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Change is a constant as the channel looks ahead

Concluding our two-part look at what lies ahead this year, we find expectations of more consolidation and ongoing change

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What can we expect in 2022? Product shortages seem likely to continue for some time to come and the pandemic is stubbornly resisting attempts to return to normal life. 

Consolidation: time to cash in?

In the first of our features looking at what’s in store for the channel, we highlighted a range of issues, including security and sustainability, that will be prominent in 2022. Let’s continue with something that has a direct effect on partners themselves: consolidation.

Richard Massey, vice-president for Europe, the Middle East and Africa (EMEA) at Arcserve, predicts the managed service provider (MSP) market will experience greater consolidation this year. “Many entrepreneurs started an MSP company 20 or 30 years ago and have been very successful,” he remarks. “Now, many of them are ready to sell their business and cash out.”

He predicts that, as a result, there will be a lot of larger MSPs on the acquisition trail as they seek to enter new markets and accelerate their growth. “The winners in 2022 will be those MSPs that have the ready capital to swallow up smaller players and grow their footprint,” says Massey.

“The winners in 2022 will be those MSPs that have the ready capital to swallow up smaller players and grow their footprint”
Richard Massey, Arcserve

Christina Walker, global director of channel at Blancco, believes “channel partners will start putting their money where their mouth is” in 2022 by complementing their businesses with mergers that allow them to scale their services.

Arguing that the old resell margin is dead, Walker claims the need for partners to invest in verticalised solutions will continue to grow rapidly. “For the channel, 2022 will be a year defined by service growth, mergers and implementation of new solutions,” she predicts.

Robert Brower, senior vice-president of worldwide partners and alliances at Druva, agrees there will be continued consolidation in the channel market. “VARs without the skill or scale to shift to SaaS [software as a service] will be acquired or shut their doors,” he says. “Additionally, the VMware spin-off opens re-acceleration of acquisition rounds by ISVs [independent software vendors] given capital infusion to VMware and their position to become the Switzerland of the cloud.”

Greg Jones, EMEA business development director at Datto, states that the mergers and acquisitions (M&A) landscape is exploding right now. “We are currently seeing some big numbers around M&A – six times, 10 times, 12 times. Never rule out M&A as you don’t know what is around the corner, Covid-19 certainly showed that,” he says.

Jones advises owners to document everything within their MSP business. “This makes your business more valuable if you do ever sell as you are de-risking your business for any potential buyer,” he says.

Martin Riley, director of managed security services at Bridewell Consulting, takes it up to the vendor level, with predictions that cyber security vendors will start to consolidate as Microsoft and Google evolve to become leaders in cyber security.

“Microsoft has announced a huge commitment to growing its cyber security offering and Google has taken huge steps to bolster its security expertise,” he says. “As both companies continue to build their expertise, we expect to see traditional cyber security players start to lose market share as they struggle to keep up with the visibility, coverage and collaboration benefits the global giants can offer.”

Changing roles and different priorities

There will be a number of changes that partners need to be aware of in terms of how they conduct their business and the roles played by different parts of the channel.

Matthieu Brignone, vice-president of the global partner organisation, EMEA and Latin America, at Pure Storage, says the pandemic has led to a boom in the adoption of as-a-service and managed services solutions. “Some early adopters in the channel are claiming that around 75% of their revenue is now being driven by managed services at the expense of ‘traditional’ reseller methods,” he reveals.

The trend will continue to grow and evolve in 2022, Brignone adds, with bigger year-on-year growth in as-a-service adoption than ever before. “This is being driven largely by users who are asking more questions of resellers about cost efficiency, flexibility and user experience, driven by a need to be more agile following the challenges of the past two years. This is why 2022 will be the year of as-a-service,” he says.

“Users are asking more questions of resellers about cost efficiency, flexibility and user experience, driven by a need to be more agile following the challenges of the past two years. This is why 2022 will be the year of as-a-service”
Matthieu Brignone, Pure Storage

Lewis Simmonds, UK channel and mid-market/small to mid-sized business director at HPE, believes more resellers will take advantage of the opportunities presented by everything as a service (XaaS) to launch their own public clouds.

“Organisations are looking to trusted partners to provide cloud offerings with the same advantages of agility and scale offered by hyperscalers,” he says. “Locally managed clouds offer the familiar, personalised experience customers expect from channel providers, as well as all-important compliance with security, governance and regulatory factors.”

Resellers will be able to launch cloud offerings with limited upfront investment and scale their services according to demand. In addition to accelerating the sale of products as-a-service, resellers will start offering XaaS solutions under their own brand, and will see a greater opportunity to add services revenues to the mix, he states.

“Various key players in the market are already on a journey to transform to an as-a-service way of selling. The pace of the transition to as-a-service selling will strongly depend on support from vendors, so it will be crucial for vendors to help partners quote, sell and deliver as-a-service solutions easier and faster,” adds Simmonds.

Tim Britt, Dropbox EMEA head of channel, says one of the biggest disruptors in the channel in 2022 will be to the role of distributors. “For software-as-a-service vendors, it’s not just about providing an advanced marketplace for transactions. They still look to distributors to provide value-added services around new resellers, recruitment, enablement and knowledge-based services.”

In 2022, distributors will need to think about their offerings as a whole, rather than about the one aspect that brings in the most revenue. “For example, they need to think about how they provide support for their level two and three vendors – this is where partners need support the most as it helps build a sense of loyalty amongst customers,” he adds. “There are a lot of players currently in the market and distributors need to create value with integrated services to stand out. This will be a commodity item rather than a luxury.”

Matt Child, managing director of advanced solutions at Tech Data UK & Ireland, agrees that the role of distributors will continue to evolve. “We need to understand the specific needs of each particular partner – whether they are VARs [value-added resellers], MSPs or MSSPs [managed security service providers] – and create a tailor-made bundle of enablement, education and services that will help them meet their specific business outcomes for both cyber security and cloud,” he says.

