Change to the channel, partner programs highlight channel aspects of CompTIA 2017 outlook

sees 2017 as continuing trends like the greying of the channel and the increase in non-traditional partners which have been developing for several years.

, Senior Director, Industry Analysis at CompTIA

IT trade association CompTIA has released its IT Industry Outlook 2017. They project a good year for the industry as a whole, with 4.1 per cent growth globally. Their specific channel forecasts consider it likely that the industry will see change to channel programs, the channel’s role in , and the channel itself. None of the changes are likely to be shocking, however.

“Nothing is dramatically new year over year,” said ‎Carolyn April, Senior Director, Industry Analysis at CompTIA. “Every year when we do trends, the channel trends are a slow march toward change. The takeaway this year, including broader technology trends, is mostly positive however.”

Changes to the channel itself include two major components. One is the continued expansion of the channel to incorporate more non-traditional partners. The other is the continued greying of the channel, as many approach retiring, leading to many firms being unlikely to survive in their present form.

“The channel is changing pretty significantly in terms of its makeup,” April said. “It is now vastly different from the traditional mix of solution providers, resellers and . They are moving in from various places. The most numerous are the ecosystems, thousands of organizations. They align with specific SaaS-based ISVs, and will be a force to be reckoned with over the next few years.”

The role of telecom players in the IT channel continues to grow, April said, continuing a trend which has been there for several years.

“We are also seeing digital marketing agencies, who building end users web sites and offer other digital market services becoming actual channel players,” April said. “More companies who are not really in the tech world at all – accounting and legal firms who recommend services – are aligning with vendors who they sell and getting referral fees.”

While the channel community is attracting new types of businesses, it is falling short in attracting younger people into its senior management, the study said. This is problematic because approximately 40 per cent of the channel universe expects to retire over the next decade.

“There’s always an attrition rate of owners exiting the business, but 10 years ago that percentage was lower than today,” April stated. “The issue is how to fill that void, and the question is what does the channel look like after that happens. On the traditional channel side, I’m not seeing a significant number of younger entrants.”

As a result, the likelihood is that many existing businesses will be sold.

“Channel owners want to sell their businesses, not shutter them,” April said. “Some hand them down to family members, like with many other small businesses, but that assumes someone is there who wants to run the business. When a business is bought, it doesn’t always continue in the same vein. Their services don’t always continue in the same way, shape or form.”

April said that while the channel is optimistic about the year ahead, this still doesn’t mitigate the problem of the lack of younger successors.

“This year, we have seen optimism increasing in the channel, something that is general with small businesses,” she said. “Lending has been tight in the channel since 2008, although I do see that loosening up. But while the environment looks better for entrepreneurs, the key is to get them to build a channel career as opposed to going into a type of different small business. The generational cultures are very different. The old generation, for example, regularly put stuff on their own credit cards. The younger ones have a different attitude about that.”

Changes are likely coming to channel programs this year. The issue here is that – especially among partners with a significant presence in consulting work and services, traditional programmatic incentives like sales spiffs, upfront discounts and backend rebates matter less. This means that these features in programs are less likely to be something that positively differentiate one vendor from another.

“This was very clear in our data, that these sorts of items are less important than two years ago,” April said. “Something like back end rebates – all I hear from partners is what a headache they are. Some partners leave them on the table because of that, just as they often leave MDF.”

One reason for this is that while vendor-provided margin once accounted for a majority of channel revenue, many channel companies today think their own sales and marketing activities drive the bulk of sales.

“Partners have become more reliant on their own sales and marketing efforts to drive revenue,” April said.

These attitudes mean vendors are likely to change the way their programs work.

“They have to retool their programs to be in line with business models the channel has today,” April noted. “If you do referral business for the cloud, volume discounts mean nothing to you.”

The cloud continues to be controversial in the channel, although the positive view is rather larger than the negative. 6 in 10 channel firms said cloud had generally strengthened ties with end customers, while a quarter said the reverse, that the cloud model has generally weakened them. Similarly, 27 per cent of MSPs believe 2017 will see accelerating growth, 58 per cent see growth as likely to be stable, while only 9 per cent see it as flat or declining. As the number of cloud companies and services continues to grow, the report concludes this will provide more channel opportunities around cloud management.

“Basing business just on referrals is tough,” April said. “We see more of the opportunity around being the orchestrator of all cloud solutions, around management. Solution providers do need to be creative to make money with cloud, whether by specializing in a vertical, or on anything to do with security around the cloud.”

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