The channel opportunities in 2019

Looking forward into 2019, it’s hard not to escape a feeling of déjà vu. After leaving 2018 behind, a year dominated by Brexit, it would be nice to look forward to something different this year but, sadly, that looks increasingly unlikely. Brexit, it seems, is not just for 2016, 2017 and 2018, it’s for 2019 and who knows what else.

We’ll come back to Brexit later. In the meantime, let’s take a look at two significant issues for the channel for 2019 (and for any other year): where will the main opportunities for channel businesses arise and what will the main threats be?

It should come as no surprise to hear words like “cloud”, “IoT”, “as-a-Service”, “digital transformation”, “converged infrastructure”, “automation”, “AI”, “machine learning” and “security” mentioned when it comes to identifying “channel opportunities” over the coming year. After all, many of them were used 12 months ago.

One thing everyone is agreed on is that the traditional reselling model has had its day – something they were also saying in 2016, 2017 and 2018. Phil Jones, managing director of Brother UK, puts things in stark terms. “2018 has witnessed even more high profile channel and high street names disappear, which leaves a vacuum for others to fill in 2019,” he says. “In the IT space, consolidation continues and we may see international M&A activity increase in the months ahead.”

All this is set against a backdrop of relentless pressure on margins with buyers prioritising price in their buying decisions and the IT industry becoming more commoditised. “This could cause problems for independent resellers that haven’t protected their customer base by moving to a more service-based business model,” Jones warns. 

He foresees a continued decline in the number of traditional transactional resellers in the face of competition from ‘born in the cloud’ resellers that provide exclusively cloud-based services, rather than hardware and software licences. “These businesses are already generating more than half their sales from recurring contracted revenues, which makes them very resilient,” he notes.

Justin Sutton-Parker, Citrix Northern Europe partner director, says that some channel partners have already shifted from selling items to “selling services that deliver a business outcome”. With more business leaders being appointed CIOs and CTOs, discussions around the real impact of IT solutions are taking a priority over the finer details of IT infrastructure.

As a consequence, channel partners are “also shifting to conversations focused on business intelligence and how technology can drive better business outcomes. To differentiate themselves from the competition and really cater for customer needs in 2019, partners will need to focus their efforts on ensuring they can deliver on business outcomes rather than selling point solutions”, he adds.

Matt Eckersall, EMEA West regional director at SUSE, frames this in the context of customer satisfaction which “will be a top priority for the channel in the year ahead”. To make the transition to become a trusted advisor, partners need “to go beyond selling solutions”, which means going “the extra mile to prove that they develop smooth working relationships and possess an open and collaborative mind-set, extending past their own corporate boundaries”.

Karl Roe, VP of services and cloud at Nuvias, agrees that “the tradition of simply reselling products is no longer enough to create real customer value and a successful business.” The role of the channel is changing, he adds, “to reflect the need for true systems integration, in terms of connectivity and user IT systems”.

What this means is that there is more to life than plugging equipment together and configuring it. “The channel needs to extend its portfolio of ‘off-the-shelf’ products and develop specific and maybe even bespoke software and applications, to deliver tailored solutions that support their customers’ drive for so-called digital transformation and change the way they operate,” Roe states.

So-called digital transformation? That’s an interesting choice of words when so many others in the industry make no such qualification. Sutton-Parker believes that some channel partners are already trying “to appeal to businesses undergoing digital transformation” and they are doing so by “offering consultancy for these transformational services”.

With cloud, for example, it isn’t enough for partners “to come in with a cloud solution”, he argues. Instead, they “are looking at the business challenges on a consultative basis and creating a step-by-step approach for the customer to follow”. Sutton-Parker claims that some channel businesses “are already investing in consultants to make the most of this market demand but we will see more following suit in 2019 to cash in on customers’ appetite for consultancy”.

 Physical to digital

Carlo Longhi, Xerox’s director of channels, is expecting “the continued acceleration of the channel industry’s transformation from physical to digital” this year. The shift to digitisation will extend beyond hardware with more and more SMB customers relying on trusted partners “to support their transitions, allocating more resources towards managed services in particular”.

From Xerox’s perspective, he believes SMB customers will look to managed service providers (MSPs) to provide assistance in managing their hard copy archives and converting their data to digital. This will “require services around large volume and bulk scanning, indexing and inputting into document management solutions and providing online access to searchable data thereafter”.

Kaseya chief strategy officer, Mike Puglia, urges MSPs to “harness the power of SMB customers who will continue to drive big technology growth” in 2019. “MSPs that don’t have an SMB-centric strategy in place will lose out,” he argues. “SMBs consume technology in a less expensive yet more efficient way than their larger counterparts and as such, vendors and MSPs must offer products that are easy to consume and easy to do business with.”

A point echoed by James Pittick, director of B2B indirect sales at Canon UK, who agrees that there will be increased opportunities for partners that can support a managed service. “The trend is leaning towards digital convergence and services offered by partners are becoming more prevalent and essential,” he observes. “It is now important to see MPS [managed print service] as a full IT service.”

