kentoh - stock.adobe.com
Now that the 2010s are over and we find ourselves in the 2020s, it seems a good time to ask what the future looks like for channel businesses in the coming year. What are the big opportunities for those companies in 2020 and what are the main threats they are likely to face?
In those circumstances, what types of channel businesses will prosper and what kinds will struggle? And just how big a role will distribution play over the next 12 months?
The good news is that the outlook for the channel appears pretty bullish. “There are almost too many opportunities to mention and channel companies have never been busier,” says Westcoast managing director Alex Tatham.
He highlights supporting businesses with their migration from Windows 7 to Windows 10 as a major preoccupation for partners this year, although this will be affected by Intel shortages, which Tatham predicts “will become more acute”.
Leigh Schvartz, head of product innovation strategy at Fujitsu UK, agrees that the channel will capitalise on the end of support for Windows 7, which will lead to a spike in desktop and notebook sales in the first quarter, “especially as businesses may have delayed their decisions to refresh their systems until it is absolutely necessary”.
He predicts that the main opportunities for channel businesses will be in riding the desktop-as-a-service (DaaS) wave “created by Microsoft WVD” and will help customers understand DaaS, PC-as-a-service (PCaaS) and leasing options to “find the best fit and be the partner of choice for customers looking to optimise or redeploy their current public cloud deployments”.
Schvartz says opportunities will be created as businesses move to an everything as-a-service (XaaS) model to address changing consumer buying patterns. “As a result,” he says, “they will invest in skills and people to help push their technology and sales.”
Phil Brown, sales and commercial director for business at Exertis, is clear that the trend towards XaaS will continue, claiming “there is still plenty of opportunity in many areas” for managed service providers (MSPs).
He cites managed print services, particularly for small and medium-sized enterprises (SMEs) that “may have previously been put off by the cost”, now that more resellers are moving to “a subscription-based model to capture the market opportunity and retain an ongoing relationship with the customer”.
Brown adds that distributors can play a key role in helping resellers move to this model by assessing and deploying software-as-a-service (SaaS) and platform-as-a-service (PaaS) solutions with cloud marketplaces.
Atul Damani, chief technology strategist at Westcon-Comstor, says higher value services will become a new opportunity to channel businesses.
“As companies embrace various digital initiatives, they will require help with architectures, navigating the maze of new tech versus established, and developing new business models,” he says. “Channel businesses are best suited to take on the role of trusted advisor in their specific disciplines with the digital transformation focus.”
Simon Aldous, global channel chief at Dropbox, argues the challenge for the channel this year will be to more effectively demonstrate the value that emerging technologies can deliver. “Artificial intelligence and machine learning, for example, will continue to grab headlines and drive discussion, but many people are still unclear about what these will actually mean for their business,” he says.
Aldous adds that the IT industry is often guilty of talking “about amazing new technologies without framing them in the context of what it actually means for the user, be it a SoHo [small office, home office], SME or large enterprise”.
Carolyn April, senior director of industry analysis at CompTIA, warns that to succeed this year, channel firms will need to “push themselves out of their comfort zone in order to thrive”.
With half of channel organisations expecting significant gains in emerging tech adoption, she says, the “democratisation of technology across all levels of the business world” will be a significant factor, affecting how the channel sells and goes to market, who it sells to, what the sales cycle looks like, and the type of services that wrap around any initial sale or engagement.
MSPs in demand
A shortage of IT professionals will drive demand for managed service providers, across all types of software, according to Nick Miles, director for regional alliances at Okta, especially in the cyber security sector. “MSPs are being sought as the solution to fill this void,” he says.
Miles notes that “the shroud of uncertainty surrounding Brexit” is adding another layer of complexity. But that uncertainty is accentuating the role that channel partners will play in 2020.
“They need to do more than just sell software. The resellers that help customers on their journeys, provide added consultancy on all issues and are able to react to the inevitable changes that will take place, will have the biggest opportunity to succeed,” he says.
A number of observers believe channel consolidation will continue throughout this year.
Martin Smith, UK partner manager at Cohesity, says that after more than three years of mergers and acquisitions by venture capitalists, “2020 will see yet another year of consolidation of channel companies”.
Resellers and distributors will purchase smaller organisations “that offer new revenue streams, or those complementing what they already do, just bringing a greater economy of scale”, he says.
The consolidation is driven by two factors: continued margin pressure/profitability with mature technology sales, and owners of privately owned solution providers reaching retirement age and looking to exit their business.
Jamie Farrelly, vice-president of Europe, Middle East and Africa (EMEA) channels at Veritas Technologies, believes channel partners will need to expand beyond their traditional role of being able to understand customers’ problems and find solutions to reduce risk and complexity while increasing revenues.
“The evolving digital business landscape means customer challenges are changing, and partners now need to work with a variety of different solutions and platforms they haven’t traditionally worked with before to help address the problems of today’s digital age,” he states.
By the same token, vendors need to accept they can no longer exist within their own technology bubble, but are part of a much wider ecosystem – they need to think beyond their own area of expertise. “It’s no longer just about working with partners, but also other vendors, in order to create ecosystem solutions that solve bigger customer issues in this digital age,” he argues.
