Canalys: The glory days of hardware are over

The channel is at an inflection point, shifting from a traditional hardware world to one dominated by software and services.

This was the grim edge to the keynote from Steve Brazier, co-founder of Canapii, at the Canalys Channels Forum in Berlin, as he cast a sober eye over the challenges that had faced the industry in the past year.

He said that, fundamentally the channel, was at a point where the old rules would no longer apply.

“For 30 years or more, the channel has been easy to run. You thought you were all business leaders and geniuses the success you had, but if we boiled it down, you sat there, you waited for new hardware products to launch in different categories, and you followed that growth as those different categories grew year after year,” he said.

“Unfortunately, we’re calling a turning point today in that 30 years, which is essentially across the board, the hardware industry is no longer growing, whether that’s printers, PCs, servers, storage, Wi-Fi, routing or all our major categories, they are all essentially flat.” 

Brazier advised the assembled distributors, MSPs and resellers to change their businesses and embrace software and services.

“If your hardware, through your organisations, is not growing and unfortunately unlikely to grow over the next three years, unless we defend a new miracle category, then software and services is where you need to focus,” he said.

He accepted that it was not a transition without its challenges but one that the channel has been urged to make for years.

“Services work is extremely difficult because it encompasses so many things: managed services, professional services into the ESG-type curriculum...It’s a very complex subject,” Brazier said.

“If you want to move into the services space or into professional services, that will depend on the quality of your individual leadership. Many people fail to make the transition.

“If you run a hardware-led business, your primary job is to manage the salesforce and the sales pipeline, to retain your sales force every two years through the accounts and look at renewals, etc. If you want to be a professional services company, you need a different culture.”

The software industry is not easy either and the arrival of marketplaces…distorting natural market behaviour, but also driving standardisation of purchasing. Standardisation of RFPs is disruptive to what’s going on in software,” said Brazier.

He added that the shift would be an evolution for many partners that not all would love at the same speed.

“Over the next three years, we’ll expect to see some partners pull out of hardware. Those who stay focused on hardware will continue to gain market share as less people participate in that marketplace, which is another valid position to take as this industry moves forward,” he said.

Despite the difficulties faced over the past year, there were still some reasons to be optimistic, with cyber security remaining the “gift that keeps on giving”.

“Cyber security is still a double-digit growth business. Those of you well-positioned in cyber security are definitely in the best place to be,” said Brazier.

Luca Rossi, president of IDG and executive vice-president of the Lenovo Group, said that he was feeling more optimistic about the prospects for the hardware market. “We are witnessing maybe the biggest and the most profound transformation of PC, and not only PC, over the past 30 years,” he said.

He pointed to the wave of AI PCs coming as evidence that the hardware market would grow next year and into 2026.

Dimitra Darda, general manager of device partner solutions sales for EMEA at Microsoft, was also upbeat, pointing to the end of Windows 10 support as a moment that would spur a significant tech refresh and bolster partner revenues.