Cloud has become an integral essential element of all solutions, he argues, and having the ability to deliver effective cyber security and services that can monitor and manage entire hybrid infrastructures, including managed cyber security services, is going to be important.

“Some customers want their partners to be able to do all of that today, others will move at a slower pace,” he notes. “Partners will need to cater for both, and they may well need our support along the way as they transition to a new business model.”

Paul Flannery, vice-president of international channel sales at Epicor, makes an interesting point about the supply chain in the wake of the pandemic. With public health guidelines and lockdowns, he says, local supply chains proved to be more resilient than their global counterparts.

“While immediate changes were made by channel partners and their customers to ensure business processes kept running smoothly, the reality is that many supplier arrangements are contracted as multi-year deals,” adds Flannery. “We therefore expect that many organisations will continue to renegotiate aspects of their supply chains over the next 12 months.”

He argues that channel partners “looking to increase their resilience and grow their businesses should look to local areas and markets for a new customer base that they may not have worked with in the pre-pandemic, globalised environment where price meant everything”.

A changing relationship

Stacy Hayes, co-founder and executive vice-president at Assured Data Protection, predicts that more vendors will build MSP networks to drive revenues, with many reopening MSP lines of business they had previously neglected. “It’s a proven model that complements direct sales and helps organisations to drive new revenues and extend reach. OEMs and larger vendors are now recognising the value that MSPs offer,” he says.

Demand for cloud technologies and managed services is on the increase and vendors are looking at ways to meet demand and lower the overall cost of a sale. “Having a viable MSP option removes the need to invest in new sales teams,” says Hayes. “Instead, they can look at transforming their solutions into SaaS offerings to open new market opportunities with segments – and regions – they probably haven’t considered targeting before.”

Matt Halsey, senior director of sales at Cyren, says the enforced shift away from face-to-face meetings during the pandemic has magnified the role of channel partners. “They have the relationships with customers and vendors that will make a difference and can connect the dots between what is required by enterprises and what the cyber security community is providing,” he says. “They are our boots on the ground and have the ability to provide valuable advice and guidance as they see the market from both sides.”

Halsey says there needs to be a change in how vendors and channel partners work together. “While they may be partners on paper, there has always been an element of competition as to who ‘claims’ a customer win and where it is allocated against the KPIs in place for each team. But who does this competition really serve? Surely, it would be better to cooperate and effectively use each team’s skillset to achieve the end result,” he says.

“There needs to be a differentiated approach that re-evaluates how internal targets and KPIs are set to remove direct versus indirect sales conflict, ensuring they are remunerated the same. I genuinely believe this kind of differentiated approach would incentivise channel partners and generate the best results,” says Halsey.

Don’t get carried away

Datto’s EMEA business development director, Greg Jones, says there’s a tendency, at the end of each business year, to look for the next shiny thing to focus on. “My tip for 2022 would be to stop; don’t focus on anything new unless it’s an absolute game changer for your MSP business,” he says. 

Jones suggests the focus for 2022 should be on four key areas where SMEs need help and support: work from anywhere and remote working; security and cyber resiliency; empowering business processes with technology; and co-managed IT.

“My tip for 2022 would be to stop; don’t focus on anything new unless it’s an absolute game changer for your MSP business. Don’t lose focus on shiny, new things – sometimes less is more”
Greg Jones, Datto

“Those four areas are certainly enough for any MSP to focus on for 2022 and can deliver high monthly recurring revenue for MSPs. Don’t lose focus on shiny, new things – sometimes less is more,” he cautions. 

Druva’s Brower predicts that 2022 will not be a “grow profits year” for channel partners. “It’s a ‘modernise and secure your business for the future’ year,” he argues. “Consider the practical realities of the current macro state: supply chains will take years to recover from where they are now given Covid disruptions, the backlogs created, and the shifts in capital to resume moving goods – what used to cost $4,000 a day to do currently costs $80,000 regarding freight movement.”

Mike Tankard, Citrix northern Europe partner and alliances director, warns that 2022 may not be that easy to forecast. “I’m speaking with partners a lot and they’re all finding it difficult to predict too far into the future,” he admits. “The pandemic has shown us all there’s a twist at every corner and no one can say with precision what is coming next.”

Nevertheless, he manages to turn it into a positive, describing the uncertainty as “the single biggest business driver, changing the sales journey from longer-range technical innovation, to greater agility and security around dynamic changes”.

Conversations “are very different”, with partners and resellers “increasingly being asked for a broader range of capabilities, especially in specialist areas such as security, through to managed service models where innovation is commercially and technically built into an evolving relationship”.  

Keep it simple, make it easy

John Brown, EMEA channels director at Menlo Security, argues that every organisation, especially channel partners, will need to work even harder in 2022 to stand out from the crowd and the tsunami of digital content.

He offers some practical suggestions: “Make sure you incentivise loyal and happy customers to record short, sharp bursts of headshot video content, which shows them talking about why they chose you and what value you’re bringing to their business. If you haven’t got in-house skills to professionally produce and edit these yourselves, outsource it – it will be worth it.”

Partners should “be punchy and bold in your promotional activity – prospects like to see a partner’s DNA shine through”. In addition, everybody in the business should be able to “effortlessly convey what you do, how you do it and why they should buy from you. If you can’t condense that into two to three minutes or on one slide, go back to the drawing board”, he adds.

Partners need to focus on building and maintaining value through concise and captivating storytelling, consistent and meaningful engagement with customers and prospects – which Brown admits is “harder than ever, but still doable” – and they should “never underestimate the power of being easy to do business with”.

 

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