Channel Futures Quarterly Agent Survey: Economy, Customer Demand Confidence Hold Despite M&A Concerns
Agents' reported biggest source of competition? Other agents.
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The survey respondents served as a reminder of how small agencies tend to be.
Twenty-two percent of respondents ran a sole proprietorship. A whopping 36% counted two to five people among their staff.
On the other hand, some agencies have grown beyond their traditional “mom-n-pop” size. The larger categories (11-20 employees, 21-50 employees and 50-plus employees) all comprised 11% of the respondents, respectively.
M&A has contributed in part to the rise of those 50-plus member agencies, though some of those mergers in all likelihood reduce the total number of agencies in that 11-50 range.
A small yet sizable portion of advisors are growing in size. Channel Futures asked respondents how their full-time headcounts changed in Q4.
The majority (72%) said it remained the same. Twenty-five percent said headcount increased. Only 3% said headcount decreased.
When asked if hiring was easier or more difficult, 64% said they were unsure or weren’t hiring. Nineteen percent said hiring was easier, and 17% said it was not easier.
Partners have been pushing to add next-generation technologies like contact center as a service and cybersecurity, and the survey results reflect that.
Twenty-five percent of respondents said they significantly increased their sales of cybersecurity-related offerings in Q4. Nineteen percent of them said cybersecurity sales increased slightly, meaning that 44% of agents said their security practices grew in some way. Moreover, only 6% of advisors said they do not offer cybersecurity sourcing.
CCaaS showed more polarizing results. On one hand, 17% of respondents reported a significant increase in CCaaS sales, and 17% reported a slight increase (making for a 34% total increase). On the other hand, 25% of partners said they do not offer CCaaS sourcing.
At the same time, UCaaS actually scored the highest overall increase. Thirty-nine percent of respondents reported a slight increase, as opposed to an 8% significant increase (47% total increase). But 22% of partners said they do not offer UCaaS.
No respondents reported a significant decrease in any categories.
Mobility and IoT showed the smallest increases. Twenty-five percent of agents said they do not offer mobility services, while 19% said they don’t offer IoT.
Although 8% of agents said wireline sales dipped slightly in Q4, 39% still reported an overall increase for this technology category.
Channel Futures asked survey respondents if they provided implementation/deployment services for any of the solutions they sold. Sixty-one percent indicated that they do provide those services. On the other hand, 39% rely on the vendor for deployment.
Moreover, 60% of those implementation-providing partners charge for those services.
Channel Futures and partners it has quoted have predicted that more agents will certify as deployment partners for their biggest vendor partners, particularly in cloud communications. Some vendors are charging end-customers a special fee for deployment services, opening up an opportunity for agents to save clients money and frustration.
Respondents listed the vendor they increased the most business with in Q4. Three respondents noted Airespring, the managed connectivity services provider and CLEC.
A host of cloud communications providers — Zoom, Vonage and RingCentral — earned two shoutouts from partners.
Threat visibility provider Qualys also scored nods from two partners.
And Lumen got on the board with two agents saying business increased the most with that company last quarter.
Channel Futures asked the same question for vendors whose business decreased the most with the partner in Q4. This time there were fewer repeat mentions.
Only AT&T/ACC Business and RingCentral got multiple nods, at four apiece. That in some respects makes sense considering they are two of the larger players in their respective spaces (WAN/connectivity and UCaaS/CCaaS).
It’s also worth noting that Airespring, which saw a strong increase in business with three partners, aggregates services for carriers like AT&T.
Respondents reported how their relationships with technology services distributors (TSDs) and other types of distributors and marketplaces are evolving.
Telarus scored the largest increase, with 30% of agents saying business increased. Sandler Partners saw an increase from 21% of respondents. Avant and Intelisys were not far behind with increases of 17% of 15%, respectively.
Readers ought to take these numbers with a hefty grain of salt, considering that the acquisitions of TCG (by Telarus) and PlanetOne (by Avant) occurred in between the fourth quarters of 2021 and 2022. Keep in mind also that AppDirect’s acquisition of TBI came after this quarter.
Intelisys recording the highest number of partners keeping their size of business the same (26%) could reflect the fact that its parent company, ScanSource, did not engage in M&A last year.
