The Doyle Report: The Past, Present and Future of the Channel Explained
Business history. Technological innovation. Macroeconomics.
If you want to understand the industry’s past, present and future, it helps to have a working understanding of each. There may be no better person to provide perspective on these than CompTIA CEO Todd Thibodeaux. In addition to running the 35-year-old industry trade association, Thibodeaux spends his days huddling with industry leaders, career practitioners and political power brokers. At night, he pores over the biographies of industrial tycoons and longreads from The Atlantic and other sources looking for wisdom. Add it all up and you begin to understand why he’s emerged as one of the top thought leaders in the business.
In conjunction with CompTIA’s launch into professional career advancement and recruitment this week, which was made possible by the acquisition of the Association of Information Technology Professionals (AITP), I reached out to Thibodeaux for his thoughts on the future of the channel and more. He talked passionately about his association’s efforts to work more closely with IT pros thinking about retirement and students mulling their career choices.
Ironically, we started our conversation discussing, of all things, The Gilded Age that followed the Industrial Revolution and Post Civil War Reconstruction era that extended well into the 20th Century. It’s a period that Thibodeaux says “was probably the most transformative ever.”
“People who that lived during that 40-year period saw more massively impactful innovations probably than any other people in history,” he says. It was a perfect jumping off point in our wide-ranging conversation, which I’ve edited for clarity.
The Doyle Report: Why is this period of history so fascinating to you?
CompTIA CEO Todd Thibodeaux: That was a 40-year period without any world wars, with the exception at the very tail end of it. We had a few depressions during that time period, but America was expanding. It was just, I think, a period of hope, optimism and a spirit of "we can make this happen." The American Dream really evolved during that period. I think there were just a lot of things going for it. A lot of immigrants came in and worked their butts off to try to make things happen for themselves and grow. The university systems were evolving, etc. We had just a ton of forces all moving at the same time to make it possible for a lot of things to happen. Compared to today, when where we're in a globalized market, the U.S. doesn't seem to have the same advantages it had during that period.
Doyle: So do you buy into the notion that we are out of big ideas and stuck in a rut?
Thibodeaux: Not necessarily. You don't see those things until you look at them in retrospect. The U.S. is still a preeminent place where most of the major technological innovation happens. Facebook wouldn't have come out of any other country. Twitter wouldn't have come out of any other country. Some of the things that Google is doing with search, etc., wouldn't have happened anywhere else. The innovation that Amazon has brought to market would suggest we aren’t stuck… But we don't know what will come down the road. We know there will be stuff, because history has always shown that there will be. But when you're in the moment, you can't see the big picture. It's hard and confusing. I call it “the fallacy of now.” People think that the things that are happening to them now are the most important things that have ever happened in history, and that the trends that are happening now are the trends that are going to happen forever.
Doyle: …Like a 14-year old…
Thibodeaux: …Yes. If something looks like a period of stagnation, you think, “of course it's a period of stagnation.” But the next year could see major breakthroughs in one or two areas. If so, we’d be like, “wow, this is one of the most innovative periods in history.” …So maybe we are in a slight technological lull in terms of major, impactful innovations. Moore's law hasn't necessarily slowed down, but its impact has been diffused. We've seen electric cars and some of those things come into the forefront, but they haven't really been mass-adopted in any big way… IoT is really just an extension of all the existing technologies that we have. I don't think we’re going to recognize another massively innovative period until we see a quantum leap in processing power that makes a whole new range of things possible. We're doing absolutely everything we can with the processing power and capability that we have now, but it's not until we get to a whole other level of battery capacity or processing power that we will open up whole other worlds.
Doyle: Let’s talk workforce participation and employee displacement via technological innovation. As one who represents the greater technology industry but who also has a vested interest in making sure we're training and employing people, how disruptive will innovation be to the world of employment?
Thibodeaux: Everything happens a lot slower pace than what it appears. Take cloud computing. Cloud hasn't impacted the IT employment space at all yet, and it's been around for a few years. The thing is once something comes along like cloud, people find ways to exploit it. That opens up job opportunities. We haven't begun to touch automation in any real meaningful way, with smart automation, with AI, etc. We haven't begun to touch the possibilities of robotics. We haven't really begun to deploy the Internet of Things in any kind of meaningful way. Smart cities are still in their infancy. We have a whole bunch of these fields which will require huge amounts of infrastructure to make them work. The infrastructure that powers our cellphone networks and our broadband networks requires only a fraction of what will be required to have a highway system that has a built-in charging capacity in it or telematics or super-high broadband. The same is true for what we will need to have robotics operating fast-food restaurants or retail locations, etc. The point is we don't know how durable those things are going to be. They may require tons of technicians to keep them running. They'll displace certain types of workers, for sure. But then we might need other, really high-skilled workers just to keep these things working. If the drone delivery thing happens, who knows how durable they will be?… Maybe cloud diminishes some career opportunities, but it may dramatically increase demand in other areas.
Doyle: All of our advances today seem software related. Why?
Thibodeaux: Why haven't we been able to make batteries that just last forever? Why haven't we been able to do that? Because it's a physics problem and it's really hard. You have to manipulate nature. We haven't discovered everything about nature, for sure. There's tons left to learn.
