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Canalys: There are reasons for optimism
Chief analyst shares reasons why the channel should be positive, but encourages investment in emerging technology and services to remain relevant
Although the overall vibe of the Canalys Channel Forum keynote was downbeat, particularly about the prospects of the hardware market, the event did have some moments of optimism.
The reality is that the channel has enjoyed a few strong years, but 2024 has been difficult. Wars in Eastern Europe and the Middle East, and elections across major Western countries, have exacerbated customer hesitancy around spending.
“The channel has seen the worst performance over the years in particular, of the last several decades,” said Alastair Edwards, chief analyst at Canalys. “We track all of your financial performance, and we saw the decline for the first time in distribution and resale in the last three quarters. Even as macroeconomic indicators start to improve, our customers are still cautious. They’re nervous about the wider geopolitical situation, they’re constraining their budgets, and their extending sales cycle is hard to drive growth.”
Having laid out the grim reality, he shifted to a more upbeat tone about why the channel should be more positive about the future.
Edwards pointed to a recovery in the PC market, cyber security, infrastructure and managed services as beacons of growth that would produce single-digit growth in the second half of 2024.
He said channel customers faced challenges, had evaluated their attitudes to risk, and were looking for help mitigating their potential exposure to threats and downtime.
There would also be opportunities for partners that could help deliver the returns around artificial intelligence (AI), while getting the balance right between on-premise and public cloud continued to be an issue the channel could help firms deal with.
Sustainability goals
There were also sustainability goals that required customers to look at power consumption and work with partners to try to lower their emissions.
“All these challenges open up new potential routes to growth, but we are just at the start of a period of accelerated transformation with our customers fuelled by AI, which means that if you are not staying at pace with them, with their change, you’re going to become irrelevant,” said Edwards. “What this means is the only way the channel can maintain relevance is to adopt a similar approach of accelerated change, of transformation.”
He said there were already firms in the channel taking steps to improve their offerings, with the likes of Ultima, which has embraced AI and embedded it into its services, an example of adapting to change.
Insight was another example of a firm that had widened its revenue base by expanding its services capability, often via acquisition, countering some of the impact of a declining hardware market.
Edwards also cited Advania, which yesterday acquired CCS Media, as an example of how focusing on sustainability could help the firm add fresh revenue lines.
He said those that did come to the market with a compelling proposition would find a welcome audience, not only from customers, but also vendors. “Almost all vendors are telling us they want to get closer to the channel,” said Edwards. “They want to rely more on partners to deliver services, deliver solutions, to help them scale efficiently, particularly as they cut their own internal resources.”
He recommended the channel embraced digitisation to participate in marketplaces, invest in skills or collaborate with others, and finally, to continue to innovate, because “innovation is going to underpin your ability to change”.
