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Top 10 channel stories of 2017

The channel is on the up and this year saw mainly advances with a few notable exceptions

The last 12 months have been a time of unprecedented change on the political, economic and technology fronts. It has become almost impossible to avoid talking of Brexit, Trump or getting caught up in a discussion about digital transformation. Throughout it all there were some stories that stood out, because they marked the start of a fresh chapter or sadly the end of the tale. Here, in no particular order, is a chance to walk back through some of the talking points of 2017.

1. Avaya entering and exiting Chapter 11

It has been a rollercoaster year for the voice and data specialist with January seeing the firm's US operations file for Chapter 11. Although the UK business was not involved it gave rivals the chance to try to sow uncertianty and exploit the situation.

speaking back in January the Avaya CEo Kevin Kennedy said it would emerge stronger from going through the Chapter 11 process: "This is a critical step in our ongoing transformation to a successful software and services business. Avaya’s current capital structure is over 10 years old and was put in place to support our business model as a hardware-focused company, which has evolved significantly since that time. Now, as a result of the terms of Avaya’s debt obligations and the upcoming debt maturities, we need to recapitalize the Company."

There were attempts to keep the focus on business as usual with March seeing the launch of the "Powered by Avaya" campaign, which aimed at working with the channel to get more mid-market customers to move to the cloud.

The early summer saw Extreme Networks picking up the Avaya networking business, which gave the vendor more opportunity to focus on the core unified comms and contact centre solutions business. Extreme's president and CEO Ed Meyercord penned a blog post to reassurce partners that there would be minimum disruption with the change of ownership.

By the time of the vendor's partner conference in France in November the firm was close to exiting Chapter 11 and was able to update the channel on its position. "Avaya is grateful to our partners for their continued dedication over the past 25 years. As we prepare to emerge from chapter 11 proceedings this event also marks the start of a new journey for Avaya focused on growth and winning, in which our partners play an even bigger role in our go-to-market strategy," said Fadi Moubarak, vp channels at Avaya International.


2. Dell EMC launches unified partner programme

Having sealed the mega deal to acquire EMC the job for the partner team at the unified company was to deliver a single partner programme. With the ambition of combining the best of both worlds that scheme arrived in February with the vendor promising to make it simple and rewarding.

“We’ve diligently designed the Dell EMC Partner Program to be the most desirable program in the industry. We are truly providing the means and the opportunity along with the recognition and profitability that our partners want and deserve. We’re ‘all in’ with our partners and invested in their success,” said Michael Collins, senior vice president, channel, Dell EMC EMEA.

The partner programme launch also included some comments on plans to reduce distribution. By the end of the month the vendor was confirming that it was working with Arrow, Exertis, Tech Data, Ingram Micro, Getech, Westcoast and Hammer.

By the summer the vendor was keen to provide an update on the progress of the programme, talking about the success it had enjoyed since the launch. "We continue to get strong positive momentum and locally double digit growth in the channel. Regionally and geographically things are pretty balanced and there was pretty strong performance and the UK market had a good channel growth quarter," said Cheryl Cook, senior vice president, global channel marketing at Dell EMC, after the first three months.

The rest of the year saw the vendor add some enhancements designed to get the channel more involved with the education market and selling storage. By the time we sat down with Collins again in early October he was upbeat about the progress it had made this year.


3. Tech Data completes Avnet deal

The integration of Avnet into the Tech Data business took the bulk of the year but there were signs as early as February that things were progressing with the distributor revealing the executive team line-up.

The two distributors revealed they were becoming one in september 2016, once the $2.6bn deal went public. The aim was to create a single distributor that could serve the digital living room right through to the largest enterprise's IT needs. Tech Data CEO Bob Dutkowsky described the completion of the deal as a "momentous day".

"Our combined company is perfectly positioned at the epicenter of the IT ecosystem—with the scale and scope to serve dynamic markets throughout the world—giving our customers access to an end-to-end portfolio of IT solutions and efficiently bringing our vendors' products to new customers in more markets," he said.

Towards the end of the year there was a glimpse of the rewards of the acquisition with Avnet contributing to the distributors third quarter numbers. "We are pleased to report Q3 results that were in line with our expectations and that continue to highlight the enhanced earnings power and cash flow profile of the new Tech Data," hsaid Dutkowsky.

"For the first time in Tech Data's history, quarterly sales surpassed $9 billion, and through pricing discipline and strong cost controls, we delivered solid non-GAAP earnings per share," he added.


