Canalys Forum 2021: Top 5 Channel Trends
Canalys makes some predictions for the channel. One might surprise you.
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The technology industry is facing a new period of customer demand and expectation. Every business is digitised as a result of the pandemic.
As a result, the importance and relevance of the channel is tied directly to its ability to help customers on that digital journey.
“Organisations are undergoing a fundamental shift in their IT decision making as they prepare for an uncertain future,” said Canalys chief analyst Alastair Edwards. That is “driving acceleration in multicloud, hybrid IT and now edge investments as well as automation and AI technologies.”
“More than anything, customers are looking for a partner who can help them on that journey. They want a partner who can lead the conversation from a professional services perspective, not just a supply perspective. A partner who can help them plan their future technology road map, when no blueprint exists for this. And they want a partner who can help them with the compliance, regulatory and cybersecurity challenges.”
Edwards said that customers want a partner that can de-risk the process as they become more technology dependent.
“They face the risk of making the wrong investment decisions in terms of hybrid and multicloud. Or getting locked into one vendor or platform.”
Moreover, he said the biggest threat to the channel is a failure to keep up with these demands.
“Customers … are finding the skills they need to make those decisions are actually lacking in their channel partners,” he said. “That’s going to drive customers to do one of three things. They’re going to turn to vendors to provide those skills. They’ll find alternative IT partners, or they’re going to build those skills internally.
“For the traditional channel, the opportunity to generate product and services revenue will depend on building those skills on partnering,” he added.
For channel partners, the changing expectation of customers is one of the biggest challenges ahead, said Edwards.
“The leap to digital has led to a race against time with customers now expecting everything instantly and on demand. Whether that’s infrastructure, applications, or even business outcomes,” he explained.
“At the same time, the digital leap massively increased the complexity of IT, while as an industry we face growing supply shortages. So we’re facing a stark dilemma in the industry and the channel. How to meet these new demands in terms of speed of access and availability, while lead times and skill shortages are actually getting worse?”
Edwards said customers expect cloud services to be turned on instantly. They also want them connected to their preferred firewalls. They want to use container technologies to migrate workloads seamlessly. And they want all of that fully tested and approved.
Models based on a traditional on-premises deployment, which takes several months to deploy a technology, “are no longer going to be as acceptable to your customers.”
He said partners will have to re-educate customers to think in a different way. Cloud, and IT as-a service, doesn’t necessarily mean instant-on for everything.
“The last 18 months have shown that the partners that embrace digital technologies in their own businesses are those who have leapt ahead of the competition. Those who have adopted digital marketing and sales techniques, who have developed new managed services, and [who] prioritise flexibility and innovation through AI and automation.”
Edwards noted that as we move into a data led economy, data skills and the channel will be at a premium.
“HP has been among the first vendors to launch a partner program built on data sharing. That’s created a lot of pushback from the channel, but HP is on the right path. Using customer data to create targeted advertising, customised sales models and support customer life cycles. That’s going to be the value differentiator for the IT industry. AWS, Google and Microsoft have already woken up to this. And as more of the industry moves to software and subscriptions, this is going to become one of the most important ways to create unique services to enhance customer experiences and deliver value.”
The analyst also said that data now underpins new IT as a service of managed services models in the channel. The means the ability to drive higher contracts customer retention and renewals.
Customers will look to channel partners to manage the vast complexity of their new IT environments. Automation and IT observability technologies will underpin this new wave of managed services.
Additionally, vendors are pushing their own IT-as-a-service strategy hard, said Edwards. He cited HPE Greenlake, Cisco Plus, Dell Apex, and Lenovo TruScale.
“They’re going to prioritise partners with the digital skills and platforms to sell and manage those offerings,” he said.
Elsewhere, there are new channels emerging in this data economy. Hyperscaler cloud marketplaces have emerged as one of the fastest growing channels for software analytics and security. Canalys expects more than $25 billion of sales to shift this way by 2025.
But channel partners also have a huge opportunity here to manage, monitor and secure customers’ usage of marketplaces, said Edwards.
“We’ve seen the explosion of e-commerce during the pandemic. This has given some partners tremendous advantage. The next generation of e-commerce will be data-dependent and integrated with always-on digital marketing campaigns.”
However, he warned that not every channel partner has the financial strength or vision become data-led. This means there’s the potential to widen the divide between the winners and losers in the channel.
But this is where we also see the most innovative and future leading distributors standing out from the crowd, Edwards noted. They are as they investing in their own digital tools and platforms, “allowing resellers that work with them to digitise more effectively.”
The pandemic has driven a massive shift in the workplace model. This is going to fuel major opportunities for the channel. It will be underpinned by devices and products, but also a new generation or next generation of software and services.
“Every organization is rethinking their workplace environment. For most businesses, that’s going to be a hybrid model. We estimate that post-COVID, over 130 million workers globally will be working on a hybrid basis, combining office and remote working. That’s an increase of over 150% on pre-COVID levels,” said Edwards.
The PC market is facing an inevitable slowdown in the next few quarters. However, we can still expect a wave of PC refreshes over the next few years, he said. This is going to be led by Windows 11, 5G, and the replacement cycles of the total addressable market that remote working is created.
“The PC renascence has created growth. It’s going to fuel the industry for years to come,” said Edwards.
The good news for the channel is this creates an opportunity to extend the solution sale, beyond the device. This could include the backend infrastructure, tools and applications to support this new hybrid work model.
“This is increasing the value that partners are bringing to customer workplaces, in terms of delivering networking and connectivity. As employees return to the office, they’re looking for collaboration hubs, meeting places, and they need broadband and support. 5G demand will be huge to support the remote working demand. We’re seeing big growth in cloud based virtualization, especially from Microsoft.
“Cybersecurity, SD-WAN to support distributed offices, physical security, security at the edge, security in home networks. These are all big opportunities driven by the next-generation workplace.”
“We see customers increasingly making IT decisions based on sustainability metrics and measures; in many cases, ahead of price,” said Edwards.
“Our research shows that globally, only one in three partners is running some form of ESG initiative internally. As sustainability, diversity and inclusion become a critical priority for your customers, you’re going to find yourself at a competitive disadvantage if you’re not in that ont-third of the channel investing those metrics.”
“We see customers increasingly making IT decisions based on sustainability metrics and measures; in many cases, ahead of price,” said Edwards.
“Our research shows that globally, only one in three partners is running some form of ESG initiative internally. As sustainability, diversity and inclusion become a critical priority for your customers, you’re going to find yourself at a competitive disadvantage if you’re not in that ont-third of the channel investing those metrics.”
The world has undergone monumental changes over the past 18 months. The channel is no different. Partners are facing a new period of customer demand and expectation. What can you do, as a partner, to thrive in in this new environment?
Canalys’ Alastair Edwards
This was the question posed at this week’s Canalys EMEA Forum. Here, principal analyst Alastair Edwards outlines five key trends that will influence channel models as we head into this post pandemic world.
The slideshow above outlines five important predictions for the channel.
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