies.</p> </section> <section class="section main-article-chapter" data-menu-title="Examples of business transformation initiatives"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Examples of business transformation initiatives</h2> <p>Initiatives that involve the kind of fundamental change -- and <a href="https://www.techtarget.com/searchcio/definition/change-management">change management</a> -- indicative of business transformation include the following:</p> <ul class="default-list"> <li>Consolidating operations after M&amp;As.</li> <li>Developing AI-powered product lines to meet changing customer demands.</li> <li>Shutting down outdated business models and pivoting to digital-first operations.</li> <li>Moving Capex products to a subscription-based model, an example of anything as a service or XaaS.</li> <li>Consolidating multiple ERP or CRM systems into a unified platform.</li> <li>Migrating core business applications to the <a href="https://www.techtarget.com/searchcloudcomputing/tip/Explore-the-pros-and-cons-of-cloud-computing">cloud for scalability</a> or for other reasons.</li> <li>AI-driven supply chain optimization for cost reduction and resilience.</li> <li>Centralizing risk management functions using AI-based fraud detection.</li> <li>Implementing hyperautomation to eliminate manual processes.</li> <li><a href="https://www.computerweekly.com/ezine/Computer-Weekly/Can-low-code-no-code-ease-developer-skills-shortages">Expanding low-code/no-code</a> platforms to enable nontechnical employees to build applications.</li> <li>Enhancing corporate data literacy and AI upskilling programs.</li> <li>Implementing data privacy and governance to meet regulatory standards.</li> <li>Adopting <a href="https://www.computerweekly.com/opinion/Defending-against-cyber-grinches-AI-for-enhanced-security">AI-enhanced cybersecurity</a> frameworks to address threats.</li> <li>Shifting sustainability initiatives to meet carbon neutrality goals.</li> <li>Implementing outcome-based employee incentive models tied to digital KPIs.</li> </ul> </section> <section class="section main-article-chapter" data-menu-title="What are the drivers of business transformation?"> <h2 class="section-title"><i class="icon" data-icon="1"></i>What are the drivers of business transformation?</h2> <p>Many factors can trigger the need for business transformation.</p> <h3>AI, automation and digital transformation</h3> <ul class="default-list"> <li>Companies are investing in AI-driven workflows, automation and analytics to stay competitive.</li> <li>Hyperautomation reduces operational costs by integrating AI, RPA and machine learning.</li> </ul> <h3>Environmental, social and governance as well as sustainability compliance</h3> <ul class="default-list"> <li><a href="https://www.techtarget.com/whatis/definition/environmental-social-and-governance-ESG">ESG</a> frameworks adopted and championed by governments and investors require companies to meet carbon reduction goals and ethical sourcing standards.</li> <li>Supply chains are redesigning for transparency, to achieve a circular economy and to <a href="https://www.techtarget.com/sustainability/feature/Green-office-ideas-businesses-can-explore">integrate sustainable materials</a> more fully.</li> </ul> <h3>Supply chain resilience</h3> <ul class="default-list"> <li>Global trade disruptions, geopolitical risks and deglobalization trends drive onshoring and nearshoring operations.</li> <li>Example: The <a href="https://www.techtarget.com/searchenterpriseai/news/366620344/Experts-stunned-by-Trump-attack-on-CHIPS-Act">U.S. CHIPS Act</a> incentivizes domestic semiconductor production.</li> </ul> <h3>AI-driven customer experience</h3> <ul class="default-list"> <li>Personalization, AI chatbots and predictive customer analytics are transforming customer engagement.</li> <li>Example: Netflix's AI-driven recommendation engine enhances user retention.</li> </ul> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineImages/networking-digital_transformation.png"> <img data-src="https://www.techtarget.com/rms/onlineImages/networking-digital_transformation_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineImages/networking-digital_transformation_mobile.png 960w,https://www.techtarget.com/rms/onlineImages/networking-digital_transformation.png 1280w" alt="A chart describing the characteristics and key benefits of digital transformation, an enabler of business transformation" height="290" width="560"> <figcaption> <i class="icon pictures" data-icon="z"></i>Digital transformation is often a key enabler of business transformation, as illustrated in this chart. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> </section> <section class="section main-article-chapter" data-menu-title="Steps to implement business transformation"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Steps to implement business transformation</h2> <p>Implementing business transformation should involve these steps:</p> <ol class="default-list"> <li><b>Clarify goals</b>. Teams first need to develop clearly defined goals that succinctly state the business transformation's purpose and a theory about what steps could help address these goals.</li> <li><b>Get executive buy-in</b>. Next, <a href="https://www.techtarget.com/searchcio/definition/executive-leadership">enrolling an executive champion</a> to support the goals is essential. This person can help flesh out the initial theory into a more substantive business strategy with specific steps, participants and funding requirements. The champion can also help overcome any hurdles or conflicts around funding, departmental control or communication.</li> <li><b>Develop metrics</b>. The core team needs to clarify what success looks like. What are key metrics to monitor that indicate the work is moving in the right direction? What potential risks could derail the efforts, and how could these be mitigated?</li> <li><b>Get employee buy-in</b>. Once the vision is clear, the core idea must be translated to characterize how it can positively affect employees. This might be as simple as creating a new message and broadcasting it across various corporate channels. Another approach might involve <a href="https://www.techtarget.com/searchhrsoftware/tip/Employee-experience-vs-employee-engagement-The-differences">attracting employees to the new vision</a> to help the effort blossom and gain momentum.</li> <li><b>Demonstrate success and build on it</b>. Change of all kinds is hard. Early success on a few pilot implementations can build enthusiasm and buy-in for a new idea across the organization. A center-of-excellence model can consolidate enterprise learnings related to the initiative in a single location and convey success stories that could inspire others to participate.</li> </ol> </section> <section class="section main-article-chapter" data-menu-title="Best practices for a successful business transformation"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Best practices for a successful business transformation</h2> <p>Many business transformation efforts fail to reach their goals. A 2018 McKinsey study reported that only 30% of digital transformation efforts succeeded. The group defined success as equipping the organization to sustain performance and equipping the organization to support improvements over time. Prior McKinsey surveys claimed success rates were as low as 20% in 2016 and 2012.</p> <p>In 2023, the Boston Consulting Group noted a similar trend, while a 2025 Gartner CIO survey revealed that over 50% of digital transformation efforts failed to meet expectations and achieve their desired outcomes. However, BCG found that companies that implement six key practices can significantly increase their chances of successful transformation:</p> <ul class="default-list"> <li><b>AI-powered strategy.</b> Align AI adoption with clear business goals.</li> <li><b>Strong leadership buy-in.</b> Senior leaders must sponsor transformation projects.</li> <li><b>Right talent in right roles.</b> Equip teams with AI and <a href="https://www.techtarget.com/virtualhealthcare/news/366597992/Hawaii-Program-Brings-Telehealth-and-Digital-Literacy-Training-to-Libraries">digital literacy training</a>.</li> <li><b>Agile execution.</b> Use AI-enhanced decision-making for real-time adjustments.</li> <li><b>Measure and adapt.</b> Continuously analyze AI's impact on business KPIs.</li> <li><b>Composable business models.</b> Shift from monolithic transformations to modular, iterative improvements.</li> </ul> <p><i>Explore valuable insights into the </i><a href="https://www.techtarget.com/searchcio/feature/How-one-CIO-drives-business-transformation-through-tech"><i>CIO's key role as a business transformation driver</i></a><i> while managing emerging technologies such as AI.</i></p> </section> Business transformation refers to fundamental changes in an organization’s operations, strategy or structure to improve efficiency, competitiveness and financial performance. https://cdn.ttgtmedia.com/visuals/digdeeper/2.jpg https://www.techtarget.com/searchcio/definition/business-transformation Tue, 22 Apr 2025 16:28:00 GMT <p>Dynamic routing protocols encourage customization to suit specific environments. Even without advanced options, many errors can occur from basic configurations and cause network disruptions.