What Will 2018 Bring for the Channel?

It’s that time of year again, when the Channel Futures editorial team is inundated with predictions for the new year on everything from the Next Big Technology to trends coming down the OEM partner program pipeline.

Facing rapidly dwindling hardware margins and customers who increasingly demand consumption-based services, many traditional partners in 2017 came face-to-face with the painful reality of having to pivot vertical or horizontal focus (or both), and moving to a recurring revenue business model. For better or worse, today’s channel doesn’t look a whole lot like it did a decade ago. What will it look like in a year? Here are some ideas from the industry:

No VAR Is an Island

As we move into 2018, the “mainstream” VAR will increase their vertical industry experience/knowledge through partnerships with ISVs, which are essentially individual companies that have a level of expertise and value unmatched by any other partners. VARs will realize that ISVs are the most underrated partners in the ecosystem, and begin identifying key players and building services around them.

For example, an ISV with an ERP application focused on manufacturing and warehouse distribution is in a perfect position to leverage predictive maintenance solutions (i.e. IoT data and virtual reality) and mobile services…VARs are in a great position to build the skills and competencies necessary to bring together these new products and technologies from different ISVs to create ‘whole product’ solutions, which offer much higher business value for their customers.

Own It

Differentiating services is critical to achieving profitability in the channel, especially when virtually every MSP, VAR and agent is setup to resell offerings such as Office 365. On top of that, as more customers move to the cloud, partners that have lagged in this transition are having to play catch up to avoid major consequences, such as customer churn, downsizing and sun setting their business altogether. To remain competitive, partners need a business approach that allows them to be the brand, face, and solution provider for their customers. If partners want to succeed, and grow profitably, long term, working with vendors that let them put their own brand on the product should be part of the mix. 

The “Wal-Mart Effect” Comes to the Channel

This coming year we will see a growing trend of more “super” MSPs showing up in the market. The MSP market used to be defined by local competition, made up of smaller niche firms. In 2018, this market will get turned on its heads as more super MSP powerhouses set up shop in the North American market. This has already begun, but next year the impact of super MSPs will be even more acute. These super MSPs are the result of M&A activity among smaller players. The MSP market will see much consolidation in the coming year, leading to the rise of the super MSP. 

Every Company is a Tech Company, and Every Partner is an MSP

Continued movement down market by telcos and independent software vendors (ISVs) resulting in the erosion of MSP marketshare: Many telcos are actively trying to make use of their existing scale and IT savvy to move beyond basic voice and data services in order to offer managed services. Additionally, ISVs seeking to expand software availability, delivery, and reach, are augmenting revenue with service-based business units. With managed services proving to be a profitable line of business for telcos and ISVs, established MSPs can expect to feel revenue pressures in the year ahead.

Vendors: Don’t Rest on Your Laurels

Many OEMs have partner relationships which date back many years. Partners have built successful solutions on top of the OEM’s products, which will need to be updated to meet modern customer requirements. Given this, it’s critically important that OEMs not only continue to innovate by introducing products and services based on new technologies, but that they also provide an easy migration path for their older technologies. OEMs that require their customers and partners to re-invest significant resources every few years to take advantage of new technologies will quickly find out the hard way that partners now have many choices!

Ignorance Is No Excuse

The most important steps MSPs can take to prepare for 2018 is to educate themselves on the market. Understanding the competitive landscape in your field, why certain suppliers win specific types of opportunities, and knowing the best of breed in your space (and that doesn’t mean who has the highest SPIFF that month) is critical for success. If you want long-term success in this rapidly changing world, you must understand your customer’s needs and the real, viable technologies that can solve them.

MSPs must also identify newer revenue streams and how to make money after a sale. For example, if they’re selling an SD-WAN service, how do they wrap their other services around it and create additional revenue streams beyond that?

Cybersecurity Goes to Washington

With major cyberattacks like WannaCry and the breach at Equifax getting the attention of lawmakers, it is only a matter of time before we starting seeing more cybersecurity companies be called to testify before congress. So far, victim organizations have taken the brunt of criticism from politicians and the press, but less attention is being paid to the companies promising to secure the sensitive data in the first place. There will be a moment when security vendors are asked to explain why their products weren’t able to live up to the promises of their marketing departments, which will have a serious impact about how we talk about the capabilities of security solutions. 

MSPs Better Watch Their Backs

Transformative new applications and delivery models based on cloud technology will continue entering the market. Businesses will have more choices – often a confusing array of choices – that savvy MSPs will see as an opportunity…We’re also going to see a lot more attempted disintermediation by ISVs, ISPs, and other vendors with cloud capabilities. Put in simpler terms, some companies will try to eat the unwary MSP’s lunch. In order to survive and thrive, MSPs will need to do much more than simply be an “outsource IT” service offering. IT as a Service will drive stickiness and growth for MSPs that focus on delivering business value and not just IT resources.

Customer Demand = Channel Opportunity

In 2018, channel partners will have to cope with more emerging technologies being added to their customers’ wish lists. This combined with needing to justify their value to their customers’ operations, while dealing with flat or declining budgets, will increase the challenges in the channel. Next year, the future is all about simplifying hybrid IT. As more and more organizations adopt a hybrid cloud model, they will look for solutions that allow them to utilize their apps created for on-prem to run in the cloud, which will be a game changer for end users, channel partners and MSPs globally.

Wi-Fi Elevates the Analytics Game

In the wireless space, such as enterprise Wi-Fi networks, managed services are a great opportunity for today’s Internet service providers (ISPs), Value Added Resellers (VARs) and System Integrators (SIs) to step in and fulfil diverse and profitable needs. To succeed, MSPs must address not only the overt need of this unmanaged IT segment, but also the less obvious need – the underlying anxieties that prospective MSP customers can experience when they outsource their IT needs, including feeling of loss of network control; concerns on data privacy and access to data; visibility to critical performance indicators of the overall health of their network; and a need for actionable insights making the businesses operations profitable…MSPs that understand these inherent business drivers can offer marketable insights beyond daily IT needs, gaining competitive advantage and increasing the rate of onboarding managed businesses.