The channel: Four decades of change

The past four decades have seen changes on all fronts, with economic highs and lows, different political parties moving in and out of Downing Street, and even a historic pandemic. Throughout that time, the channel has also been evolving not only to deal with the challenges of the time, but to ensure it has a position in the future.

Before we look forward, let’s look back over the past 40 years to get a sense of what the channel has gone through and what that evolution has felt like for those working in the industry. Some of the big shifts include the emergence of software as a primary revenue driver and – of course – the cloud. 

Tom Hermann, vice-president of channels and alliances at Synopsys Software Integrity Group

Forty years ago, channel partners were selling predominantly hardware and devices. Software solutions were just starting to be introduced by brand new companies such as Microsoft, Oracle and SAP that had only been founded a few years prior to address the emerging PC and server market outside of mainframes.

Fast-forward to today, not only are channel partners selling much more software than hardware (if any at all), but even that has changed to include cloud solutions now rather than infrastructure.

In addition, channel partners had to differentiate themselves years ago to provide much more “value add” in terms of services to go along with the solutions that they were selling. This led to the emergence of the value add reseller (VAR), which is essentially the de-facto model today, where most channel partners cannot survive on selling lower-margin products alone and have to be skilled at delivering services.

Dale Smith, director of UK&I channel at Juniper Networks

A lot has changed, but the core values of the channel remain the same. People have always bought from people, and partners sell what is easy to consume, consistent and profitable. However, the channel has evolved a great deal in how partners and resellers sell and who they target.

The way the channel uses data has also evolved over the past 40 years. Data has become the core advantage for partners and resellers to be able to target customers with the right messages at the right time. The use of such business intelligence tools – which includes known customer buying trends, key search terms and algorithmic analysis of predicted needs – means the channel is laser-focused on prospecting versus the old-fashioned cold calling method to generate leads.

Trust, commitment and investment together is what has always made the channel such a successful sector

While innovation has evolved the methods and ways that the channel operates, channel partnerships and the core values will never change. Trust, commitment and investment together is what has always made the channel such a successful sector. May it continue for another 40-plus years.

Marc Monday, global vice-president of strategic partnerships at Sage

In 1982, the disk operating system (DOS) was the emerging dominate operating system, with Microsoft having licensed 86-DOS from IBM and released PC-DOS 1.0 in August 1981. Windows was not yet invented and wouldn’t be commercially available until 1985. There was no public internet like we know it today, no commercially available cell phones, and software was mostly delivered via floppy disks. It would be another 16 years before Google would be founded, and  the iPhone wouldn’t be launched until 2007 – wow, a lot has changed in 40 years!

Over the years the channel has evolved and transformed with technology, always with the customer needs at the centre of all we do. In the early days, that was driving around to offices and doing a lot of onsite installs, fixes and management – connecting cables seemed to be an ever-present job. The channel continued to drive innovation forward from PC towers with 186K of memory, then doubling every couple of years – my first laptop weighed nearly 7KG.

The channel has evolved with each new technology shift, embracing technologies and helping customers to transform. Throughout it all, regardless of the common naming of channel partners (resellers, VARs, MSPs, CSPs and so on), they have focused on delivering high-value services, support and advice for customers to use technology to most effectively manage and transform their businesses.

Technologies have evolved, tech companies have risen and fallen, and with each new tech wave, the business models have changed and evolved, and – throughout it all – with partners providing trusted advice and services to customers.

James Rigby, CEO at SCC

Clearly the biggest thing to change in the channel over the past 40 years is the technology itself. At its most basic level, the role of the channel has remained the same: we take the latest technology and apply it in the most innovative ways to deliver continuous improvement and sustainable success for our customers.

What started with the PC revolution and memory chips has turned into advanced artificial intelligence (AI), robotics, and masses of data we could never have imagined. But it’s always been up to the channel to see what’s coming next and how these advancements in technology can be applied to complex infrastructure to keep resellers and our customers ahead of the competition.

This isn’t without its challenges in such a fast-paced and cyclical environment. But it’s the reason why the IT channel is still thriving and plays such a crucial role in the technology we all use every single day.