</p> <p>This article explores various routing errors rooted in <a href="https://www.techtarget.com/searchnetworking/tip/BGP-vs-OSPF-When-to-use-each-protocol">Border Gateway Protocol (BGP) and Open Shortest Path First (OSPF)</a>. Some errors occur due to misconfigurations, while others don't meet the conditions necessary to route data packets. However, network professionals can perform key checks to fix these errors.</p> <section class="section main-article-chapter" data-menu-title="Error 1. EBGP multihop sessions not appearing"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Error 1. EBGP multihop sessions not appearing</h2> <p>BGP peers don't need to connect directly. Instead, BGP establishes neighborship over a TCP session. This requires multiple hops to pass data packets between routers. Network professionals might encounter an issue as they configure External BGP (eBGP) over multiple hops. Their setup might appear correct, but the BGP session doesn't appear.</p> <p>No matter the number of routers between eBGP peers, the time-to-live (<a href="https://www.techtarget.com/searchnetworking/definition/time-to-live">TTL</a>) value in an IP packet remains critical to form neighborships. By default, eBGP's TTL value is set to 1; for Internal BGP peers, the TTL value is 255. This means the packet can't pass through a single router. To enable packet traversal through multiple routers, the TTL value must increase. Configuring eBGP multihop is the best way to fix this problem. It enables packets to pass through intermediate routers so peers can establish a session and exchange updates.</p> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/image_vina_ebgp_time_to_live_value-f.jpg"> <img data-src="https://www.techtarget.com/rms/onlineimages/image_vina_ebgp_time_to_live_value-f_mobile.jpg" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/image_vina_ebgp_time_to_live_value-f_mobile.jpg 960w,https://www.techtarget.com/rms/onlineimages/image_vina_ebgp_time_to_live_value-f.jpg 1280w" alt="eBGP time to live (TTL) value" height="320" width="559"> <figcaption> <i class="icon pictures" data-icon="z"></i>If the TTL value is set to 1, packets cannot pass through the router. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <p>To enable eBGP multihop, use the <span style="font-family: courier new, courier, monospace;">ebgp-multihop</span> command within the BGP configuration. This simple adjustment ensures eBGP peers can connect, even when separated by multiple hops.</p> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/image_vina_ebgp_connect-h.jpg"> <img data-src="https://www.techtarget.com/rms/onlineimages/image_vina_ebgp_connect-h_mobile.jpg" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/image_vina_ebgp_connect-h_mobile.jpg 960w,https://www.techtarget.com/rms/onlineimages/image_vina_ebgp_connect-h.jpg 1280w" alt="eBGP multihop"> <figcaption> <i class="icon pictures" data-icon="z"></i>Here is a sample eBGP mulithop configuration on two routers. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <pre><span style="font-family: courier new, courier, monospace;">#csr_01<br><br>router bgp 100<br>&nbsp;bgp log-neighbor-changes<br>&nbsp;neighbor 23.23.23.1 remote-as 200<br>&nbsp;neighbor 23.23.23.1 ebgp-multihop 255</span></pre> <pre><span style="font-family: courier new, courier, monospace;">#csr_02<br><br>router bgp 200<br>&nbsp;bgp log-neighbor-changes<br>&nbsp;neighbor 12.12.12.1 remote-as 100<br>&nbsp;neighbor 12.12.12.1 ebgp-multihop 255</span></pre> </section> <section class="section main-article-chapter" data-menu-title="Error 2. No matching BGP network command prefix"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Error 2. No matching BGP network command prefix</h2> <p>BGP must meet some conditions before network administrators can use the command to <a target="_blank" href="https://www.packetswitch.co.uk/bgp-prefix-advertisement-iii/" rel="noopener">advertise a specific prefix</a>. One critical condition is to ensure an exact match for the prefix exists. To do this, BGP references the <a href="https://www.techtarget.com/searchnetworking/definition/routing-table">routing table</a>. After it finds a matching route, BGP includes the prefix in its BGP table and advertises it to other routers.</p> <p>However, routing tables don't always provide a match. When this happens, BGP doesn't advertise the prefix or route the data packet. If the router doesn't advertise a configured network statement prefix as expected, network administrators should recheck the routing table. This should confirm that the exact route is there. If it's not there, network admins should perform further troubleshooting steps.</p> </section> <section class="section main-article-chapter" data-menu-title="Error 3. Mismatched AS numbers"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Error 3. Mismatched AS numbers</h2> <p>Another common eBGP issue occurs when mismatched autonomous system (<a href="https://www.techtarget.com/searchnetworking/definition/autonomous-system">AS</a>) numbers are in the configuration. The AS numbers must match on both sides to establish an eBGP session. If the AS numbers don't align, the BGP session doesn't appear. Network administrators should always double-check the AS configurations of both peers to confirm the expected match.</p> <p>For example, assume Router 2 must mirror Router 1 in their configurations. If Router 1 is in AS 64512 and has a neighbor statement configured with AS 64513, then Router 2 should be in AS 64513 and have a neighbor statement pointing back to Router 1.</p> </section> <section class="section main-article-chapter" data-menu-title="Error 4. OSPF neighbor relationship requirements"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Error 4. OSPF neighbor relationship requirements</h2> <p>OSPF router configurations enable routing on specific interfaces. It searches for neighbors by sending and receiving <a href="https://www.techtarget.com/searchnetworking/definition/HELLO-packet">HELLO packets</a>. However, neighbor detection is only the first step. OSPF must meet certain conditions to establish a neighbor adjacency.</p> <p>While troubleshooting OSPF neighborship issues, network administrators should check the following settings to ensure both routers align:</p> <ul class="default-list"> <li><b>Interface IP addresses must be in the same subnet.</b> The routers don't form an adjacency if the interface IP addresses don't match <a href="https://www.techtarget.com/searchnetworking/tip/Introduction-to-IP-addressing-and-subnetting">within the same subnet</a>.</li> <li><b>OSPF authentication must pass if configured.</b> The routers must have matching passwords if authentication is enabled.</li> <li><b>Hello and dead intervals must match.</b> These timers control how often routers send HELLO packets and how long to wait before declaring a neighbor down. Mismatched values prevent adjacency.</li> <li><b>Interfaces must be in the same area.</b> OSPF routers must be in the same area for adjacency to form.</li> <li><b>Maximum transmission unit (MTU) mismatch.</b> The neighboring interfaces must match the MTU.</li> </ul> <h3>MTU mismatch example</h3> <p>The following example demonstrates an MTU mismatch. Router-01's MTU is listed as 1400. MTU's default is 1500, so it is incorrect.</p> <pre><span style="font-family: courier new, courier, monospace;">router-01(config-if-Et1)#mtu 1400<br>router-01(config-if-Et1)#end</span></pre> <p>When checking the OSPF neighborship, notice the state is stuck at EXSTART/DR and the logs indicate an MTU issue.</p> <pre><span style="font-family: courier new, courier, monospace;">Jan 28 23:01:01 router-01 Ospf: Instance 1: <br>OSPF: invalid DD packet from 10.50.50.6: DD MTU is too large (29)</span></pre> <p>Changing the MTU back to 1500 forms the neighborship again.</p> <pre><span style="font-family: courier new, courier, monospace;">router-01(config-if-Et1)#mtu 1500<br>router-01(config-if-Et1)#end<br>router-01#Jan 28 23:03:54 router-01 Ospf: Instance 1: <br>%OSPF-4-OSPF_ADJACENCY_ESTABLISHED: NGB 10.50.50.6, <br>interface 10.50.50.5 adjacency established</span></pre> </section> <section class="section main-article-chapter" data-menu-title="Error 5. OSPF passive interface"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Error 5. OSPF passive interface</h2> <p>OSPF passive interface stops sending HELLO messages, so it doesn't form neighbor relationships over that interface. However, OSPF advertisements still include the connected network.</p> <p>The <span style="font-family: courier new, courier, monospace;">passive-interface default</span> command makes all interfaces passive. If this command is active, network administrators should manually enable OSPF on specific interfaces requiring neighbor relationships using the <span style="font-family: courier new, courier, monospace;">no passive-interface</span> command. Check the interface in settings if OSPF neighborships don't form despite the correct configuration. If it's set to passive due to the global command, disable it on that interface using <span style="font-family: courier new, courier, monospace;">no passive-interface</span>. This enables OSPF to form the neighborship.</p> <p>The following example shows OSPF configurations on Interface Eth1 on router-01 and uses the <span style="font-family: courier new, courier, monospace;">passive-interface default</span> command. Due to this, the neighborship did not form.