Business Models Blending for U.K., EMEA Channel Partners
Learn how reseller, integrator, MSP and agent models are evolving and merging in Europe.
![EMEA channel partners see business models blending EMEA channel partners see business models blending](https://eu-images.contentstack.com/v3/assets/blt10e444bce2d36aa8/bltf8504d90f2af8ee6/6523f0e99bb5a77eb7442ebd/Blender.jpg?width=700&auto=webp&quality=80&disable=upscale)
S_Photo/Shutterstock
Stuart Wilson, senior research director for IDC‘s Europe, Middle East and Africa (EMEA) partnering ecosystems program, said large businesses are turning to MSPs more than ever. Specifically, enterprise co-management opportunities have ticked up, he said.
Why has that happened? Wilson said enterprises shifted to view technology “as an enabler as opposed to an anchor.”
“And that was simply because on the back of COVID-19, many larger enterprises, whether that be Fortune 500 or whatever, were saying, ‘Actually, we’re not as agile or as quick to get up and running as some of the smaller players. How do we close that gap? Well, we need to outsource some of this, or we need help around digital transformation.'”
Wilson said large companies are registering concern about their ability to compete with more nimble SMB and SME rivals.
Greg Jones, Datto/Kaseya’s vice president of business development for EMEA, said the MSP operational maturity model is growing at a fast clip.
“Typically when you look back at the MSP channel business, the U.S. usually leads the charge. It used to be around five years ahead of the U.K. market. However, that gap is closing. That’s [now] about three years in terms of business operational maturity level for some MSPs,” he said.
He noted that less mature MSPs tend to serve a higher number of verticals. On the other hand, he said more mature MSPs aren’t focusing on a given vertical at all, but rather business characteristics.
“They’re looking for customers who are looking for business outcomes. They’re the ones with more business aspirations, goals, dreams, not working with lifestyle businesses,” he told Channel Futures.
Security is top of mind for most MSPs in Europe. Jones said the secuity market is growing rapidly.
“A lot of MSPs who are solely focusing on security and leading with security, are seeing double the monthly recurring revenue of traditional MSPs, which is a huge opportunity for MSPs to be able to focus on that,” he said.
Stephen Harley, presales director at U.K.-based MSP ACS, said the MSP community is still maturing in its depth of cybersecurity services.
“If I rewound four or five years, I think everybody in the MSP space was scrambling around to have a security-as-a-service offering, which vary massively from, ‘I will sell you Microsoft 365, and we’ll turn on Microsoft security basics,’ to, ‘We’ll do something with the higher end capabilities,'” Harley told Channel Futures. “I don’t think we are yet in that vision of being fully turnkey and having all the facilities under one roof. I think that’s still a little way away.”
ACS, for example, includes security as a service as a component of its managed services. That comprises both in-house talent, such as ethical hackers and Cisco engineers, as well as a product set from vendors like KnowBe4 and Barracuda. But the creation of an actual security operations center (SOC), with all of its staffing demands, doesn’t currently look viable for a partner of ACS’ size in the short-term.
“What we built and will continue to grow is a platform where we’re using partners and blending that with our own skill,” he said.
Is a software focus driving the MSP growth into larger customers?
Kaseya/Datto’s Greg Jones (pictured) said it is. Moreover, Jones said customers have more choices than ever before due to the way technology is changing.
“If we look back 10-15 years ago, technology was very rigid, and businesses had to mold around technology. Whereas in today’s digital business age, it’s no longer the case. Technology molds around the business … if you can think it and imagine it, it’s possible with technology now at a more affordable price,” Jones said.
Wilson added that hyperscaler cloud spend agreements are driving demand for outsourced IT services. He said that this trend has surfaced at the enterprise level in North America, and now it has reached EMEA.
“A large customer will commit to a certain amount of spend with Azure, AWS or Google and then they want to burn through that committed cloud spend. So if you’re a partner, and whatever you’re putting in front of the customer has a software element, the customer says, ‘I need to buy that software element through the marketplace. I need it to happen in that way to burn through my committed cloud spend, even if it’s third-party software,’ and this is now starting to move into services,” Wilson told Channel Futures.
