In part one of my three-part series on what I've learned about the channel this summer, I discussed how the channel is getting smaller and younger, while M&A is strong—sort of. Here are my next three observations.
4. Managed Services has plateaued: One of the most surprising things I observed this summer is the research around the MSP market. Only 12 percent of channel companies report that more than 50 percent of their revenues are recurring.
While a much larger number of companies do offer managed services, they are a part of their offering and not the massive “do it or die” business model transformation that was predicted over the past decade.
Much like corporate outsourcing of IT, or direct hardware purchasing, there is a definite need for it in the market—but it won’t likely become more than a small slice of the pie.
5. Partners are getting mobile in a more serious way: Not surprisingly, 70 percent of the channel now offers mobile services on their line card. Taking advantage of BYOD, BYOA and the weekly consumer security scares, partners are implementing profitable mobile services.
Ranging from risk assessments, policy creation and deployment, mobile device management (MDM), providing infrastructure and support to ongoing strategy and integration, a large number of partners have carved out a successful new niche.
6. The channel is small business, and getting smaller: Much of the attrition that I mentioned above has come from within channel companies. Doing more with less. The average channel partner has eight employees, and 97 percent of them have fewer than 50.
With the rapid growth of freelancing (think oDesk and Elance), offshoring (Fiverr) and rapid software development (Mechanical Turk), many companies are outsourcing their own functions such as marketing, operations, finance and custom development.
Vendors are looking at opportunities to help their partners with these functions and keep them focused on (selling and) delivering solutions for end customers.
Stay tuned for part three with my final reflections on the channel. As always, I'd love to hear your thoughts on my observations so far—drop me a line in the comments section below.