Channel Partners Push Back Against Gloomy Canalys Forecast

Partners have pushed back against the suggestion that the outlook for the European channel is gloomy.

Former Canalys CEO and co-founder of Canapii Steve Brazier indicated tough times for partners at this month's Canalys Channels Forum EMEA. Canalys is owned by Channel Futures’ parent company, Informa.

There, he noted that many channel partners’ revenues were “declining, not growing.” He also told partners they have had an easy time of it — until now.

“For 30 years or more, the channel has actually been easy to run. You thought you were all business leaders and geniuses for the success you had,” he said. “Unfortunately, we’re calling a turning point today. The hardware industry is no longer growing — whether that’s printers or PCs or servers or storage or Wi-Fi or routing or all our major categories. Running a flat business is OK, but they’re all essentially flat.”

Brazier also maintained that European channel partners are missing out on opportunities compared to their U.S. counterparts.

In response, channel partners acknowledged a tough economy that is making customers rethink their budgets. But they are more optimistic overall than the forecast suggests.

Channel Partners’ Babies Called Ugly

“I think many leaders of those European channel firms attending Canalys in Berlin might have felt their baby was being called ‘ugly’ after listening to Steve Brazier’s keynote comments. Not only was their baby being labelled ugly, but it also had no chance of fulfilling its ambitions over the coming years unless getting the help of its U.S. cousins,” Rich Eglon, CMO, Nebula Global Services, told Channel Futures.

Related:Partners Face Wake-Up Call as Hardware Sales Flatline

Eglon said even though he agrees with Brazier’s overarching message of the industry being at a turning point, he doesn’t think it is quite that straightforward.

“Traditionally we have been a vendor-led industry waiting for the latest products to be launched to fuel growth. Many have built successful businesses and ecosystems to embrace this. However, in an ‘as-an-outcome’ market where the end client increasingly defines the rules of engagement, channel firms need to pivot their business away from being ‘revenue junkies’ to a more profitable and value-creation business model in order to remain relevant.”

Tough Times Should See Partners ‘Pop The Hood’

Distology CEO Hayley Roberts was a panelist on stage at Canalys Channels Forum. She doesn’t believe the comments from the analysts “were too harsh or too negative.”

But Roberts also points out that the distributor “sits in cyber, where the landscape is ever changing, and agility is baked into our DNA as a business.”

Distology's Hayley Roberts

“I think it is all too easy to criticize when things go wrong in the markets," she said. "A lot of UK plc businesses and European companies had a really bad 2023 — across all industries. The fact that the channel suffered should not be a surprise. Companies that do not retain agility and keep evolving and keeping up with market demands, will ultimately struggle… this is a simple fact.”

Roberts said tough times should be when channel partners “pop the hood internally” to see how they can navigate the storm.

“[It’s a] great time to be more curious and not defeatist in down times,” she said.

Partners Look to Reinvent Themselves

“People were telling us [more than] 12 years ago that hardware was dead and that the future was bleak,” added Gerard Brophy, CRO at distributor, Climb Global Solutions. Brophy believes that the outlook from Canalys should be put into perspective.

“In our world, hardware – on the infrastructure side – is actually scaling,” he said.

Brophy said, in his experience, channel partners “never stand still and are always looking at ways to reinvent themselves.”

Climb Global Solutions' Gerard Brophy

“AI is a good example of this," he explained. "Our new DACH division has just launched the Climb AI Academy, which offers partners a framework with custom AI training to help them gain a foothold in the booming market. It’s about taking advantage of new technologies and continuing to move forwards.”

Partners Must Shift to Software, Cloud Services

Elsewhere, Rob Mackle, managing director, EMEA & APAC, Assured Data Protection, confirmed that economic factors are having an impact on customer buying trends.

“Inflation and economic uncertainty cause consumers to prioritize spending, reducing discretionary purchases like new hardware,” he said.

Mackle also pointed out another key challenge facing the channel is adapting to software and cloud services.

“Businesses and consumers increasingly rely on software solutions and cloud-based services, [so] the need for frequent hardware upgrades diminishes. It is quite simple: For channel businesses to survive the decline in hardware sales, they must shift to providing software and cloud services to their customers.”

However, Brazier noted at the event that partners’ success in the services space is reliant on want to the quality of their individual leadership.

“If you want to be a professional services company, you need a totally different culture. The sales pipeline is no longer central to your business,” he said. “Your No. 1 job every day is to keep your talent on board with your company. They are artists, not factory workers. You need to empower down the organization so that teams and departments can make the decisions.”