Although conversations about software and cloud growth have often relegated hardware to an afterthought, equipment sales comprise an important part of ACS’ business, Harley said.
Even the pandemic, so often associated with a mass movement to the cloud, involved hardware in a big way.
“We sold every man and his dog a laptop in 2020, but they’re getting a little bit old now. So they’ll be wanting to replace those at some point soon. So hardware is not going away,” Harley said.
In particular, Harley said those customers who moved to the cloud are still leveraging server and storage equipment as part of their hybrid work strategy.
“It’s really important. It gives us buying power with the vendors, our clients want it, and it still drives profit,” he said.
Harley said smaller MSPs likely would express more reluctance around hardware sales, however.
“They’ll perhaps see margins a little bit tighter. Getting credit lines, if you’re not a part of a VC, might be a bit more more challenging. So if you talk to some of the smaller MSPs out there, they’ll do it, but they’ll perhaps do it with less joy in their heart,” Harley said.
Harley (pictured) said ACS represents a typical U.K. MSP partner. The 28-year-old company employes about 95 people. And its business mixes hardware, resale and recurring revenue, Harley said. It has historically targeted small and medium-size enterprises (SMEs).
He said ACS, like all partners, battles to find, and retain the best IT talent. And that challenge is occuring at the customer level as well, which is driving more demand for MSPs.
“Skill set is a real commodity. It’s hard to get good engineering, good technical skill to deliver a project. It’s harder still to retain it,” he said.
Partners historically face the challenge of keeping their employees from going to much larger vendors, who perhaps can pay more or offer deeper benefits. However, recent vendor layoffs have opened up a deeper pool of talent for partners like ACS.
And partners have always offered a unique value proposition for ambitious IT professionals.
“We’re engaged in major project after major project after major project after major project. You will develop your career much more quickly than you will perhaps with internal IT or even with a fast moving organization,” Harley said.
Partner movement to recurring revenue models is occuring all across the globe, with EMEA no exception, Jones said. Specifically, many traditional European value-added resellers (VARs) are adopting managed IT services. And COVID-19 accelerated that pivot.
Take, for example, the managed print industry.
“A lot of those revenue streams were turned off overnight, then when it came back, people didn’t print as much, and business didn’t bounce back as much,” Jones said. “They thought, ‘Well, how do we protect that revenue stream? How do we convert the monthly recurring revenue? How do we look to get into the MSP landscape?'”
And the movement of European VARs into the managed services space often takes the form of mergers and acquisitions.
German solution provider Bechtle, for example, closed the acquisition of ACS in late 2022. The deal will put ACS on the map with larger midmarket customers.
“From an ACS point of view. it gives that opportunity to grow into those larger clients. It gives us that greater brand recognition. It gives us that that backing that we need,” Harley told Channel Futures.
On the other hand, the deal represents both Bechtle’s expansion into the U.K. as well as its expansion down-market. Bechtle had been running a U.K. branch for decades but lacked in-house engineering capabilities on the island, Harley said.
“Obviously it gives them that that resource on the ground. So that merging to try and take that and then build it into a bigger MSP and value-added reseller really works,” he said.
The deal doesn’t only reflect the tendency of VARs to purchase MSPs. It reflects the maturation of the MSP space to the point where a large group of owners feel ready to do a transaction.
“You’ve got a generation or so of MSPs that have built up to a certain size and people who are looking to make an exit or to buy,” he said.
Dipping into recurring revenue does not always entail an outsourced IT division. Some VARs are adopting an agent model for parts of their portfolio. In that model, the recommended vendor bills the customer and provides the partner a monthly commission for the life of the software or services contract. Partners sign agreements with technology services distributors (formerly known as master agents) in order to sell any vendors from the TSDs’ massive portfolios.
And for VARs that have historically only sold a handful of vendors, working with a TSD can fill significant gaps in their line card.
“If you’re working with a VAR who has clients across big, multinational companies, they’re not going to be able to sell everything to them. And they’re going to be saying no to a lot of stuff: ‘We don’t do that.’ So that’s where we can come in and enhance their portfolio,” said Rob Merhej, vice president of EMEA for Avant.
