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It's that time of year when you pull on a Christmas jumper, try to get the seat next to the open fire, gently pull on a paper hat and sip on something warming. Thoughts turn to thinking about all that has been achieved over the past 12 months. There has been Brexit, World Cups and Donald Trump. The Bodyguard gripped millions of viewers and Jose Mourinho discovered three years after being sacked in late December that Santa really does have it in for him as he was kicked out of Manchester United.
There was also plenty going on in the channel. The following highlights are by no means exhaustive but give a flavour of some of the main themes. Overall it has been a positive 12 months for distributors and resellers with record months and growth the experiences for many. There will be plenty hoping that is repeated in 2019. But until then let's look back and remember some of the talking points from 2018.
The two words mean many things to many people. But for the channel they should equate to a chance to make money. All year the message to customers has been that they need to join up more digital processes to improve their competitiveness. No one wants to be the victim of the next Uber or Airbnb and so the pressure has been on to embrace 'digital transformation'. We can all argue about the definition but it has dominated conversations over the last 12 months and it has made a difference to the channel. Right back in January CompTIA released its IT Industry Outlook 2018 and forecast 5% growth across the global tech sector this year. Behind a lot of that growth was a broad church of technologies that can be pitched as part of a digital transformation solution, including cloud, IoT and security. “Beyond strong economic fundamentals, the growth story revolves around the spending associated with companies entering new phases of digital transformation,” said Tim Herbert, CompTIA’s senior vice president for research and market intelligence.
Even before 2018 started there had been plenty of action by those pitching data management and security solutions. As the EU regulations came into force at the end of May that activity reached a fever pitch. But once GDPR came into force there was largely silence left in its wake. Customers needed a break from hearing about it and perhaps resellers also relished a chance to talk about something else. But over the last few weeks the discussions in the security and data worlds are again around the regulations. The expectation is that 2019 will see the first big fines handed out for those failing to adhere to the rules and it will again give the channel the chance to pitch around the issue. Only last week the Information Commissioner's Office warned firms that GDPR would continue whatever happened to Brexit. "The UK is committed to the high standards of data protection set out in the General Data Protection Regulation, and the government plans to incorporate the GDPR into UK law when we leave. Therefore, your best preparation for the future UK regime is to ensure that you are effectively complying with the GDPR now," stated the Information Commissioner Elizabeth Denham
Aside from the will they won't they move back into public ownership the firm was keen to drive its channel revenues. Back in February the vendor made no secret of its plans to take partner revenues through the $50bn barrier. At the time $43bn was generated worldwide through the channel but Joyce Mullen, president global channels, OEM and IoT solutions at Dell EMC, made it clear there was plenty of room for growth estimating the potential size of the addressable market as being worth $3trn and that left plenty of room for more channel revenue. "We want to continue this phenomenal momentum we have seen in this past year and we know exactly what it takes to get to $50bn," she said. Dell returns to life as a public company just before the end of this month and the firm will be keen to keep that channel revenue growing to give a fresh wave of investors some cheer.
A theme throughout the year was the need for the channel to continue to educate and then protect customers against the threat. Datto's State of the channel Ransomware report in February revealed that 89% of European MSP customers were victims of the attacks. The firm followed that up with a further report earlier this month and highlighted the potential problems for those deemed to be responsible for keeping customers safe. Christian Nagele, interim head EMEA at Datto, said that when an attack hit a customer there was not just an impact on the security systems and finances but also on the relationship with the MSP that works with that business. "Ransomware is a security threat that has serious implications for both small businesses, and their MSPs," he added "There can be significant financial and reputational implications of ransomware attacks for the MSP, as it is often the MSP who is held responsible for repairing the damage caused by ransomware, from restoring data to rebuilding systems." There has been some positive news though and it seems that since the WannaCry attack on the NHS last May the issue has been firmly on the agenda in many boardrooms up and down the country. That seems to have had a real impact in slowing the pace of the impact of ransomware according to a market analysis from SonicWall. The security firm reported in the summer that globally ransomware had increased by 229% in the first six months compared to last year but in the UK it had fallen by 34%. "You can see that the awareness has increased. You can see it in the numbers. The second quarter it came down," said Bill Conner, CEO of SonicWall.