Still on the subject of print, Neil Walker, channel marketing manager at PFU EMEA, says there will be “numerous opportunities” for partners presented by the “always on” nature of today’s work and home environments, for example in the creation and sharing of digital documents, the uploading of documents in the cloud to share or large scale digital transformation projects.

He claims that, for many, document capture is “the on-ramp and first step in a digital transformation journey and by unlocking data from its paper prison and in gaining new insights from the information now available – businesses are able to drive innovation and take advantage of new found opportunities”. What this means, he states rather bullishly, is that “there has never been a better time for our channel partners to capitalise on their expert knowledge and experience as the early pioneers of digital transformation”.

But digitisation also brings its own security concerns. As Pittick acknowledges: “Increased connectivity from IoT devices in the office will lead to a rise in security threats.” A business is only as secure as its weakest connected device so organisations will need to work to alleviate risks to remain secure. “Partners have an important role to play here by working in close collaboration with customers to ensure their devices are robustly secured,” he adds.

As a service

Roe at Nuvias says another big trend for the channel will be an acceleration of traditional resellers and newer channel players “to embracing the as-a-service model” at the same time as existing service providers move into new services, such as adding security to their managed service provision. He also believes that DevOPs-as-a-Service, fixed cost software development and integration, could provide “great opportunities” to expand the as-a-Service delivery model.

Mike Conlon, VP of channels at Mitel, agrees that 2019 “will be a decisive year for channel partners transitioning away from traditional hardware sales to the more flexible, customer-centric SaaS business model”. The cloud will give partners the opportunity to deliver products using an Opex consumption model. He identifies unified communications-as-a-service (UCaaS) and contact-centre-as-a-Service (CCaaS) as the two main tech trends for channel partners in Mitel’s space to watch. “Channel partners should focus on training their sales teams accordingly to handle customer implementation and support needs,” Conlon adds.

Roe expresses optimism for unified communications in 2019, although he accepts that “the speed of adoption of unified communications in 2018 has not met many predictions made at the beginning of the year”. Nevertheless, he believes that user data on the consumption of UC services “will allow businesses to see how staff collaborate and interact to improve productivity and to also measure user adoption”.

On a more generic level, Nick Miles, Okta director of regional alliances, predicts that more SaaS vendors will enter the channel over the next 12 to 18 months because they are “realising its importance, and partners themselves will need to embrace this openness to drive maximum value from their ecosystem. Ultimately, people buy from people, which is a key value added service of the channel”.

This will require channel partners “to change their mindset to meet the demands of a SaaS world”. What this means in practice is a shift from focusing “their efforts on a handful of vendors bringing in the most income, which are typically on-premise based vendors”. As they move “towards a growing SaaS model, channel partners will need to take a risk, avoid being scared, and dip their toes in this new world”.

Speaking of new worlds, what about Brexit? Dave Oddie, Eaton data centre and IT channel manager, warns that a “key challenge for channel partners in 2019 will be maintaining their focus on organisational goals without being distracted by major macro-economic trends or events, such as Brexit”. He says it’s important they do so because “uncertainty and a lack of vision are quick routes to immobilising an organisation. In a year when many companies are hoping to do business early given a potentially tough second half to the year once the UK has left the EU, those paralysed by doubt will struggle”.

Oddie believes that “organisational capabilities and supplier-customer relationships may be tested in a post-Brexit world where channel partners are required to manage tariff fluctuations as well as navigate around tighter borders”. That’s if there is such a thing as a post-Brexit world, of course. In any case, it’s fair to assume that “not every vendor, distributor or reseller has a clear strategy for how success can be achieved. In today’s market landscape, remaining agile is key. Channel organisations must proactively prepare for these eventualities to avoid being paralysed by uncertainty in a year of major change”.

Brexit

Miles at Okta points to “the huge shroud of uncertainty of Brexit” looming over 2019. He adds that “without a clear idea of how businesses should react to Brexit, the channel will need to be flexible and move accordingly to their customers and the market”.

Jones at Brother wonders whether Brexit will “be the millennium bug 2.0, a lot of scare with little consequence, or a genuine shift in the economic fortunes of the country? Time will tell,” he says. “In the short term, supply chain predictability in Q2/Q3 of 2019 will be critical. In the event of a ‘no deal’, the ability to get goods coming into the country quickly will be key to supply chain integrity”.

Steve Bailey, commercial director at Agilitas IT Solutions, agrees that 2019 is likely “to be a tumultuous year in terms of the sociopolitical climate in the UK, as well as further afield”. But to thrive in such an ever-changing landscape, he argues that collaboration among channel businesses will be more critical than ever before. 

Despite the threats posed by Brexit in terms of potentially decreasing business opportunities for UK companies in the EU market, Bailey says that “one of the main opportunities for channel businesses in 2019 will be in international expansion”. He argues that going global “will allow companies to take advantage of other markets and collaborating with other channel businesses is the ideal way to counter the increasing uncertainties associated with doing business today”. And tomorrow. And the day after.