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Channel explainer: How to make money out of GenAI

It’s tipped as the most important technology for a generation, but how are customers using it, can the channel make revenues from it and what are the risks?

The channel is used to hype and promised pivotal shifts. Anyone who has been in the industry for a few years has been blitzed with launches and presentations that talk of “unique” propositions that will shake the market to its core. So, when Jay McBain, chief analyst at Canalys, stood up at the Canalys Channel Forums event in October 2023 and talked of generative artificial intelligence (GenAI) being a “generational opportunity”, it might not have registered with everyone.

His argument was that the opportunity to use AI to mine data insights was going to be a game changer: a moment that turbo-charged what digital transformation means and an opportunity for the channel to go back to every single customer with a fresh story.

He was not alone in talking about GenAI and its potential, with every major vendor also talking about how the technology would feature in its products and services, and impact customers. There is no doubt this is the big topic in the IT world at the moment. Everyone is talking about it, customers apparently want to buy it and the pressure is on the channel to deliver. But what exactly are they delivering? Plus, let’s be blunt, can distributors, MSPs and resellers make some serious money out if it this year? And if not now, then when?

This is an evolving topic, but it’s useful to gauge where things stand right now as we brace ourselves for the arrival of more AI-capable industry offerings.

Before working out the revenue potential for the channel, a definition of GenAI needs to be established.

A clear sense of what it involves comes from Ranjan Singh, chief product officer at Kaseya: “GenAI is artificial intelligence technology that can produce new content (text, documents, presentations, audio and video) based on learnings from various data sources.”

The other attraction is the speed with which the technology can handle tasks. “GenAI technology can collate and analyse publicly available information a lot faster than an individual could research,” he added.

What are the use cases?

One of the current obsessions across the channel is for more use cases. The feeling is that when customers see how AI works in various parts of their business, it will be easier for the channel to pitch it. There is a sense that the lack of use cases is one of the main factors holding back more sales and adoption. The expectation is that more examples of where GenAI makes a positive impact will emerge this year, and many in the channel, GTDC included, expect that will trigger more activity.

“The use of GenAI spans across all business functions,” said Tom Henson, managing director at Emerge Digital. “Sales teams can leverage it to enhance the effectiveness of their communications, marketing teams might employ it for crafting more personalised content, and HR departments could utilise it for developing policies or handling inquiries. Additionally, its application extends to summarising emails or providing concise recaps of meetings, demonstrating its wide-ranging utility in streamlining business operations and enhancing productivity across various departments.”

The approach the channel needs to take is to ensure they pitch GenAI in the right places. Acting as if it can solve every problem will only cause more problems further down the track.

“Businesses need to be clear-eyed about Generative AI’s capabilities – specifically, what it’s good at and where its limitations lie. Generative AI is best at summarisation, code generation and data generation. Piecing these three capabilities together as building blocks for insights best informs use case exploration,” said Scott Van Valkenburgh, senior vice president of Global Alliances and Channel Leader at Alteryx .

Research by Alteryx reveals that the most widely reported use cases of GenAI at present are content generation (46%), analytics insights summary (43%), analytics insights generation (32%), code development (31%) and process documentation (27%),” he added.

Hype around some AI tools, including Microsoft’s Copilot, have raised user awareness and meant that many have had a smooth slide into the world of GenAI.

“Most customers will be using generative AI to some extent already,” said Sara Wilkes, chief operating officer at Agilitas. “A lot of software solutions have generative AI functionality built in, for example, Microsoft’s co-pilot can summarise documents, write emails or minute meetings. For creative teams, GenAI is writing copy and editing imagery. Others may be using AI to assist with analysing data and finding trends. In Agilitas’s latest Channel trends research, 37% of channel businesses surveyed are already using AI chatbots, with a further 33% looking to utilise this technology in the next 12 months.”

What are the risks?

The introduction of GenAI is another risk factor running across a network, and customers are already showing some concerns about the implications on the security front.

“Organisations making use of GenAI must also be aware that these tools open their data to third parties,” said Dominic Trott, director of strategy and alliances at Orange Cyberdefense. “While some providers of GenAI embrace robust standards for data privacy and security, this will not be the case for all.

“Consequently, it is important that organisations build awareness and drive compliance to enact the right ‘guardrails’ that facilitate but also safeguard the adoption of GenAI,” he said. “These guardrails will need to include: the enactment of policy to set out compliant behaviour; development of process to guide best-practice usage; and the deployment of technology to facilitate privacy and technology.”

Of course those risks are another opportunity for the channel, with those able to sell a solution that covers off those concerns, as well as security specialists, in a position to guide customers though adoption and deployment.

“This is where channel partners can step in and use their expertise, capabilities and partnerships to help internal security teams in building the right guardrails that are appropriate for their organisation’s specific context, whether that be advisory services to conceive and design a secure GenAI roadmap, professional services to deploy and integrate new solutions, or even managed services to monitor and run those solutions,” said Trott

There are also risks for the channel in deciding not to get involved with GenAI, or choosing to wait and see if it starts to deliver an opportunity.

“For those channel companies that don’t leap into GenAI, there is still the potential to make money by using AI to improve productivity levels, therefore being able to use resources to focus on other key revenue-generating areas,” said Wilkes. “However, the risk-reward for those companies wanting to explore AI opportunities could be far greater. AI Consulting services, developing custom AI solutions, providing AI integration services and offering AI training are all going to be areas in demand over the coming years.”

What’s coming next?