“Integration and specialisation mean everything to the modern customer, so working with other vendors is a must. As a result, we’ll see more integration and collaboration in the channel in the year ahead.”
When it comes to threats, Phil Jones, managing director of Brother UK, predicts purely transactional resellers risk further decline as the industry becomes smaller but more sophisticated.
“Even those that have already transitioned to service-based models will need to up their game as SME buyers get savvy,” he warns. “The democratisation of business applications – in which smaller enterprises can access the same tools and solutions as larger firms – is driving this. Resellers need to be one step ahead of these accessible knowledge curves if they’re to offer added value back to customers.”
He adds that scale isn’t necessarily the answer. “It used to be that the big ate the small – now, the fast eat the slow,” says Jones. “Your relevance, proposition and speed of response will need to be on point to ensure survival in the democratised business jungle.”
Jeremy Payne, vice-president of alliances at Enghouse Interactive, believes the big danger for channel partners is complacency. “The UK high street is an example of a sector that lost touch with what its customers really wanted and couldn’t adapt fast enough – and it’s the same for the channel,” says Payne.
“Organisations can buy and deploy technology through the cloud quickly, easily and often directly with a vendor, but the role of the channel here is to understand the whole picture and how these individual jigsaw pieces can be glued together to create an optimised customer experience. Channels that are in a box-shift mindset will face a similar fate to that of some high street stores.”
Phil Brown, sales and commercial director for business at Exertis, says resellers that don’t embrace change will struggle to take advantage of new opportunities. “The move away from a capex to an opex business model, the requirement to look for and service complementary technologies such as AV and IT, and the need to partner with specialist resellers or distributors that can offer additional services are key to growing business.”
Fujitsu’s Schvartz warns: “Partners that are not open to change will struggle as their current customers digitally transform and look for partners with service or consulting capabilities. Partners which do not embrace the importance of the partner ecosystem and collaboration will also lose out in 2020.”
Leigh Schvartz, Fujitsu UK
Atul Damani, chief technology strategist at Westcon-Comstor, highlights the danger of what he dubs user “paralysis analysis as the tech disruptions are moving very fast”. To counter this, he says channel businesses “need to get ahead and lay out a roadmap that allows their customers to move towards a defined roadmap”.
There’s a danger they could lose a customer to a next-generation savvy channel partner which is in tune with the customer’s changing needs and digital plans. “This cuts across any technology area – security, networking, infrastructure, unified communications, or application development. There is a new norm coming which requires the channel to adopt it faster,” says Damani.
Scott Murphy, director of cloud and advanced solutions at Ingram Micro UK and Ireland, suggests that differentiation, which offers vast opportunities for growth, can become a threat if it isn’t considered.
“Failing to provide a differentiated offering will allow other organisations to find gaps in the market first, leaving businesses on the back foot. Channel partners need to find ways to evolve their offerings for clients to make sure value is wrapped in everything that they do,” he says.
Partners need to address their core business objectives and extend user reach to enhance their engagement. “Competence, capability and commitment are all areas requiring focus,” says Murphy. “All channel businesses have at least one of these, so it’s about finding that balance and acknowledging where they fall short. This will allow them to undertake the next steps for growth.”
Chris Ross, senior vice-president of international sales at Barracuda Networks, says that when it comes to the cyber security space, keeping up with the flurry of mergers and acquisitions will challenge channel businesses to fully engage with vendor education programmes.
“If you’re not fully up to speed on how changes in vendor ownership might impact the products that your customers are using, you can bet that your competitor up the road will seem like a much more tempting
proposition,” he says.
Adapt or die
Westcoast’s Tatham has a very succinct answer: “Doing what you always did will mean that you will be getting less of what you always got. Change, adapt or die!”
As a distributor, he is keen to talk up the role of distribution. “As always, distribution will be there to enable the change with tools, services and flexible help. I have never seen more opportunity in the distribution channel in the 25 years I have been doing this,” he says.
Frank Vitagliano, CEO at the Global Technology Distribution Council, says distributors “are continuing to step up with new types of services offerings” as we begin a new decade.
“Ultimately, customers will reap great benefits as their channel partners rely on distributors to fill in gaps they can’t – or prefer not to – address,” he says. “The ways solution providers and vendors leverage distribution will continue to cover an unprecedented scope in 2020 as well.”
Exertis’s Brown believes distribution is likely to “become even more important for the channel” as inefficiencies in the direct model become even more evident and the opportunity for supply chain services that can handle complex, international roll-outs of solutions become more frequent.
“The core competencies of distribution provide services that are crucial for vendors and resellers in terms of operational excellence and financial support. Remaining relevant to customers, being agile and adaptable, ensures that the distributor’s role remains even more important in today’s market,” he says.
Ingram Micro’s Murphy warns that traditional distributors “will struggle to add value in 2020” because channel businesses are looking for something else. “Distributors which position themselves as a solution provider will fuel the channel more than traditional distributors. This will enable them to meet the growing demands of partners and, ultimately, users,” he says.