</p> <pre><span style="font-family: courier new, courier, monospace;">router-01#show run | sec ospf<br>interface Ethernet1<br>&nbsp; &nbsp;ip ospf area 0.0.0.0<br>router ospf 1<br>&nbsp;&nbsp; passive-interface default</span></pre> <p></p> <pre><span style="font-family: courier new, courier, monospace;">router-01#show ip ospf neighbor<br>Neighbor ID&nbsp;&nbsp;&nbsp; &nbsp;Instance VRF&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pri State&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Dead Time<br>Address &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interface</span></pre> <p>After disabling the passive interface on Eth1, the neighborship came up. This should happen immediately.</p> <pre><span style="font-family: courier new, courier, monospace;">router-01(config)#router ospf 1<br>router-01(config-router-ospf)#no passive-interface eth1<br>router-01(config-router-ospf)#end</span></pre> <p></p> <pre><span style="font-family: courier new, courier, monospace;">router-01#show ip ospf neighbor<br>Neighbor ID&nbsp;&nbsp;&nbsp; &nbsp;Instance VRF&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pri State&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Dead Time<br>Address &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interface<br>10.50.50.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;default &nbsp;1&nbsp;&nbsp; FULL/DR&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 00:00:31<br>10.50.50.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ethernet1</span></pre> <p><i>Suresh Vina is a network engineer who has worked in the networking field for the past eight years. He has hands-on experience with technologies from Cisco, Juniper, Palo Alto Networks, Fortinet and more.</i></p> </section> It's important to troubleshoot routing errors to minimize network disruptions. Common errors rooted in BGP and OSPF include misconfigurations and various unmet neighbor requirements. https://cdn.ttgtmedia.com/rms/onlineimages/competition_a299069360.jpg https://www.techtarget.com/searchitchannel/tip/How-to-troubleshoot-five-common-routing-errors Tue, 04 Mar 2025 09:00:00 GMT <p>A quantum, the singular form of <i>quanta</i>, is the smallest discrete unit of any physical entity. For example, a quantum of light is a photon, and a quantum of electricity is an <a href="https://www.techtarget.com/whatis/definition/electron">electron</a>. Quantum comes from Latin, meaning <i>an amount</i> or <i>how much.</i> If something is quantifiable, it can be measured.</p> <section class="section main-article-chapter" data-menu-title="What is quantum in physics?"> <h2 class="section-title"><i class="icon" data-icon="1"></i>What is quantum in physics?</h2> <p>German physicist Max Planck introduced the modern concept of quantum in physics in 1901. He was trying to explain blackbody radiation and how objects changed color after being heated. Instead of assuming that the energy from heat was emitted in a constant wave, he posed that the energy was emitted in discrete packets or bundles. These were termed <i>quanta of energy</i>. This led to him discovering <a href="https://www.techtarget.com/whatis/definition/Plancks-constant">Planck's constant</a>, which is a fundamental universal value.</p> <p>Planck's constant is symbolized as <i>h </i>and relates the energy in one photon to the frequency of the photon. Further units were derived from Planck's constant: Planck's distance and Planck's time, which describe the shortest meaningful unit of distance and the shortest meaningful unit of time. For anything smaller than a unit, such as a particle variable, physicist Werner Heisenberg's uncertainty principle postulated that variables of a particle had inherent uncertainty in position and momentum when measured, so these variables couldn't be definitively measured.</p> <p>The discovery of quanta and the quantum nature of subatomic particles led to a revolution in physics, and to the birth of quantum physics. Before the quantum discovery, the physics world revolved around Albert Einstein's theory of relativity, which described the behavior of macroscopic things. In contrast, quantum theory described the behavior of microscopic particles, which became known as <a href="https://www.techtarget.com/whatis/definition/quantum-theory"><i>quantum theory</i></a>, or <i>quantum mechanics</i>. Einstein's theory of relativity and the microscopic focus of quantum theory became the two theories underpinning modern physics. Unfortunately, they deal with different domains, leaving physicists seeking a unified theory of everything.</p> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/actual_results_of_double_slit_experiment-f.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/actual_results_of_double_slit_experiment-f_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/actual_results_of_double_slit_experiment-f_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/actual_results_of_double_slit_experiment-f.png 1280w" alt="An image showing the double-slit experiment and wave-particle duality. " height="409" width="560"> <figcaption> <i class="icon pictures" data-icon="z"></i>The double-slit experiment showed that light behaves as both a wave and a particle. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <p>In 1801, English physicist Thomas Young revealed the quantum nature of light in his <a href="https://www.techtarget.com/whatis/definition/double-slit-experiment">double-slit experiment</a>. In his experiment, a wave was split into two separate waves and projected upon a screen, demonstrating that light behaves as both a wave and a particle.</p> <p>Subatomic particles behave in ways that are counterintuitive. A single photon quantum of light can simultaneously go through two slits in a piece of material, as shown in the double-slit experiment.</p> <p><a href="https://www.techtarget.com/whatis/definition/Schrodingers-cat">Schrödinger's cat </a>is a famous thought experiment that describes a quantum particle in superposition, or the state where the probability waveform hasn't collapsed, and where multiple states or probabilities can exist simultaneously. Particles can also become <a href="https://www.techtarget.com/searchcio/definition/quantum-entanglement">quantumly entangled</a>, causing them to interact instantly over a distance.</p> <div class="youtube-iframe-container"> <iframe id="ytplayer-0" src="https://www.youtube.com/embed/3T7PfpOhsKU?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> </section> <section class="section main-article-chapter" data-menu-title="What is quantum in computing?"> <h2 class="section-title"><i class="icon" data-icon="1"></i>What is quantum in computing?</h2> <p>Quantum technology uses the nature of subatomic particles to perform calculations instead of electrical signals like <a href="https://www.techtarget.com/whatis/definition/classical-computing">classical computing</a>. Quantum computers use quantum bits or <a href="https://www.techtarget.com/whatis/definition/qubit">qubits</a> instead of binary bits. By programming the initial conditions of the qubit, quantum computing can solve a real-world problem when the superposition state collapses and where multiple coexisting probabilities resolve into a single outcome.</p> <p>This enables the processing of complex artificial intelligence (<a href="https://www.techtarget.com/searchenterpriseai/definition/AI-Artificial-Intelligence">AI</a>) algorithms that are too numerically intensive for the electrical processing workflows of classical computing power to undertake. The forefront of quantum computer research is linking greater numbers of qubits to solve larger, more complex problems.</p> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/classical_computing_vs_quantum_computing-f.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/classical_computing_vs_quantum_computing-f_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/classical_computing_vs_quantum_computing-f_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/classical_computing_vs_quantum_computing-f.png 1280w" alt="A chart showing the differences between classical and quantum computing." height="374" width="560"> <figcaption> <i class="icon pictures" data-icon="z"></i>Quantum computing uses the nature of subatomic particles to execute calculations as an alternative to the electrical signals used in classical computing. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <p>Quantum systems from Google, IBM, Microsoft and others benchmark quantum computer performance by measuring factors such as volume, which in quantum computing means the amount of computational space a circuit can process while still being able to return an accurate result. It's already been ascertained that quantum computers can perform certain calculations much faster than classical computers because they must go through each processing option one at a time. It can take a long time to go through all the options for some types of problems. Quantum computers don't need to try each option; they resolve the answer almost instantly.</p> <p>Some problems that quantum computers can solve quicker than classical computers are factoring for prime numbers and the <a href="https://www.techtarget.com/whatis/definition/traveling-salesman-problem">traveling salesman problem</a>, which involves processing an algorithm to find the shortest route between a set of points and locations that must be visited. Once quantum computers demonstrate the ability to solve these problems faster than classical computers, <a href="https://www.techtarget.com/searchsecurity/definition/quantum-supremacy">quantum supremacy</a> will be achieved.