In the meantime, distributors traditionally associated with IT and/or hardware didn’t register too many agents doing business with them. For example, 88% still aren’t doing business with TD Synnex. That being said, cloud distributor Pax8 registered a 12% year-over-year increase in usage.
The survey showed that the majority of agents are placing more of their business with their TSD partners, rather than negotiating their own agreements with suppliers.
Thirty-four percent of advisors said their number of direct contracts increased from a year prior.
That’s a slight increase from the Q3 survey, in which 32% of respondents said their direct contracts had increased in number.
Partners listed their three most pressing concerns.
Creating recurring revenue streams scored highest 32%, not a surprise considering the reliance of agents on monthly recurring commissions. Keeping pace with technology advacement scored second at 26%. Those two categories placed first and second in Q3, but flipped.
In the meantime, industry consolidation rose from the seventh biggest concern in Q3 (14%) to the third in Q4 (25%). The concern centers on multiple fronts. On one hand, partners have reported less choice resulting from their TSD partners consolidating. On the other hand, some partners have told Channel Futures privately that they worry about keeping up with larger and better funded agencies that can offer more professional and managed services.
The aforementioned concern about PE-funded partners could be reflected in Channel Futures’ question about competition. Partners listed their three biggest sources of competition.
In a significant shift from Q3, other technology advisors scored the highest at 44%. That number was 36% last time around.
At the same time, direct sales teams dropped from the top competitor at 50% to second, at 35%.
Although the United States and much of the world have entered an economic downturn, agents aren’t letting that dampen their spirits.
Forty-nine percent of respondents said they hold a good level of confidence in the overall U.S. economy. That’s up from 39% the previous quarter.
On the other hand, only 17% of respondents listed their confidence as “poor” or “terrible.”
Although the United States and much of the world have entered an economic downturn, agents aren’t letting that dampen their spirits.
Forty-nine percent of respondents said they hold a good level of confidence in the overall U.S. economy. That’s up from 39% the previous quarter.
On the other hand, only 17% of respondents listed their confidence as “poor” or “terrible.”
Industry consolidation and more erratic customer purchasing priorities are keeping technology advisors on their toes in 2023, according to the latest survey of agent leaders.
Those conclusions come from the Q4 Technology Advisor Market survey, whose findings Channel Futures released on Thursday. The data, stemming from the responses of three-dozen customer-facing partners, points to a relatively confident group of entrepreneurs. Despite a global recession that has hit the vendor community hard with layoffs, agents are growing their teams. Moreover, customer appetite remains substantial as ever, despite a noted shift from the third quarter.
In Q3, only 7% of agents reported that customers’ willingness to spend money had dropped. Now that number is 26%. However, that still pales in comparison to agents who think spending is going up (32%) or staying the same (41%).
Q: From your perspective, how did customers’ willingness to spend money on technology in the fourth quarter of 2022 compare to quarter a year ago?
Q2 | Q3 | Q4 |
Increased | 37% | 43% | 32% |
Stayed the same | 43% | 50% | 41% |
Decreased | 20% | 7% | 26% |
Channel Futures Q4 Technology Advisor Market Survey
“Our fourth quarter was extremely strong, but we also saw deals push,” one respondent wrote. “Personally I think the sales cycle will be longer, but the deals will happen. We are seeing a tremendous amount of interest in the first six weeks of 2023.”
Looking Within
At the same time, a somewhat noticeable downward shift did occur in how agents reported feeling about their own industry. Thirty-one percent of advisors reported average confidence in the health of the industry, compared to 18% last quarter.
Q: What is your company’s level of confidence in the health of the industry?
Q3 | Q4 | |
Excellent | 18% | 14% |
Good | 57% | 49% |
Average | 18% | 31% |
Poor | 7% | 3% |
Terrible | 0 | 3% |
Channel Futures Q4 Technology Advisor Market Survey
Industry consolidation is rising in the minds of agent leaders as a challenge for their business, as advisors and distributors come together. Moreover, other agents emerged as agents’ most common source of competition.
The slideshow above contains 10 key data points from the quarterly survey. It tracks which TSDs and vendors are increasing partner relationships and which technologies are gaining in partner sales.
You can also check out the Q3 agent survey results.
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. |
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