Even if the emerging use cases and technologies don’t particularly resonate with some partners, the key thing is to keep an open mind, because this is a rapidly evolving area. For example, expect to hear a lot about AI-capable PCs this year as the main hardware vendors start to introduce products. The expectations are that it will translate into a revenue opportunity for the channel. 

Canalys has tipped AI-capable PCs as having an impact once they start appearing this year, with the analyst forecasting that 19% of PCs shipped will be able to exploit GenAI. Once the products start hitting the market, momentum will continue to build, with the portion of devices being sold using the technology hitting 60% by 2027.

There are also signs that AI is having an impact in the print world, with the desire to store information digitally driving more scanning. The main outcome of the shift to digital has already had an impact, with Quocirca expecting print volumes to fall by an average of 3% this year, and small and medium-sized enterprises and the public sector experiencing more significant drops.

Karlton Gray, channel director at Schneider Electric UK&I, is already encouraging partners to look at GenAI beyond just the software and a few hardware devices.

“From a channel perspective, however, I believe the impact will be significant – not only at the application layer, but from an infrastructure perspective,” he said. “For example, with AI comes the need for specialist datacentre and physical infrastructure systems, high-density racks, resilient power protection and a demand for highly energy-efficient cooling.”

Can the channel take advantage of AI?

With an ongoing focus on customer experience and using technology to increase automation, there are clear opportunities for the channel to use the technology themselves. Across the channel, at all levels, the question of where AI can be deployed is being looked at to help increase business efficiencies and customer service.

Immediate areas where GenAI could make a difference is improving marketing, analysing business data to expose sales opportunities and make the life of staff more enjoyable by automating mundane and repetitive tasks.

“MSPs can leverage the power of GenAI to enhance and support existing processes within their business,” said Manish Kamra, vice-president of engineering at N-able. “For example, not every MSP has the capacity to run a full marketing department, and many lack the skills needed to manage social media accounts and write website copy. Using generative tools can be a fast way to enhance an MSP’s digital presence and gain a competitive advantage in a crowded marketplace.”

There are also clear benefits from being able to demonstrate the impact of GenAI by demonstrating how it has changed a channel partner’s own business. Getting it right internally not only generates use case examples but gives a chance for a partner to learn the lessons ahead of rolling it out on a customer’s network.

“There are a few ways I see GenAI being a key revenue driver for the channel, from increasing operational efficiency within channel businesses to offering GenAI-specific add-on services,” said Emily Fallon, regional vice-president of international channel marketing and partner programmes at RingCentral. “In relation to operational efficiency, implementing GenAI within channel businesses can reduce the time employees spend on repetitive admin tasks and instead focus on tasks that drive revenue and increase the bottom line.”

Can the channel make money out of it?

The simple answer is yes, and it should get easier. As more use cases emerge, vendors offer partners more products with AI embedded, it should widen the reasons why the channel would pitch the technology.

“The channel can generate revenue from GenAI through a two-pronged approach: preparing clients for AI adoption and creating custom AI solutions,” said Henson. “Initial efforts involve ensuring that client systems are optimised for AI technologies like Microsoft Copilot for Microsoft 365, and offering comprehensive training for both end users and power users. This not only covers technical readiness but also includes fostering an AI-receptive culture within the client’s management and teams. Moreover, developing bespoke AI solutions tailored to individual business requirements, using platforms such as Microsoft Azure AI Studio, presents a significant opportunity.”

Adam Wilson, strategic partner director for EMEA and APAC at Vonage, said that in many ways, the channel can bring to bear its traditional solution and services expertise with GenAI.

“The channel can craft professional service offerings to complement the vendor propositions that they’re taking to market, ensuring the customer receives a solution that addresses their end-customer’s unique challenges and requirements,” he said. 

The other function the channel serves is to provide user education, both pre- and post-sale, with that also another area where those comfortable with GenAI are able to make revenues, according to Charles Damerell, senior director for UK and Ireland at SolarWinds.

“As AI technologies are still new to many, there’s a significant opportunity in providing training and consultation services,” he said. “IT channel companies can educate clients on how to effectively use generative AI tools and integrate them into their business strategies.

“Offering managed services for AI solutions, including ongoing support, maintenance, and updates, will ensure that AI systems remain effective and evolve with changing business needs and technological advancements for the customer, providing long-term revenue upsell and cross-sell opportunities.”

Any other problems?

One of the problems with dubbing technology AI-capable is that it’s a label that covers a wide spectrum of outcomes. To avoid confusion, some in the industry are already calling for agreed frameworks to be established to make sure partners can sell something solid and customers know what they are buying.

“The use of generative AI always comes with the risk of bias and hallucinations – we need to reduce this if we are to enable secure and selective adoption throughout the supply chain,” said Ali Nicholl, head of engagement at IOTICS. “Not only will this enhance channel partner and end-user experience, but by improving experience in the channel, generative AI will drive revenue up and costs down.”

There is a sense that vendors are taking steps to establish what makes a solid channel AI player through the introduction of more certifications. Microsoft and Dell are among those that have outlined specific rewards and support for those that want to identify as GenAI experts. Those sorts of efforts should help standardise the baseline for expertise in this area.

There are also chances that GenAI specialists will emerge, giving vendors a challenge identifying and rewarding them through partner programmes. Plus, it will provide more competition for those trying to establish themselves as subject experts.

“Looking forward, we may even see a greater diversification of partner types, more demand for systems integration skillsets, and new alliances between manufacturers, partners and chipmakers.,” said Gray.

This is an evolving area, and the channel can expect more use cases, further partner programme tracts around GenAI and increasing customer demand.

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