4. Brexit

Although this was a year of uncertianty about just what sort of trade deal would be struck between Britain and the EU once we left Europe most customers accepted that they would have to continue to invest in IT to remain competitive. Research from Ricoh Europe in February found that most customers saw technology as the best way of making sure they could improve the fortunes of their business. On the wish list were using IT to improve customer communications, increased productivity and simpler business processes.

The downside of Brexit was the ongoing impact it had on currency rates with many US vendors being forced to roll out price rises to make sure they did not lose out. An analysis of just how bad things had got for the customer from Which? magazine in Spetember found that in an analysis of the computer market Apple MacBooks, had in some cases increased by just shy of 20%, along with Microsoft Surface models that had gone up between 11-15%.

Context, which monitors the ASPs being offered through distribution, saw rises over the course of the year. Distributor ASPs for PCs were up 17% year-on-year across Western Europe, from €486 in July and August 2016 to €567 in early Q3 this year.

There were still problems for vendors as late as September with Meg Whitman, CEO of HPE, discussing the impact of Brexit on her firm's Q3 numbers with analysts.

“I think we are still feeling some after-effects from Brexit, because it’s not clear exactly how this is all going to work,” Whitman confessed. “So I would say, the UK market is a bit challenged for us.”

The other consequence of leaving Europe was for some firms to think about where they located their offices. Some of the banks indicated they would be moving staff to mainland Europe to remain in the EU and it was also a motivation for Computacenter to open an office in Dublin in November. “We found there was high demand for a permanent Irish base, with many seeking greater business security ahead of the impending conclusion to Brexit," said Neil Hall, Computacenter managing director UK & Ireland.


5. GDPR

It has been the year to talk about data compliance regulations. The channel loves a good deadline and as the clock ticked down from a year, to six months then to less than 150 days, with the warnings increasing at each turn.

What became clear was that a fairly large number of customers remained unprepared for the legislation that comes into force next May.

NetApp was among those having undertaken research into what was happening with customers and in June revealed that many small firms were woefully under-prepared.

"There is a clear need for increased education, particularly among smaller businesses, which should instill greater confidence and propel preparations forwards," said Martin Warren, cloud solutions marketing manager at NetApp.

Concerns started to emerge that the GDPR panic was helping more unscruplous sellers take advantage of worried customers.

“Organisations are running headlong into GDPR to get prepared for when it comes into effect on 25 May 2018. However, there is an equal and opposite rush from consultancies to fill the market void, leading to untested and potentially incorrect approaches to ensuring compliance. We can expect a lot of teething problems and some significant compliance failures coming to light over 2018/19," said Richard Hannah, head of consulting at ST2 Technology.

But that issue aside the looming GDPR regulations were largely seen as a positive with the security market already enjoying stronger sales as a result.

Research from Agilitas at the end of November revealed that most resellers expected GDPR to be an earner beyond its introduction in 2018.

“Our research merely reinforces the fact that, while there are significant challenges in the channel, the industry is rolling with the punches and taking the glass-half-full approach towards disruptive factors,” said Shaun Lynn, CEO of Agilitas.


6. Skill gaps

Throughout the year there has been a trickle of stories about different areas of the market that are suffering skills gaps. The channel should be well placed to help customers struggling with staffing issues and emphasise the benefits of working with a managed services provider.

There were plenty of examples of warnings about skills but some of the most notable included UKFast and Cisco turning the focus on potential problems in the North of England in February.

“Everyone is talking about the skills shortage in technology, and there’s no way we can combat that shortage if we don’t give the teachers the tools to deliver cutting-edge digital training. Technology is evolving so quickly that we need to focus on supporting teachers and keeping them up to speed with the latest developments," said UKFast CEO Lawrence Jones MBE.

The next to speak of the channel plugging the skills gap was the UK Check Point boss Nick Lowe: "If you are a very large enterprise you can afford to go and buy security staff," but he added that the vast majority would find hiring specialists a luxury. "Partners are deploying these technologies and they are managing more and more."

The idea is that skills not only help secure business but possibly come with the chance to charge a premium for a service. Microsoft exposed that situation in March. "There is an opportunity for the partners," said Glenn Woolaghan, partner business and development lead at Microsoft "Customers are looking for resellers with the right certifications and they are prepared to spend more money."

By the end of the year the list of areas that were suffering from skill gaps included infrastructure, especially servers, security, big data and cloud.

