By: Carolyn April, Senior Director of Industry Analysis at CompTIA -
The tech industry, like most others, has its fair share of pundits. Some predict gloom and doom if the stock market has a single down day or jump on every vendor or provider setback as if it were a long-standing trend. Then there are the channel optimists, who emphasize the positive points around industry news and put a rosier spin on any negative concerns. A commonly accepted business practice is to listen to both camps for their views and reasoning before developing your own conclusions, especially when your investments and reputation depend on the decisions you make with that information.
Overall, most IT professionals remain optimistic about the future of our industry, even in the face of tremendous change and new business challenges. In fact, six out of ten channel firms have a positive outlook on what the future holds for the channel in general, according to CompTIA’s 5th Annual State of the Channel research project. Five years ago, many VARs, solution providers and other industry professionals were concerned about their long-term business prospects with cloud computing gaining traction. The turnaround in the channel’s outlook is quite significant.
Cloud computing is now cited as the chief reason to be optimistic about the channel’s future since, among other things, it opens doors to new opportunities. Whether or not there is reason to be this hopeful remains to be seen. But, according to our most recent study, channel companies are seeing the cloud as less of a threat. They are discovering that cloud isn’t a single business model; it gives them the chance to plug in at various points. They can sell SaaS, integrate cloud with on-premises solutions, broker and aggregate cloud options, develop applications and offer complementary managed services and other support options.
On the flip side, the cloud also has its skeptics. A subset of our study respondents remain pessimistic and about future of the channel and cite cloud a one reason. This is especially true of those channel firms that sell primarily to very small end customers. Why? Among these small-sized clients, cloud solutions offer a no-brainer alternative to on-premises hardware and software solutions (where many VARs still prosper). Likewise, one third of channel firms indicated that a wider availability of purchasing options and customer self-sufficiency were sources of concern for the channel’s future. This may be behind many of the smallest channel companies rethinking their customer value proposition. For example, 26% of firms with less than 10 employees currently list pure consulting services as their main source of revenue. If their end customers decide to convert to an all cloud model, these small VARs have to create support service offerings to help guide their clients’ decisions. Those opportunities seem to make the most sense.
While cloud has the promise to simplify things for some customers, others continue to struggle with the growing complexity of IT. That’s great news for channel companies. The third platform technologies (mobility, cloud, big data, and social media) perplex many small businesses today, so IT firms that can help design, implement and support these solutions are truly relevant.
Companies with those capabilities should be optimistic. Of course, there are other reasons why the study respondents had a positive outlook on the channel’s future, including:
• Wider variety and use of technology by all types of customers and end users
• Increasingly complex solution and service options
• Larger demand for vertical industry expertise
These are market realities that provide channel companies with a reason to be optimistic and a number of roles to fill. The opportunities are theirs for the taking if they take the appropriate steps. With solid recruitment efforts and effective training programs, it will make it easier for channel firms to focus their efforts on emerging and more sophisticated technologies.
VARs and MSPs should also be making continual improvements in the business practices. A makeover of sales and marketing strategies can help bring in new customers from different verticals. Back office automation can help reduce billing and cash flow issues, and other tools can improve customer service and support operations. Channel firms that embrace an “as-a-service” way of life typically have a more optimistic outlook.
There’s plenty to be positive about in the IT industry right now. Based on all the information we compiled during the latest State of the Channel survey, a majority of firms are definitely more optimistic than they were five years ago. The real question right now seems to be “will that positive outlook continue?” Time will tell.