Charles Damerell, senior director of UK&I at SolarWinds

Having been in the industry for 20 years, there’s been a huge amount of change I have seen in two decades. Many reseller companies have been acquired, some disappeared, and a few managed to stick around and are doing well today. Some 20 years ago, distributors held a strong commercial role and were making much better margins. Customers relied on those distributors offering a one-stop-shop for everything from laptops to networking devices to software.

It was also a time when we were seeing the beginnings of the internet, with companies such as Cisco and 3COM acting as trailblazers. While there were a whole range of local networking companies, the past two decades saw the beginning of more global networking. American or Israeli companies were coming to the UK to work with key organisations that they could resell to or partner with in order to resell through.

Having a deep knowledge of both the technology and organisation has won the day.

It’s also worth reflecting on the fact that Cisco created the direct touch model, with salespeople promoting solutions to customers and help them understand the technology. Cisco’s main B2B partners were given “gold status”, and a lot of business was coming through those elite partners.

The key to all of this is that 20 years ago, the real value add was coming from the distributors or partners having not just salesmanship, but technical competency. Having a deep knowledge of both the technology and organisation has won the day. Well-run companies in the channel space have both stayed in business and grown in the past 20 years.

David Weeks, senior director of partner experience at N-Able

Some 15 years ago, when I started in the channel, the managed services opportunity was still a new conversation for many partners. Over the years, they have had to deal with various things: changing internet speeds, the arrival of remote access, evolving from the break/fix model, recessions, security threats, labour scarcity, the move to the cloud, and the rapid shift to remote work during the recent global pandemic to name but a few. Many MSPs in the channel are thriving and have shown the true value of the managed services model.

One word I would use to sum up the channel over the past 40 years is dynamic; it is constantly evolving and those involved do a fantastic job of adapting to support teams and customers as market changes emerge. I believe the future of the channel is extremely strong and will continue to evolve, with increased peer-to-peer engagement driving opportunity, as well as the channel and those within it making the move from regional to global players.

Andrew Forsyth, sales and marketing director at Brother UK

When Microscope launched there were obviously no online sales, before Dabs.com created a digital route to market that transformed how resellers could present products and solutions to businesses. The sector’s biggest players, from Computacenter to SCH Group, moved away from distribution to focus on developing their system integrator skills while investing in international growth. Many other resellers diverged into specific technologies, verticals and geographies.

The shift towards the as-a-service model has transformed the landscape too. It was always an aspiration, but it has taken time for much of the sector to get annuity models in place for the products and solutions they specialise in.

An evolution in customer-buying behaviours and the introduction of cloud technology has driven the change, and models such as managed print services (MPS) are now very advanced and proving to be strategically important for the sector as it offers customers greater scalability and cost flexibility – and, importantly, it’s giving partners the opportunity to strengthen their customer relationships, lock in revenues and forecast better.

Clare Loveridge, general manager of Europe, the Middle East and Africa (EMEA) at Arctic Wolf

It’s no secret the channel has undergone a substantial transformation, even in the time I have been working in it. Previously, sectors have been the domain of specialist resellers. However, a broader trend has formed with resellers creating one-stop shops for their customers.

“Channel partners...have realised there is now space for them to offer security solutions, which has arguably made resellers more attractive to end-users and more resilient to changing needs in their markets”

Clare Loveridge, Arctic Wolf

For example, channel partners, who have previously focused on sectors such as retail or finance have realised there is now space for them to offer security solutions. This has arguably made resellers more attractive to end-users (who now don’t need to negotiate with a host of different providers for solutions), and more resilient to changing needs in their markets.

Robin van Stroe, European partner sales director at Canon EMEA

The channel has gone through massive amounts of change over the past 40 years, and large numbers of mergers and acquisitions (M&A) have led to an ongoing state of flux. This surge in M&A activity and big changes in ownership should not mean a shift in levels of service for the end user. For channel businesses, it marks a time of uncertainty, which means vendors must continuously support partners and help guide them as best they can. 

Another way the channel has changed is in its capacity to meet a wider range of needs. Today, customers are looking for end-to-end solutions and services able to meet their hybrid working, security and sustainability demands. In response to this, channel partners have looked to diversify their portfolio in a number of ways – for example, many have moved from hardware-only offers to software and cloud solutions, and adopted new models such as as a service. Partners have demonstrated their adaptability to end customer needs, and are looking to future-proof their businesses for the long term.