Canalys Channels Forum
The annual event always throws up some food for thought. As well as warnings that a hard Brexit would trigger a tech recession there was also an indication that tensions were increasing in the channel. Using his keynote slot the analyst firm’s president and CEO Steve Brazier warned that the channel was facing increasing competition from Amazon and professional service providers and there was also more overlap between the channel and likes of Atos and Cap Gemini and the battleground was in the managed services space. “When we look at the large enterprise space we are discovering there is more and more crossover between the channel partners and the professional services companies, the likes of Deloitte, Accenture and Atos and the overlap is getting bigger,” he added “What is driving this trend? It is the move towards managed services. Managed services build deeper relationships than just buy and sell. They build stickier and normally longer term relationships and the professional services companies want that business."
The web giant has been rolling out its business offering in an increasing number of countries in Europe, with the UK getting the service last April. The channel might take comfort in its ability to out service Amazon but there were warnings that getting involved with its shops process would undermine competitiveness. Steve Brazier, president and CEO of Canalys, warned that he expected that within 18 months the firm would have doubled its presence in Europe to operate in 10 countries. “They are a threat to you, there’s no question. Bevery careful,” he also had some words for vendors that might sell via the etailer, "Our message to the vendors is if Amazon wins fair and square, ie it buys products at the same price, and manages to provide better customer service and cheaper prices and it wins a customer, that's fine. But we think Amazon Business will put the vendors under a lot of pressure for special terms and conditions and deals, and we strongly encourage the vendors not to do that. It will be in your long-term disadvantage to do that."
Summer of consolidation
The idea that acquisitions happen in the channel is not one that would raise eyebrows but the volume of deals that were done over the summer stood out this year. An ambition to grow managed services skills was the ambition behind a lot of the deals that were struck in the weeks that are usually spent with resellers applying sun cream and recharging the batteries ahead of the hectic Q4. Not this year though. Deals struck in the summer included Peach Technologies picking up Taylor Made Computer Solutions, Getronics buying ITS Overlap, Six Degrees Group bought CNS Group, Adept acquired Shift F7 and that followed Shearwater buying Brookcourt, Cancom picking up OCSL and HP snapping up managed print player Apogee. That list is by no means covering everything that happened; it's just an illustration of how busy those summer weeks were.
The progress of the hype to reality cycle has been happening in front of everyone's eyes this year. According to IDC, global SD-WAN infrastructure and services revenues are growing at a rapid pace and expected to reach $8bn by 2021. The figure for EMEA is predicted to hit $2.4bn. The growth is being driven by digital transformation, the rise in cloud-based SaaS business applications and a wider acceptance of SDN. Not only are resellers making money out of the technology but all of the vendors you would expect to be lining up behind it are doing so. Cisco used its partner event in November to talk about how it had a robust offering, combining security into the mix. Silver Peak has also been pushing its partner base to get more involved with a market that is growing quickly. Oracle decided it also needed to get a slice of the action and purchased Talari last month. There are also indications that the battle ground is moving on from SD-WAN with Juniper Networks using its recent partner event in London to talk about it being a stepping stone on a longer journey to multi-cloud. Expect more of that sort of talk in 2019.
The days when a reseller could rely on the relationship with an IT director being key to driving revenue were already under strain before 2018 started. Over the course of the year it has become even clearer that IT budgets have become diluted across a number of executives and the challenge for the channel has been to identify those now holding the purse strings. At the same time the long awaited impact of the millennials is starting to be felt with the channel getting a warning in April from Spiceworks that things are changing. “Millennials are moving up the corporate ladder and are becoming more responsible for IT buying decisions. This is going to have a big impact on how the channel markets and sells to its buyers,” says Sanjay Castelino, vice president of marketing at Spiceworks. “We know millennials’ tech preferences and buying habits are markedly different from previous generations, and the channel will need to cater to them accordingly.” That changing buying landscape is only set to continue to change in the year ahead.
Although it's impossible to talk about the last 12 months without referring to Brexit the issue has not been one that has publicly dominated the channel. There has been the occasional flash at an event or in a one to one where views have been shared but in the main the channel has kept its own counsel on the topic. But over the past few weeks there has been a growing sense of exasperation that with just 100 days until Britain is meant to leave so little is still decided. Amidst votes of no confidence and threats of no deal the irritation has increased. One senior executive summed it up: "We have to sit down in October and do all of our planning for the year ahead and all we can do is come up with contingency plans for after March. Plus it's giving those customers who want an excuse to delay projects a chance to push spending back." His views will have no doubt have been shared by many. At the time of writing it seems that there will be a vote on the Brexit plan in early January and the commitment to leave by 29 March remains a government ambition.