</p> </section> <section class="section main-article-chapter" data-menu-title="The future of quantum computing"> <h2 class="section-title"><i class="icon" data-icon="1"></i>The future of quantum computing</h2> <p>Market.us reports that the <a target="_blank" href="https://market.us/report/quantum-computing-market/" rel="noopener">global market</a> for quantum computing will reach $8.28 billion by 2032.</p> <p>Quantum computing is rapidly growing, driven by public and private sector investments. Industries are realizing its potential in areas that require immense computational capabilities not even possible with the largest supercomputers.</p> <p>The following highlights potential advancements in the field of quantum computing across various industries and sectors:</p> <ul class="default-list"> <li><b>Healthcare and pharmaceuticals.</b> Quantum computing has the potential to accelerate drug development, and quantum-enhanced AI models could enable earlier disease detection.</li> <li><b>Cybersecurity.</b> Quantum cybersecurity uses quantum computing and the laws of quantum mechanics and computer science to develop modern <a href="https://www.techtarget.com/searchsecurity/definition/cryptography">cryptography </a>systems that secure digital communication. Experts expect quantum computers to render existing cryptographic systems insecure and obsolete. Efforts to develop <a href="https://www.techtarget.com/searchsecurity/definition/post-quantum-cryptography">post-quantum cryptography </a>are underway to create algorithms resistant to quantum attacks but can still be used by classical computers. Eventually, full quantum cryptography will be available for quantum computers.</li> <li><b>Supply chain and logistics. </b>Quantum computing can potentially speed up the loading and shipping of goods from one place. Optimizing routes could help reduce fuel consumption.</li> <li><b>Finance. </b>Quantum technology could help optimize financial portfolios and detect fraudulent transactions.</li> <li><b>Climate forecasting.</b> Quantum technology, combined with <a href="https://www.techtarget.com/searchenterpriseai/definition/machine-learning-ML">machine learning</a>, has the potential to enable more accurate weather predictions, helping provide better preparedness for extreme weather events.</li> </ul> <p><i>Quantum computing has many potential uses. Learn which areas organizations </i><a href="https://www.techtarget.com/searchcio/feature/Quantum-computing-in-business-applications-is-coming"><i>could apply quantum computing technology</i></a><i> to increase efficiency and reduce costs.</i></p> </section> A quantum, the singular form of quanta, is the smallest discrete unit of any physical entity. For example, a quantum of light is a photon, and a quantum of electricity is an electron. https://cdn.ttgtmedia.com/visuals/digdeeper/4.jpg https://www.techtarget.com/whatis/definition/quantum Thu, 27 Feb 2025 11:00:00 GMT <p>Artificial intelligence this year will make further inroads into how IT service providers run their businesses -- while also driving demand for their consulting and implementation offerings.</p> <p>Those are among the trends poised to shape the service provider sector as it moves into 2025. Other anticipated themes include a continued <a href="https://www.techtarget.com/searchcio/feature/CIOs-weigh-generative-AI-costs-as-ROI-comes-into-focus">focus on ROI</a> amid cautious technology spending and an increase in mergers and acquisitions in the IT services sector.</p> <p>Here's a rundown of six top trends to watch in the IT services market this year.</p> <section class="section main-article-chapter" data-menu-title="1. More AI in service delivery, operations management"> <h2 class="section-title"><i class="icon" data-icon="1"></i>1. More AI in service delivery, operations management</h2> <p>Service providers have been incorporating <a href="https://www.techtarget.com/searchenterpriseai/definition/generative-AI">generative AI</a> (GenAI) into their operations for the last couple of years, influencing how they <a href="https://www.techtarget.com/searchcio/tip/How-AI-impacts-digital-transformation">deliver digital transformation services</a>. The in-house AI adoption trend, which also includes machine learning (ML) and <a href="https://www.techtarget.com/searchenterpriseai/definition/agentic-AI">agentic AI</a>, will intensify in 2025. Customers will increasingly view AI use as an evaluation criterion for service providers.</p> <p>"There's an emerging expectation that service providers leverage AI to produce a better service," said Brian Klingbeil, chief strategy officer at Ensono, a managed service and cloud service provider based in Downers Grove, Ill. "That needs to happen to be competitive, and those who do it will get more business."</p> <p>AI will become increasingly embedded in the core of managed services.</p> <p>For decades, service providers have monitored customers' IT environments for problems and responded to alerts as incidents occur. But now, the industry must shift from fixing problems reactively to addressing systems before they crash, Klingbeil said. He called the emerging approach "predict, prevent and optimize."</p> <p>"The way to do all three of those things is AI," he said, noting that proactive maintenance will augment traditional monitoring.</p> <p>To that end, Ensono is rolling out a proprietary predictive engine tool that uses ML at its core to predict which incidents will become major incidents and taps GenAI to automatically create service tickets. That aspect of the system, Phase 1, went live in December 2024. Phase 2, slated to launch by the end of March 2025, will identify precursor events that create the conditions for major events to prevent them from occurring, Klingbeil said.</p> <p>Klingbeil said he expects the predictive engine will provide a "double benefit" of increased customer satisfaction and reduced labor expenses. The cost savings will stem from faster time to resolution and, with the arrival of phase 2, incident prevention, he noted. The latter will eliminate the need for troubleshooting.</p> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/key_attributes_of_agentic_ai_vs_generative_ai-f.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/key_attributes_of_agentic_ai_vs_generative_ai-f_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/key_attributes_of_agentic_ai_vs_generative_ai-f_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/key_attributes_of_agentic_ai_vs_generative_ai-f.png 1280w" alt="Table comparing agentic AI and generative AI across five characteristics." height="330" width="559"> <figcaption> <i class="icon pictures" data-icon="z"></i>Agentic AI is expected to see a sharp uptick this year, while more GenAI pilots move into production. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> </section> <section class="section main-article-chapter" data-menu-title="2. AI drives service provider demand"> <h2 class="section-title"><i class="icon" data-icon="1"></i>2. AI drives service provider demand</h2> <p>Service providers have been busy with customers' AI projects for a couple of years, <a href="https://www.techtarget.com/searchitchannel/feature/Partners-generative-AI-training-plans-aim-for-1M-employees">training an army of consultants</a> to meet demand. In 2025, they can expect that trend to continue as pilot deployments expand and organizations look to embed AI in their business workflows.</p> <p>"We anticipate a strong focus on scaling generative AI across industries, moving beyond proofs of concept to enterprise-wide implementations," said Patrick Corcoran, global head of analyst and advisor relations at Hitachi Digital Services, in an email interview.</p> <p>Within that focus, companies will integrate GenAI into core processes, including customer engagement, supply chain optimization and predictive maintenance, he added.</p> <p>Justin Copie, CEO at Innovative Solutions, a cloud service provider based in Rochester, N.Y., also cited customer engagement as a top priority for GenAI deployment. Organizations view GenAI as a way to "remove friction" in customer service, he noted.</p> <p>In addition, Copie pointed to agentic AI, which revolves around autonomous agents, as an opportunity. Service providers can help customers use agentic AI to build automated workflows that link data sets to accomplish a task, he said.</p> <p>"Customers have large data sets and don't know how to tie these data sets together with large language models in an agentic way," Copie said.</p> <p>Ken Englund, technology sector growth leader at consultancy EY Americas, said he expects agentic AI to ramp up significantly this year, with tech enterprises applying the technology to customer service and marketing. Englund works with consumer electronics, internet, social commerce and software companies, among other tech providers.</p> </section> <section class="section main-article-chapter" data-menu-title="3. AI affects pricing models in IT services market"> <h2 class="section-title"><i class="icon" data-icon="1"></i>3. AI affects pricing models in IT services market</h2> <p>But while agentic AI could help such companies optimize internal functions, the technology also harbors a competitive risk.