Nick Bannister, UK&I vice-president of sales for enterprise computing solutions business at Arrow

As technology has changed, so have the types of business and business models that operate in the channel. The biggest catalyst for change has been the adoption of cloud and digital transformation, and with that the shift to subscription models and recurring revenues.

James Hudson-Dale, senior partner business development manager at IDnow

The channel has evolved significantly in the past four decades. In the 1980s, it was all about computers and hardware, accelerated by the likes of IBM and Apple. A pivotal moment which would kick-start the channel business was powered by Lotus 1-2-3 in 1982, which would see businesses beginning to rely on technology on a wider scale. This evolved even further when Microsoft partnered with IBM and MS Windows launched in 1985.

Over the following decade, computers would become a much more common sight in the workplace, along with other hardware such as printers and networking equipment. IT providers would become experts in their own field, later evolving into resellers as well as being there to provide external IT support.

Distribution and channel sales continued to drive adaptation and growth of new technologies including telephony, computers and networking. Software was often packaged with hardware up until the introduction of the CD-ROM in 1987, which subsequently made software more of a commodity.

“Today, there are circa 175,000 software companies, compared with 10,000 only a decade ago”

James Hudson-Dale, IDnow

In 1995, the World Wide Web would begin to influence commerce, culture and technology development. Software became a product in its own right, with the channel forming a major factor in software sales owing to the training, expertise and support that came with purchasing the product through VARs.

As wireless internet access was introduced and became the standard, distributors and resellers started to offer more diverse products and software, rather than just computers and networking.

Less than a decade later, software as a service (SaaS) would be widely adopted. Following this, in 2006, Google introduced the concept of cloud computing, further evolving the channel away from “box shifting”, i.e. having to adapt to a new era of accessibility and availability of emerging tech at scale.

Businesses began to operate in agile and innovative ways, exploiting new technology and the ability to grow fast and at scale. The continuing record number of tech startups from 2018 onwards have flooded the industry with unprecedented choice, allowing partners and resellers to begin forming direct relationships with vendors, therefore bypassing distribution channels.

Very recent history has also changed the landscape, with the pandemic changing the way we do business over the past two years. As a result of the truly global event, digitisation and technology adaptation has increased significantly.

Last, the software ecosystem has increased exponentially as the channel has developed. Today, there are circa 175,000 software companies, compared with 10,000 only a decade ago.

Hayley Mooney, general manager at Crayon UK

In my 20 years of experience with software, so much has changed, and yet so much has remained. I think back to the millions of physical boxes of the likes of Microsoft, McAfee, Veritas and Crystal Decisions that we sent out to resellers, who then had to handle logistics and shift them on to their customers. It’s astounding when you think about how much that must have cost all links in the chain.

In the early stages of my career, I sat on the licence desk, processing thousands of Microsoft OLP licences, and sent every single one out via email confirmation. Each person on the sales floor had a physical phone handset, a PC under the desk and a huge monitor. Nobody worked from home. We worked from 8am until 6pm every day and had product or sales training for one hour every morning. 

Most of the partners I looked after are still here today, though some have merged with other businesses or have been acquired. While some businesses weren’t able to keep up with the pace of change, the people have remained pretty static. Even today, it’s great to be able to say that I still work with many of my colleagues from 20 years ago in many different roles across the channel. We’ve all built long-lasting relationships that move with the people, so our networks are broader and richer than ever.

Celine Cazali, chief partner officer at SAP UK&I

Over the past 40 years, the market has become increasingly consolidated, with larger partners acquiring boutique and specialist partners to break into different verticals and sectors. No partner can do it all – we are constantly looking to build our own ecosystems, which means attracting and onboarding the next generation of partners. This has really shifted the dynamic within the industry and made it much more collaborative.

At SAP, we’ve witnessed this shift first-hand. Primarily driven by the launch of RISE with SAP and the cloud, we’re collaborating with a wider pool of partners that we previously wouldn’t have. Building true partnerships and innovating together in this way has not only helped to build a thriving ecosystem, but has been key to driving better results for our customers.