Last month saw Claranet urge customers to use the channel to plug their skill gaps and identify those areas where they would be better working with a third party.

“With security being such a pressing concern, UK businesses have to act quickly before the skills deficit grows further. An important part of this lies in upskilling staff across the organisation to make them more comfortable with the adoption of digital technologies and what it takes to secure critical data and infrastructure. With Brexit on the horizon and the accompanying uncertainties around the future supply of skilled employees from other European countries, this is especially important," said Michel Robert, managing director at Claranet UK.

7. Good times

Optimism has been a commodity in short supply over the last few years but there was a sense that this is a golden period for the channel. A couple of stories captured the spirit out there in the market.

In March, Citrix, Cisco and then research from OnePoll on behalf of Agilitas indicated that the channel was expecting growth in 2017. The Agilitas findings looked further ahead and discovered that expectation lasted right up until 2020. Even with an acceptance of the economic uncertianties 47% of those quizzed were still expecting channel growth with only a quarter of those asked being pessimistic about the next three years.

“The results of our research suggest that the channel will see significant movement to OPEX based support services in the next few years” stated Agilitas CEO, Shaun Lynn. “A rise in support services and contracts moving to an OPEX model provides significant new revenue streams for resellers, managed service providers and independent IT providers alike.”

Towards the end of the year Steve Brazier, CEO of Canalys, was using his keynote at the analyst house annual European Channel Forum event to herald positive times.

"The channel partners are doing well and perhaps more importantly the European economy is looking better that it has done for the last ten years," he added "There are more opportunities for the channel now than there have ever been."


8. The end of Misco

March saw Systemax sell the bulk of its European operations, including its Misco operation, to business rescue specialist Hilco Capital. The decision to get rid of the European operations, with the exception of the French business, left Systemax focusing mainly on the US.

The Hilco deal involved Micso management and former Selection Services CEO Alan Cantwell, who had been instrumental in the purchase and buy-in move by the management team. “We believe this transaction is a significant step forward for Systemax and Misco, enabling both parties to focus on their respective strengths in industrial products in North America and IT solutions in Europe. We are acquiring a business with huge potential to expand in the European IT services market,” he said.

Cantwell was providing an update in early October  after the firm had rolled out a back office system refresh to improve efficiency. He argued that good service would put it in a position to fend off competition from the likes of Amazon.

"I don't want to focus on the past. We had to get the costs under control and get the technologies in place that would give us the ability to sell value added services," he added "We have got the technology in place to give us a chance to compete."

Sadly that ambition was never realised with the firm entering administration just a few days later with credit issues and stiff competition to blame for its demise.

“Misco UK had made great progress since the change of ownership and new investment in March this year but the company’s turnaround plans could not deal sufficiently with the rapidly deterioration in cash-flow after the sudden tightening of credit insurance terms," said Geoff Rowley, partner at FRP Advisory.


9. Goodbye Meg

The year saw the CEO of HPE having to shake-off suggestions she was heading to become the boss of Uber and oversee more transformation at the vendor before she finally revealed she was going to exit early next year.

An indication that meg was scaling back her involvement with all things related to Hewlett-Packard came in July, when she stood down from being chairman of the HP board. She said the timing related to it being two years since the split and the HP business now being on a firm footing enjoying its own leadership under Dion Wiesler.

Perhaps her last major move at HPE was to announce a raft of changes that are designed to streamline the organisation. HPE Next was announced in September  and is going to be something that her successor Antonio Neri probably continues to work on when he takes up the reins in February.

"The goal of HPE Next is to produce an organisation that is precisely built to compete and win in the marketplace," said Whitman "To do so, we are clean sheeting the operating model and organisation structure to simplify how we work. We are improving core business processes to clarify accountabilities and make the company more efficient and effective. We are rightsizing the end-to-end cost structure to ensure we deliver on our financial architecture."


10. Entatech collapses

A failure to sell the business left the distributor exposed to unsurmountable challenges, which led to the administrators being called in back in May.

"Following a change in ownership and attempts to restructure the business, the loss of key contracts and declining sales has led to a significant drain on the company’s financial situation. This ultimately led to the directors taking the difficult decision to place it into administration," stated the joint administrators Chris Pole and Mark Orton from KPMG.

They then set about doing the best they could for creditors and provided an update at the start of December that revealed the secured creditors would be paid in full and the unsecured would be getting between 35-45 pence in the pound. Moves to sell-off a freehold property in Telford were one of the last things the administrators were working on.



This was last published in December 2017

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