</p> <p>For example, <a href="https://www.techtarget.com/searchcio/definition/business-process-outsourcing">business process outsourcing</a> (BPO) companies that charge for services on an hourly basis could adopt agentic AI offerings that use <a href="https://www.techtarget.com/searchitchannel/feature/Outcome-based-contracting-sees-uptick-during-pandemic">outcome-based pricing</a> models. With outcome-based pricing, some or all of a service provider's fees are based on achieving business outcomes. Using that AI-based approach would provide some level of savings while also minimizing their service delivery risks, Englund said. On the other hand, agentic AI companies could compete directly against BPO providers, he added.</p> <p>Tercera, an investment firm that focuses on IT services companies, also predicted an AI-driven shift from hours to outcomes, amid an uptick in value-based pricing. While BPO companies might be more at risk, the trend will affect the IT services sector overall, said Michelle Swan, chief marketing officer and partner at Tercera. AI's ability to complete projects faster with fewer resources will compel companies to revisit their pricing models this year, she noted.</p> <p>"Service companies need to figure this out or they will see their revenue decline," Swan said.</p> </section> <section class="section main-article-chapter" data-menu-title="4. IT spending scrutiny continues"> <h2 class="section-title"><i class="icon" data-icon="1"></i>4. IT spending scrutiny continues</h2> <p>Guarded spending was the norm for 2024, and industry executives aren't forecasting anything approaching unbridled spending this year either. The focus will remain on rigorous business justification and ROI.</p> <blockquote class="main-article-pullquote"> <div class="main-article-pullquote-inner"> <figure> There's an emerging expectation that service providers leverage AI to produce a better service. </figure> <figcaption> <strong>Brian Klingbeil </strong>Chief strategy officer, Ensono </figcaption> <i class="icon" data-icon="z"></i> </div> </blockquote> <p>Indeed, Klingbeil said a lot of Ensono's AI engagements are going into production now because customers' earlier proofs of concept demonstrated business value. Yet many organizations have failed to make the case for AI deployment, he noted.</p> <p>"A lot of people went around with a hammer, looking for nails," he said. "It might be cool, and the output might be cool, but what is the business problem?"</p> <p>Corcoran said he expects to see balanced spending strategies among IT services customers in 2025. That is, organizations will take a cautious but strategic investment approach. The spotlight will be on transformational technologies that demonstrate a clear ROI, he noted.</p> <p>But while investment in technologies such as AI is set to expand this year, that increase might come at the expense of other programs. In the technology sector, for example, companies are redirecting digital transformation funds to AI initiatives, Englund said. "For many, it's a zero-sum game."</p> <p>Overall, businesses will focus their spending on IT initiatives that boost efficiency, said Steven De Maayer, chief services officer at Blue Mantis, a digital strategy and services provider based in Portsmouth, N.H.</p> <p>"Customers are looking for ways to drive more bottom-line performance," De Maayer said.</p> </section> <section class="section main-article-chapter" data-menu-title="5. AI fuels increase in IT services M&amp;A"> <h2 class="section-title"><i class="icon" data-icon="1"></i>5. AI fuels increase in IT services M&amp;A</h2> <p>This year could see a spike in merger and acquisition activity in IT services, building upon improving economic conditions in 2024.</p> <p>"There's been a lot of consolidation in the last six months as interest rates have settled down," said Martin Wolf, president of Martinwolf, an M&amp;A advisory firm based in Scottsdale, Ariz. The Federal Reserve reduced interest rates three times in the second half of 2024.</p> <p>Wolf said he expects record levels of IT services transactions in 2025 and 2026 -- with the deal volume largely driven by the increasing adoption of AI. An unforeseen external factor, such as a new geopolitical conflict, could negatively affect deal-making, he added.</p> <p>Barring such an event, AI will fuel M&amp;A in a couple of ways. First, AI provides a <a href="https://www.techtarget.com/searchitchannel/news/366581304/Use-of-AI-in-business-drives-increase-in-consulting-services">growth opportunity for consultants</a> and systems integrators. Such deployments will require IT services on an ongoing basis, Wolf said. The second factor stems from IT service providers' internal use of AI and the resulting productivity gains and cost reductions. Service providers that reduce their selling, general and administrative (SG&amp;A) expenses will become more attractive acquisition targets, Wolf said. Lower SG&amp;A costs translate into higher profit margins -- and motivated buyers.</p> <p>World Wide Technology's agreement to purchase Softchoice, announced late last year and slated to close by the second quarter of 2025, could prove a harbinger of things to come. WWT, with headquarters in St. Louis, is a technology services provider, while Toronto-based Softchoice focuses on software, cloud and AI offerings. Softchoice offers Copilot for Microsoft 365 planning and implementation, GenAI consulting and conversational AI services.</p> <p>"With Softchoice on the forefront of the AI revolution, WWT will look to bolster those capabilities along with [Softchoice's] complementary software, cloud, and cybersecurity solutions," according to a Martinwolf brief on the acquisition agreement. Martinwolf didn't advise on the pending deal but has worked with Softchoice on previous transactions.</p> <p>Blue Mantis, meanwhile, completed two acquisitions in the fourth quarter of 2024 and could continue down that path this year.</p> <p>"The lower interest rate is going to help us do more acquisitions," De Maayer said.</p> <p>One of its Q4 acquisitions, SME Solutions Group, based in Tampa, Fla., provides data enablement and analytics capabilities. That transaction bolsters Blue Mantis' AI-readiness services, he noted.</p> <p>"We think that data and how to manage data, in view of AI, is going to be very important," De Maayer said.</p> <div class="extra-info"> <div class="extra-info-inner"> <h3 class="splash-heading">Quantum turbulence</h3> <p>Statements on quantum computing have resulted in wild swings in the stock prices of top vendors.</p> <p>Jensen Huang, CEO of Nvidia, got things started Jan. 6, 2025, when he said "very useful" quantum machines might be 20 years away. Some <a target="_blank" href="https://www.reuters.com/technology/quantum-computing-stocks-take-hit-nvidia-ceo-predicts-long-road-ahead-2025-01-08/" rel="noopener">quantum tech stocks dropped</a> more than 40% following that statement. On Jan. 14, Microsoft executive Mitra Azizirad <a target="_blank" href="https://azure.microsoft.com/en-us/blog/quantum/2025/01/14/2025-the-year-to-become-quantum-ready/" rel="noopener">posted a blog</a> calling 2025 the "year to become quantum-ready." Quantum stocks rose soon after.</p> <p>"While there is still debate as to exactly when the tipping point of quantum computing will arrive, there is little doubt that it's coming," said Richard Watson, EY's global and Asia-Pacific cybersecurity consulting leader.</p> <p>Against this backdrop, businesses that don't focus on post-quantum cryptography could be potentially exposed "as and when quantum technology scales," he added.</p> </div> </div> </section> <section class="section main-article-chapter" data-menu-title="6. Quantum computing becomes more visible in IT services"> <h2 class="section-title"><i class="icon" data-icon="1"></i>6. Quantum computing becomes more visible in IT services</h2> <p>Quantum computers capable of outperforming classical systems in meaningful tasks have yet to arrive. But the <a href="https://www.techtarget.com/searchcio/feature/Quantum-computing-technology-pushes-for-IT-advantage">technology continues to advance</a> as quantum ecosystems -- public-private organizations focused on commercialization -- expand worldwide.</p> <p>IT service providers' first forays into quantum computing services will likely emerge in post-quantum cryptography (<a href="https://www.techtarget.com/searchsecurity/definition/post-quantum-cryptography">PQC</a>). The prospect of threat actors harnessing quantum computing to crack conventional cryptography will result in more enterprises seeking advice on how to deploy <a href="https://www.computerweekly.com/news/366603041/NIST-debuts-three-quantum-safe-encryption-algorithms">quantum-resistant algorithms</a>.</p> <p>Already, global systems integrators and consultancies such as Accenture, Deloitte, EY and PwC offer quantum security assessment services. Customer engagements are beginning to surface: In December 2024, Accenture completed a project examining PQC technologies for Banco Sabadell, a financial services firm based in Madrid.</p> <p>The organizations with the greatest level of cybersecurity maturity are poised to spend on <a href="https://www.techtarget.com/searchsecurity/feature/How-to-prepare-for-post-quantum-computing-security">post-quantum cryptography preparedness</a>. Info-Tech Research, a market research firm based in Toronto, found that 31% of advanced IT departments are ready to invest in post-quantum cryptography in 2025, compared with 16% of the low-maturity organizations it surveyed for its "Tech Trends 2025" report.</p> <p>IT service firms might also find work advising companies as they begin exploring quantum computing applications. For example, organizations in the financial services, pharmaceutical and life sciences, and government sectors are investigating quantum computing's potential.