Leaning into agency sales helps these partners not just deepen their technology portfolio, but also their geographical footprint.
“Outside of the U.,K., If there’s something in Europe or colo in Europe, or they’ve got a site here that they need backup and disaster recovery, they can’t do those services on the continent. They’re doing all of this great business – multibillion pounds’ worth of revenue – just in the U.K.,” said Paul Harris, Telarus‘ regional vice president for EMEA.
However, the agent channel looks dramatically different in North America than it does in Europe. Specifically, most of the partners that sell in the agent model do so as an addition to a pre-existing business model.
“There aren’t any pure agents and if there are, they are because we’re here,” Merhej said. “There’s not a traditional agency channel really in the U.K. or Europe. We don’t do it that way. It’s very much a resale wholesale, put-it-on-your-paper. That’s the way that we’ve done it historically.”
Over the last five years, multiple TSDs have moved into the U.K. and Europe. Intelisys/ScanSource reportedly came first under the branding of intY. Avant, TBI (AppDirect) and Telarus have also ventured across the pond.
But on this new continent, TSDs have needed to adopt a start-from-scratch approach to partner recruitment. Rather than bringing in an existing technology advisor into their portfolio, Merhej said TSDs said they sell partners on the model itself.
“In the U.S., you could go to a partner and say, ‘Hey, we’re Avant. You do this already. You’re working with Intelisys or Telarus. You can work with us,’ and it’s kind of simple,” Merhej said. “Here it’s like, ‘We’re Avant. Let me tell you about what we do. And then I’m going to talk to you about a new model, how you make money.’ You have to really break it all down and explain the whole model to them.”
It comes down to “finding the gaps” that makes sense for a TSD to fill for the VAR, he said.
“We’re not trying to disrupt anything that they do; we’re just giving them more options,” Harris said.
On one hand, TSDs are pitching the technology advisor model to partners that are entrenched in a resale model. On the other hand, the technology landscape looks very different. In particular, connectivity solutions may not function as as much of a foundation as they do in the United States.
The agent market in North America originated as a community of partners that referred services from different telecommunication service providers. But European telecom markets tend to lack the deregulation that opened up a wide portfolio of carriers for agents to broker.
“There’s no CLEC here; you don’t need that. I can start a business tomorrow with no trading history, get a reseller agreement with BT, with Gamma Mobile, all these partners, and I can resell it to customers,” Merhej said.
Avant recently signed a deal with U.K.-based Vodafone to pursue customers both in North America and internationally. But there remains significant headway on convincing other European service providers.
“We’ve spoken to some other domestic carriers in Germany and France, and they are very against it. They’re like, ‘What is that about?’ I think France and Germany are going to be the toughest,” Merhej said.
That’s not to say that agent-led network deals aren’t occurring in Europe. Merhej said that these deals generally occur when the advisor refers a single supplier for a wide-area network spanning multiple locations and multiple continents. Partners are more likely to deliver a managed SD-WAN or SASE offering, rather than piecing together different circuits from disparate providers.
“It’s difficult to do that and save money in Europe. Most of those vendors are actually putting the commission on top of the price rather than just saying, ‘Oh, it’s part of it.’ And that’s the difference. So that’s why we have to focus on a bit more of a solution,” he said.
Vodafone has signed TSD agreements with Avant and AppDirect with a mind to expand its presence in North America. The carrier joins a growing list of European and Asian telcos that are expanding in the U.S. through TSD partnerships.
But David Joosten, director of Americas and partner markets for Vodafone, questions whether U.S. telcos will make the same channel investments outside their home countries.
“It’s a bit to be seen whether the U.S. carriers are going to be successful selling their services in Europe. I think the U.S. carriers have over the last couple of years quite retrenched in the European market,” he said.
Rob DeVita leads U.S.-based technology advisor Mejeticks. He said his firm faces the challenge of identifying providers that possess regulatory approval for managed services across the globe and allow partners to register deals in the U.K.
“Once you get to over 65 international countries, the list of providers who can ship, install and have regulatory approval to manage devices gets very small,” DeVita told Channel Futures.
DeVita said Mejeticks has found success in global deals with managed SD-WAN/SASE providers Aryaka and Cato. It is also eyeing recently merged Comcast Business and Masergy.
Although partners see limits on how they can tackle the European telecom market, cloud communications is another story.
Technology advisors saw a huge opportunity during the pandemic to consult customers on the large field of unified communications as a service vendors. That allowed the TSD market to take off in a big way.
“The UCaaS explosion really helped us in our model because some of those partners, the vendors even, they wouldn’t do any other model. Early on, RingCentral would only do referral. So everybody in the U.K. was getting used to that,” Merhej said.
Merhej added that Avant views UCaaS, contact center as a service (CCaaS) and cybersecurity as prime technologies for agents to sell.
One shift occurring, however, is the increased prominence of CCaaS.
“With UCaaS being more and more commoditized with price-per-user going down, it made sense to move into more CCaaS, and then UCaaS will be a byproduct of CCaaS rather than the other way round,” he said.
IDC’s Stuart Wilson (pictured) said a trend holding back mass adoption of the agent/advisor model is fear of losing influence with the customer. A typical agent sale involves the supplier directly billing and supporting the customer, and some VARs and MSPs view that model with concern. As VARs in the U.S. have reported, keeping the customer on one’s own paper often feels paramount.
“There is this resistance to it to some extent, especially from a lot of the traditional, smaller partners, because they’re worried about the impact on their business model, on their finances, on their revenues on everything. They’re scared that they’re losing the customer if they go down an agency model,” Wilson told Channel Futures.
Harris said Telarus has engaged with that concern. He said turning to the TSD/agent model can preserve a VAR’s customer relationship by letting the VAR sell previously untapped services.
“If they don’t think that their relationship is the most important part of that equation, then then we probably aren’t right for them,” Harris said.
Avant in the beginning of its European expansion onboarded CDW’s U.K. division. And that company remains a key partner for Avant in EMEA.
“We’ve built a whole new section for them. We obviously worked with them in the States, but they didn’t do that model here,” Merhej (pictured) told Channel Futures.
He said CDW’s rationale for adding a U.K. agency practice resembled its rationale for adding a U.S. agency practice: expanding their solution set in a cost-effective manner.
“They wanted to get into telecom a bit more. And doing it on their paper and bringing all the vendors directly takes too long,” he said.
In addition to large resellers and system integrators, Avant is also bringing consultancies and small boutique resellers into the advisor model.
“There are some pure agents, which is great, but what we are looking for, and the typical type of partner we go for, are VARs or smaller resellers that are either struggling to sell services or they want to go into that model,” he said.
Paul Harris (pictured) joined Telarus in 2021 as regional vice president for EMEA.
Harris, a former business development manager for Gamma Telecoms and CDW UK, said he sees an opportunity to build a model and a partner demographic that’s unique compared to what Avant is doing. Specifically, Harris said he sees opportunity to bring MSPs into the agent model.
Harris said the agent model can offer MSPs the opportunity to owning more of the competitive landscape. For example, customers may be asking MSPs for an expanded set of unified communication options. Partners that aren’t accessing the wide portfolio the TSDs offer may need to say “no.”
“You get more chances to be more valuable to your customer if you’re not just carrying a Cisco and an Avaya bag,” Harris told Channel Futures.
Vonage works with a variety of partner models in Europe. Adam Wilson, director of strategic partnerships for EMEA and Asia Pacific said Vonage is engaging with both commission-based TSDs and resale-based wholesale partners. On the TSD side, Vonage works with Avant, Telarus, AppDirect/TBI and London-based 186Kcloud.
Vonage’s portfolio includes unified communications (UCaaS), contact center (CCaaS)and communication APIs (CPaaS). For the latter, Wilson said API developers and CRM systems integrators are key partner demographics. In addition, Ericsson’s acquisition of Vonage will bring service providers into that base.
For UCaaS and CCaaS, technology advisors and their TSDs play a big part, Wilson said.