</p> <p><i>John Moore is a writer for Informa TechTarget covering the CIO role, economic trends and the IT services industry.</i></p> </section> Expect IT service providers to use AI to improve service delivery and automate customers' business processes this year, among other notable trends in the industry. https://cdn.ttgtmedia.com/rms/onlineimages/toolGearArrow_g1159416182.jpg https://www.techtarget.com/searchitchannel/feature/Trends-shaping-the-IT-services-market Thu, 16 Jan 2025 15:49:00 GMT <p>A request for proposal (RFP) is a document an organization uses when it's searching for a product or service to meet specific requirements. The organization posts an RFP to elicit formal bids from vendors. A good RFP specifies what the customer is looking for, including project goals, requirements, timelines and evaluation criteria.</p> <p>Government agencies and large businesses often use RFPs to buy IT systems. They're also used to procure other types of products and services, such as when hiring an architectural design team for a construction project.</p> <p>Not every project requires an RFP. They are most useful when <a href="https://www.techtarget.com/searchcio/definition/project-planning">planning complex projects</a> with a variety of elements and requirements.</p> <section class="section main-article-chapter" data-menu-title="What does an RFP include?"> <h2 class="section-title"><i class="icon" data-icon="1"></i>What does an RFP include?</h2> <p>An RFP generally provides background on the issuing organization and its <a href="https://www.techtarget.com/searchcio/definition/LOB">lines of business</a>, specifications that describe the sought-after products or services, and evaluation criteria that disclose how proposals will be graded.</p> <p>RFPs typically have a <a href="https://www.techtarget.com/searchitchannel/definition/statement-of-work-SOW">statement of work</a> (SOW) section that defines the scope of work to be provided. Besides the <a href="https://www.techtarget.com/searchcio/definition/project-scope">project scope</a>, this section discusses the tasks the winning bidder will perform and provides a project timeline for deliverables.</p> <p>The request for proposal also includes guidance for bidders on how to prepare a proposal. This section details the proposal format and instructions on how the RFP response is to be constructed and organized.</p> <p>When <a href="https://www.techtarget.com/searchcio/tip/How-to-write-an-RFP-and-statement-of-work-for-an-IT-services-contract">writing an RFP and SOW</a>, it's important to consider organizational processes and best practices to maximize effectiveness.</p> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineImages/crm-request_for_x.jpg"> <img data-src="https://www.techtarget.com/rms/onlineImages/crm-request_for_x_mobile.jpg" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineImages/crm-request_for_x_mobile.jpg 960w,https://www.techtarget.com/rms/onlineImages/crm-request_for_x.jpg 1280w" alt="Descriptions of documents used to procure products and services, including a request for proposal." height="252" width="560"> <figcaption> <i class="icon pictures" data-icon="z"></i>A request for proposal is one of several documents a potential customer might use to procure products and services. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> </section> <section class="section main-article-chapter" data-menu-title="Benefits of an RFP"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Benefits of an RFP</h2> <p>A request for proposal provides several benefits when soliciting help for complex projects:</p> <ul class="default-list"> <li><b>Clarity in project needs.</b> A typical RFP leaves no room for ambiguity, and vendors understand the project details before submitting proposals.</li> <li><b>Selection of responses.</b> An RFP elicits responses from a wide range of vendors looking to participate in certain projects. Companies reaching out individually to vendors they discover through research won't find all the interested and qualified vendors they would through a public RFP.</li> <li><b>Competitive pricing.</b> RFPs establish a competitive process among qualified vendors willing to compete for the issuer's business and offer lower prices.</li> <li><b>Transparency.</b> A public RFP explains the selection criteria and the project requirements; in doing so, it ensures <a href="https://www.techtarget.com/whatis/definition/transparency">transparency</a>. This is useful in government contracts, demonstrating that the procuring agency isn't engaging in cronyism, and the public is assured that vendors are being chosen in good faith.</li> </ul> </section> <section class="section main-article-chapter" data-menu-title="Challenges of RFPs"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Challenges of RFPs</h2> <p>There are also several challenges for companies relying on RFPs:</p> <ul class="default-list"> <li><b>Costs.</b> The procurement process incurs several costs, including employing qualified procurement professionals, hiring legal and <a href="https://www.techtarget.com/searchdatamanagement/definition/compliance">compliance</a> experts, and deploying procurement or <a href="https://www.techtarget.com/searcherp/definition/ERP-enterprise-resource-planning">enterprise resource planning</a> software.</li> <li><b>Time constraints.</b> Projects usually have deadlines for deployment. The RFP must be created and executed in a timely fashion to meet those deadlines.</li> <li><b>Potential for incomplete RFPs.</b> Organizations don't always have the in-house expertise needed to articulate all the details required in an RFP. When a company lacks expertise, RFPs can end up incomplete or unclear.</li> <li><b>Communication issues.</b> Communication with potential vendors in the bidding process can be cumbersome. <a href="https://www.gartner.com/reviews/market/rfp-response-management-applications" target="_blank" rel="noopener">Various applications and tools</a> can help streamline this communication.</li> <li><b>Lack of vendor response.</b> A good RFP elicits many responses, yet there's always the possibility that vendors don't respond or follow up.</li> </ul> </section> <section class="section main-article-chapter" data-menu-title="Why are RFPs important and who uses them?"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Why are RFPs important and who uses them?</h2> <p>An RFP is issued for several reasons. In some cases, the complexity of an IT project calls for a formal RFP. An organization can benefit from multiple bidders and perspectives when seeking an integrated solution calling for a mix of technologies, vendors and potential <a href="https://www.techtarget.com/whatis/definition/configuration">configurations</a>.</p> <p>For example, a business moving from a paper-based to a computer-based system might request proposals for all the hardware, software and user training required to establish and integrate the new system. In contrast, a simple hardware upgrade typically only involves issuing a request for quote (RFQ) to a single vendor.</p> <p>An organization might also release an RFP to boost competition and drive down the cost of the products and services it's seeking. That said, the proposal that's the most responsive to an RFP's specifications won't always be the lowest-priced bid.</p> <p>The skill with which an organization creates an RFP can dictate the quality of the bidders' responses and the success of the resulting approach. If the specified requirements are too vague, bidders might miss the mark when they design and implement the solution. Overly detailed and restrictive requirements limit the bidders' creativity and stifle innovation. Companies need to set clear expectations with vendors to receive a quality response.</p> <p>Some entities, such as government agencies, are required to issue RFPs to provide full and open competition when soliciting responses from private companies.</p> </section> <section class="section main-article-chapter" data-menu-title="Request for proposal process"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Request for proposal process</h2> <p>The RFP process involves multiple steps ranging from drafting the RFP to awarding a final contract:</p> <ol class="default-list"> <li><b>Draft the RFP.</b> The RFP process starts with a draft RFP; bidders review the draft solicitation document and submit suggestions for improvement. The organization issuing an RFP can also invite prospective bidders to a pre-bid conference where they can ask questions about the solicitation document and learn more about the project.</li> <li><b>Finalize the RFP.</b> The final RFP is a publicly issued business document that reflects the feedback received during the drafting stage.</li> <li><b>Receive proposals.</b> Bidders submit proposals based on the RFP's project description and requirements.</li> <li><b>Review and evaluate proposals.</b> When <a href="https://www.techtarget.com/searchcio/tip/12-tips-for-evaluating-RFP-responses">conducting RFP evaluations</a>, the customer down-selects bidders, reducing the initial group to a smaller one. It then enters negotiations on pricing and technical details.</li> <li><b>Solicit best-and-final offers.</b> The customer invites the remaining bidders to submit their best-and-final offers in preparation for awarding a contract.</li> <li><b>Pick a winner.</b> The customer awards the contract, project or sale to the vendor with the best final offer based on the criteria laid out in the RFP.</li> </ol> </section> <section class="section main-article-chapter" data-menu-title="RFP vs. RFI vs. RFQ"> <h2 class="section-title"><i class="icon" data-icon="1"></i>RFP vs. RFI vs. RFQ</h2> <p>Though an RFP, a request for information (<a href="https://www.techtarget.com/searcherp/definition/RFI-request-for-information">RFI</a>) and an RFQ sound similar and can be confused, <a href="https://www.techtarget.com/searchcio/tip/RFI-vs-RFP-vs-RFQ-What-are-the-differences">they represent different milestones</a> in the vendor bidding timeline.</p> <h3>RFI</h3> <p>A company issues an RFP to potential vendors when it's ready and able to specify clear-cut requirements. An RFI is used earlier in the cycle when the issuing company initially explores possible approaches.</p> <p>Specifically, an RFI solicits detailed information about suppliers' products and services. The information is stored in a database or other repository to compare suppliers later. This helps the issuing company make better decisions and narrow the field of potential bidders. RFIs are issued before RFPs.</p> <h3>RFQ</h3> <p>A request for quote is sent to suppliers to request pricing information about their products and services. This step comes after the RFP has been responded to and vendors' submissions have been evaluated. It typically indicates that the list of potential suppliers a company is interested in working with has been narrowed down and that an offer is closer to being awarded. However, an RFQ can precede an RFP if cost is important to the issuing company.</p> <figure class="main-article-image full-col" data-img-fullsize="https://www.techtarget.com/rms/onlineImages/cio-clearedge_use_rfi_vs_rfp-f.png"> <img data-src="https://www.techtarget.com/rms/onlineImages/cio-clearedge_use_rfi_vs_rfp-f_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineImages/cio-clearedge_use_rfi_vs_rfp-f_mobile.png 960w,https://www.techtarget.com/rms/onlineImages/cio-clearedge_use_rfi_vs_rfp-f.png 1280w" alt="Descriptions of a request for information versus a request for proposal." height="235" width="560"> <figcaption> <i class="icon pictures" data-icon="z"></i>A request for information and a request for proposal have fundamental differences. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> </section> <section class="section main-article-chapter" data-menu-title="Examples of RFPs"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Examples of RFPs</h2> <p>RFPs are used in both the public and private sectors as projects, such as new factory builds or IT system replacements, require outside products or expertise. Examples include the following:</p> <ul class="default-list"> <li><b>Education.</b> A university planning a new building would require a <a href="https://www.techtarget.com/searchcio/definition/project-management">project management</a> firm that specializes in construction to oversee the required subcontractors, processes and personnel. An RFP explains in detail the project overview, what function the building will serve, how it will be used and when it needs to be completed. Qualified project management firms would respond with proposals.</li> <li><b>Government or public sector.</b> A government agency planning an infrastructure project, such as building a bridge or highway, would use an RFP to hire a design and construction firm.</li> <li><b>Healthcare.</b> A large healthcare provider needing to upgrade its <a href="https://www.techtarget.com/searchhealthit/definition/electronic-health-record-EHR">electronic health record</a> system would use an RFP. The document would include specifics such as <a href="https://www.techtarget.com/whatis/definition/technical-requirements">technical requirements</a> to integrate the system with existing technology and applications it would need to interface with. Other requirements could include platform security and compliance with data privacy laws and regulations.</li> </ul> <p><em>RFPs share a common purpose, yet the templates used depend on the requested product or service. Learn how to <a href="https://www.techtarget.com/searchcio/tip/How-to-write-an-RFP-for-a-software-purchase-with-template">craft an RFP template for a software purchase</a>.</em></p> </section> A request for proposal (RFP) is a document an organization uses when it's searching for a product or service to meet specific requirements. The organization posts an RFP to elicit formal bids from vendors. https://cdn.ttgtmedia.com/visuals/digdeeper/3.jpg https://www.techtarget.com/searchitchannel/definition/request-for-proposal Tue, 17 Dec 2024 12:00:00 GMT <p>A diode is a specialized electronic component, specifically a two-terminal semiconductor device, with two electrodes called the <a href="https://www.techtarget.com/whatis/definition/anode">anode</a> and the <a href="https://www.techtarget.com/whatis/definition/cathode">cathode</a>. It has several uses: as a one-way switch that enables current to flow easily in one direction while restricting its flow in the other direction, as a converter that changes alternating current into pulsating direct current, and as a circuit protector that limits the voltage in the circuit. Diodes are also used in clamping circuits and logical gates.</p> <section class="section main-article-chapter" data-menu-title="Diode construction"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Diode construction</h2> <p>Most diodes are made with <a href="https://www.techtarget.com/whatis/definition/semiconductor">semiconductor</a> materials such as silicon, germanium or selenium. Other semiconducting materials like <a href="https://www.techtarget.com/whatis/definition/gallium-arsenide-GaAs">gallium arsenide</a> can also be used to construct diodes.</p> <div class="youtube-iframe-container"> <iframe id="ytplayer-0" src="https://www.youtube.com/embed/OiV8WhI5gpw?autoplay=0&amp;modestbranding=1&amp;rel=0&amp;widget_referrer=null&amp;enablejsapi=1&amp;origin=https://www.techtarget.com" type="text/html" height="360" width="640" frameborder="0"></iframe> </div> <p>Some diodes are composed of metal electrodes in a chamber evacuated or filled with a pure elemental gas at low pressure. Two equivalently doped P-type and N-type semiconductors are joined together, and electrode terminals are attached to each end to create a P-N junction diode. This results in the holes in the P-type semiconductor attracting <a href="https://www.techtarget.com/whatis/definition/electron">electrons</a> from the N-type material. It is this attraction that causes the electrons to diffuse and occupy the holes, and lets current pass through the diode.</p> <p>The P-type material with its excess holes is positively charged. It is known as the positive lead or anode. In contrast, the N-type material with excess electrons is negatively charged and known as the negative lead or cathode.</p> <figure class="main-article-image half-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/the_components_of_a_diode-h.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/the_components_of_a_diode-h_half_column_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/the_components_of_a_diode-h_half_column_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/the_components_of_a_diode-h.png 1280w" alt="Diagram of a diode." height="155" width="279"> <figcaption> <i class="icon pictures" data-icon="z"></i>Example of a diode with its two electrodes called the anode and the cathode. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <p>The movement of electrons also creates what is known as a depletion layer between the P-type and N-type materials. The depletion layer, also known as a depletion region, is a thin area that's depleted of charge due to the movement, or diffusion, of electrons from the N-type material to the P-type material, and the diffusion of holes from the P-type material to the N-type material. Due to the charge depletion, this layer offers high resistance, meaning it opposes the further flow of electrons from the N-side to the P-side.</p> </section> <section class="section main-article-chapter" data-menu-title="What is the function of a diode?"> <h2 class="section-title"><i class="icon" data-icon="1"></i>What is the function of a diode?</h2> <p>The fundamental property of a diode is to conduct electric <a href="https://www.techtarget.com/whatis/definition/current">current</a> in only one direction. Diodes can be used as rectifiers, signal limiters, voltage regulators, switches, signal modulators, signal mixers, signal demodulators and <a href="https://www.techtarget.com/whatis/definition/oscillator">oscillators</a>.</p> <p>Semiconductor diodes can be designed to produce direct current when visible light, infrared transmission or ultraviolet energy strikes them. These diodes are known as photovoltaic cells and are the basis for <a href="https://www.computerweekly.com/feature/Datacentres-energy-efficiency-investment-priorities-in-the-race-to-net-zero">solar electric energy</a> systems and photosensors.</p> <p>Yet another form of diode, commonly used in electronic and computer equipment, emits visible light or infrared energy when current passes through it. Such a device is the familiar light-emitting diode (LED).</p> </section> <section class="section main-article-chapter" data-menu-title="How does a diode work?"> <h2 class="section-title"><i class="icon" data-icon="1"></i>How does a diode work?