He said Vonage is still searching for the partner that sells the single stack.
“In the domain of IT, generally speaking, you have the attention of an IT manager, who has at their fingertips the telephony estate of the organization and is typically looking to transform that telephony estate into the cloud,” Wilson told Channel Futures. “And what we find is that the partners that we work with in the trusted advisor/agency domain, they’re predominantly in that area. That therefore requires our unified communications capabilities. And in some cases, you see a pull-through of mainly contact center. We have yet to see the same type of pull through for API business. But it’s very UC-led.”
Vonage works with a variety of partner models in Europe. Adam Wilson, director of strategic partnerships for EMEA and Asia Pacific said Vonage is engaging with both commission-based TSDs and resale-based wholesale partners. On the TSD side, Vonage works with Avant, Telarus, AppDirect/TBI and London-based 186Kcloud.
Vonage’s portfolio includes unified communications (UCaaS), contact center (CCaaS)and communication APIs (CPaaS). For the latter, Wilson said API developers and CRM systems integrators are key partner demographics. In addition, Ericsson’s acquisition of Vonage will bring service providers into that base.
For UCaaS and CCaaS, technology advisors and their TSDs play a big part, Wilson said.
He said Vonage is still searching for the partner that sells the single stack.
“In the domain of IT, generally speaking, you have the attention of an IT manager, who has at their fingertips the telephony estate of the organization and is typically looking to transform that telephony estate into the cloud,” Wilson told Channel Futures. “And what we find is that the partners that we work with in the trusted advisor/agency domain, they’re predominantly in that area. That therefore requires our unified communications capabilities. And in some cases, you see a pull-through of mainly contact center. We have yet to see the same type of pull through for API business. But it’s very UC-led.”
Swim lanes are blurring for EMEA channel partners as firms adopt different sales and service models.
European partners are evolving their models in big way, evidenced by M&A, rapid hiring and new partnerships. Stuart Wilson, senior research director for IDC‘s Europe, Middle East and Africa partnering ecosystems program, said the average European partner has grown “incredibly fluid and dynamic” in its model.
“You can’t draw those separating lines between partner types anymore. We’re talking to some of the largest global systems integrators out there, and they’re now becoming MSPs that are looking at the midmarket and below.”
Wilson said smaller resellers that work with IDC’s partner advisory board report seeing brand new competitors in their down-market territory. At the same time, some of those smaller partners are getting more opportunities with bigger customers than they’ve ever seen before.
“They still have this idea that everyone stays in their swim lane, and it’s all nice and friendly. But it’s not like that anymore. Because the way that technology has evolved – the move to cloud, the move to SaaS, the move to everything as a service – is suddenly enabling these new ecosystem models to build and develop that we haven’t necessarily seen before,” Wilson told Channel Futures.
EMEA Channel Partners Adopting ‘Coopetition’
IDC’s Stuart Wilson
And in many cases, partners are accepting a new sense of coopetition.
“In the past, it was always quite neat. It was always the vendor and one partner packaging that together for the customer,” Wilson said. “And now that that’s broken — that’s gone. You can have different partners working together to serve a single customer to help that customer, implement a solution, run a solution and optimise a solution.”
In the meantime, a younger channel partner model is seeking to break into EMEA. U.S.-based technology services distributors (TSDs) have set up shop in the U.K. in last decade, and they say increase demand for cloud-based communications technologies is giving them a foothold in the market. Nevertheless, the TSD community must work hard to convince long-established partners of the value of the residual, commission-based agent model.
Telarus’ Paul Harris
“The market itself here is our competition. The channel over here is probably 90-95% resale, wholesale and systems integrator. And we’re probably five to 10% of the market,” Telarus regional vice president for EMEA Paul Harris told Channel Futures.
Channel Futures recently visited London and interviewed several U.K.-based groups about the state of the EMEA channel partners community. Read highlights from the conversation, including observations on the VAR, MSP and technology advisor markets, in the images above.
Want to contact the author directly about this story? Have ideas for a follow-up article? Email James Anderson or connect with him on LinkedIn. |
About the Author(s)
You May Also Like