</h2> <p>When the cathode is negatively charged relative to the anode at a voltage greater than a certain minimum, called forward breakover, then current flows through the diode. If the cathode is positive with respect to the anode, is at the same voltage as the anode or is negative by an amount less than the forward breakover voltage, then the diode does not conduct current. This is a simplistic view, but is true for diodes operating as rectifiers, switches and limiters. The forward breakover voltage is approximately 0.6 V for silicon devices, 0.3 V for germanium devices and 1 V for selenium devices.</p> <p>The above general rule notwithstanding, if the cathode voltage is positive relative to the anode voltage by a great enough amount, the diode will conduct current. The voltage required to produce this phenomenon, known as the avalanche voltage, varies greatly depending on the nature of the <a href="https://www.techtarget.com/searchdatacenter/tip/A-primer-on-AI-chip-design">semiconductor material</a> from which the device is fabricated. The avalanche voltage can range from a few volts up to several hundred volts.</p> <p>When an analog signal passes through a diode operating at or near its forward breakover point, the signal waveform is distorted. This nonlinearity enables <a href="https://www.techtarget.com/searchnetworking/definition/modulation">modulation</a>, demodulation and signal mixing. In addition, signals are generated at <a href="https://www.techtarget.com/whatis/definition/harmonic">harmonics</a>, or integral multiples of the input frequency. Some diodes also have a characteristic that is imprecisely termed <i>negative resistance</i>. Diodes of this type, with the application of a voltage at the correct level and the polarity, generate analog signals at microwave radio frequencies.</p> </section> <section class="section main-article-chapter" data-menu-title="Forward bias and reverse bias in a diode"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Forward bias and reverse bias in a diode</h2> <p>A semiconductor diode is forward biased when the anode's voltage is more positive than the cathode's voltage, causing the diode to conduct current easily. In contrast, it is reverse biased when the cathode voltage is more positive than the anode voltage, increasing <a href="https://www.techtarget.com/whatis/definition/resistance">resistance</a> and hindering the current's flow.</p> <h3>Forward bias</h3> <p>In a semiconductor diode, forward bias occurs when the P-region connects with the positive terminal of a battery while the N-region is connected with its negative terminal. The voltage is applied in the forward direction, resulting in more holes getting pumped into the P-region and more electrons getting pumped into the N-region. The holes and electrons moving in opposite directions put pressure on the depletion layer, causing it to shrink and the diode to offer less resistance.</p> <p>The electrons in the N-region overcome the depletion layer and flow to the P-region, causing the anode to be more positively biased than the cathode, which results in the current flow increasing in one direction. This process is known as rectification. The voltage level at which the depletion region completely disappears and causes the current to flow most easily -- it increases exponentially to the applied voltage -- is known as the threshold voltage, cutoff voltage or firing voltage.</p> <h3>Reverse bias</h3> <p>Reverse bias occurs when the diode's P-type region is connected to the battery's negative terminal while the N-type is connected to the positive terminal. This configuration causes the P-type to lose holes and the N-type to lose electrons. These actions cause electrons to get pulled away from the P-N junction and the diode to be depleted of charge, increasing the size of the depletion layer and the diode's resistance. High resistance stops the current from flowing through the diode, turning it into an insulator.</p> <p>That said, a large current can suddenly pass through the diode when a certain voltage level is applied. This level is known as the <a target="_blank" href="https://www.sciencedirect.com/topics/chemistry/breakdown-voltage" rel="noopener">breakdown voltage</a>. Above the breakdown region, even a small change in the voltage will cause a large change in the current.</p> <p>The forward bias and reverse bias properties of a semiconductor diode cause it to have an electrical conductivity value that's between the values of a conductor (very high) and insulator (zero or close to zero). An example of a conductor would be a metal like iron, whereas plastic, glass and rubber are types of electrical insulators.</p> </section> <section class="section main-article-chapter" data-menu-title="Types of diodes"> <h2 class="section-title"><i class="icon" data-icon="1"></i>Types of diodes</h2> <p>Many types of diodes are available depending on their construction and application.</p> <h3>Rectifier</h3> <p>One of the most common types of diodes is the <a href="https://dynapower.com/rectifiers-nearly-everything-you-need-to-know/" target="_blank" rel="noopener">rectifier</a>. A rectifier is a P-N junction diode constructed of suitable semiconductor materials for the P-region and N-region. It lets the current flow only in the forward direction, i.e., when it is forward biased.</p> <figure class="main-article-image half-col" data-img-fullsize="https://www.techtarget.com/rms/onlineimages/photo_of_different_kinds_of_diodes-h.png"> <img data-src="https://www.techtarget.com/rms/onlineimages/photo_of_different_kinds_of_diodes-h_half_column_mobile.png" class="lazy" data-srcset="https://www.techtarget.com/rms/onlineimages/photo_of_different_kinds_of_diodes-h_half_column_mobile.png 960w,https://www.techtarget.com/rms/onlineimages/photo_of_different_kinds_of_diodes-h.png 1280w" alt="Image of various types of diodes." height="174" width="279"> <figcaption> <i class="icon pictures" data-icon="z"></i>There are many types of diodes -- specialized electronic components -- each with their own characteristics. </figcaption> <div class="main-article-image-enlarge"> <i class="icon" data-icon="w"></i> </div> </figure> <h3>Zener diode</h3> <p>A Zener diode operates in reverse bias, letting the current flow in reverse, resulting in the Zener effect. The diode is also known as a breakdown diode since its cathode conducts current in reverse when a specific breakdown or threshold voltage is applied.</p> <p>Until the voltage is applied, the Zener diode will not conduct electricity from the cathode, connected to a positive voltage, to the anode, usually connected to the ground. The property of Zener diodes to enable reverse current flow provides a stable reference voltage. This quality makes Zener diodes suitable for use in power supplies, <a href="https://www.techtarget.com/whatis/definition/surge-suppressor-surge-protector">surge suppressors</a>, voltage shifters, waveform clippers and voltage regulators.</p> <h3>Schottky diode</h3> <p>A Schottky diode, also known as a hot carrier diode or low voltage diode, is formed by joining a semiconductor with a metal like platinum or aluminum. It has a lower forward voltage drop -- which occurs at low currents -- than conventional P-N junction diodes, and there are no stored charges in the junction, resulting in fast switching action. This makes Schottky diodes ideal for rectification applications, and for use in diode ring mixers and solar cell applications.</p> <p>A key drawback of Schottky diodes is that they have a large reverse saturation current, so they cannot withstand high voltage. Also, they have a narrow depletion zone, causing high leakage currents.</p> <h3>Laser diode</h3> <p>A laser diode converts electricity into light that's emitted in a tight beam. The conversion happens when an electrical current is applied to the diode, causing the electrons and holes in a P-N junction to recombine and release energy. This energy is in the form of photons of coherent light of a specific phase and wavelength. Laser diodes have numerous applications, including optical drives, barcode readers, laser printing and scanning, telecommunications and <a href="https://www.techtarget.com/searchnetworking/definition/fiber-optics-optical-fiber">fiber optics</a>, engraving, and laser pointers.</p> <h3>Light-emitting diode</h3> <p>Like laser diodes, LEDs generate light on the application of an electrical current. However, there are several differences between LEDs and laser diodes.</p> <p>Light-emitting diodes provide incoherent light that spreads out, whereas the light emitted by laser diodes is coherent and travels in a dense, straight beam. LEDs also have lower power output, are less expensive, and have larger intrinsic and active regions than laser diodes. Common applications of LEDs include lighting, displays and remote controls.</p> <p><em>Learn more about the <a href="https://www.techtarget.com/searchcio/feature/CHIPS-Act-moves-the-needle-on-US-chip-manufacturing">state of the U.S. semiconductor market</a> and read about <a href="https://www.techtarget.com/searchunifiedcommunications/answer/Do-you-really-need-4K-video-resolution-in-the-enterprise">4K video resolution in the enterprise</a>.</em></p> </section> A diode is a specialized electronic component, specifically a two-terminal semiconductor device, with two electrodes called the anode and the cathode. https://cdn.ttgtmedia.com/visuals/digdeeper/6.jpg https://www.techtarget.com/whatis/definition/diode Tue, 03 Dec 2024 12:00:00 GMT 60 webmaster@techtarget.com