Doyle: So let’s shift to the channel and the future of ecosystems. What do you think the future of our technology business ecosystems will be and how will they meld with the traditional resell, systems integration, MSP, consulting and services communities we know as the “channel?”
Thibodeaux: The story I like to tell is the one that the Datto people tell about their CEO, Austin McChord, who spoke at one of our annual events recently. He said that his company was using something like 600 different cloud-based apps…
Doyle: Yeah, I was in the room when he said that…
Thibodeaux: Well it turns out that 500 of these were bought by staff and not by Datto’s IT department. I think this is a reality that [most] traditional channel companies haven't really had to deal with yet. They've typically said, "I'm a Cisco partner and I sell Cisco.” Or “I'm a Microsoft partner and I sell Microsoft." But then their customer begins to ask them, “well, what about this app? Or that one? What about this cloud-based application? What about Workday or some of these other companies that provide cloud-based ERP, CRM, or accounting software?” If you're not knowledgeable about these things today, you look pretty much like a Luddite when you're talking to your customer. You don't want your customer to be that far ahead of you.
Doyle: So how does that change the ecosystem?
Thibodeaux: If you're a cloud-based software provider, you may have a few partners, but so much of what's available to you is right in front of you. I think customer acquisition for some of these companies is actually pretty easy because they have a lot of people who say, "Wow, I'm using these really crappy systems; now you have this other one. That’s great." But what happens when these software providers start to tap that out and actually have to start marketing nationally and provide long-term support? One of the things I think is interesting with these applications providers is, “what's their long-term [partner] play?” After a partner sets up a customer, what's the benefit to them? You get the person set up, you get them trained, and they're using the application. What if they don't have any problems? They'd never call you. Okay, you don't have that same engagement you had with them when you were coming in and fixing their systems and doing remote patching or helping them get set up in the cloud… Do you just kind of sit back and rake in the recurring revenue? Maybe, but it's not the same level of ongoing business engagement. I think it will be interesting to see the types of partners that [emerge], and how much work there really is for them once they get someone set up and trained in some of these applications.
Doyle: Do you think there is significant amount of work, or is it different work?
Thibodeaux: It's different, but it's all upfront… In the traditional world, when it was more break/fix and more hardware and equipment sales, you had this regular engagement. Today, you have to be an agent for them; you have to be their trusted business advisor; you have to learn how to dig deep. Your job isn't to sell customers stuff, it's to prospect better applications for them and help them migrate data when they need to, and make sure that they're using the right cloud infrastructure, getting the best broadband deal for their dollar and to make sure that their systems are secure. It's a different engagement and maybe not as high touch as it might have been in the past.
Doyle: What about the traditional partners that are your rank and file members and have been for more than a decade? Do they eventually move into that space? Or are they kind of stuck in this mode where they're riding the success of bell curves of technological innovation but likely to miss this higher value opportunity that you've just described?
Thibodeaux: So I think that's a really important point. We're in a period now where they can kind of transition from the traditional MSP, break/fix, selling software licenses business to a recurring revenue model based on the cloud-based provision of services. Where I don't think they're equipped is the next wave that happens after that when someone needs an IoT system set up or a smart city deployment or a smart AI system. I think that's where they're less equipped. The other thing that's challenging for [traditional partners] is the loss of a regional advantage. [In the past], they didn't have a lot of competition because people didn't come into their regions. They were regionally protected, in other words. When you talk about a cloud world, anybody who's providing service anywhere can provide service to anyone. So traditional partners don't have the regional advantages that they used to have when it comes to cloud. When someone moves all the way to cloud, what do they care where that cloud stuff is? It doesn't matter. They don't even need their provider to be local to them… So what does this mean for the small provider? You know, a lot of those guys are getting out now while the getting is good and selling their businesses because they're probably never going to be worth more in the future than they are right now. Because of this, someone could just come in and say, "Well, why should I buy you? I can just go after your customers with these services that I'm providing everywhere." That's like WalMart coming in and putting down mom-and-pop shops.
Doyle: So does this mean that everything is going to go eventually the way the cable business went?
Thibodeaux: I think so, at least until we see some of these impacting technologies bring back some of the need for a local [presence.] If you're a gas station, you're also going to become a hydrogen or a charging station for electricity. You're going to have some physical infrastructure that's going to need to be maintained. Right now, physical infrastructure is going into the cloud, but there will be technologies that come along to bring it back down to the local and regional level… But by the time this happens, I'm not sure that the people who are partners today are going to be equipped to do this new stuff. Twenty years, 15 years from now, are we talking about a new type of partner that can maintain robotic systems and internet of things systems and smart power grid systems and more? Maybe. But they'll certainly be a lot different than those who maintain servers and desktops and notebooks and stuff today.
Doyle: Are you're confident that channel partners can transition?
Thibodeaux: Some will, but a ton of them won't. The good example of this is doctors. When electronic medical records came along, there were many who said, "Look, I’m in the last five years of my practice and I just won't take Medicare patients so I don't have to [transition.]" In contrast, younger practitioners came along and said, "Man, I'm embracing this new technology like crazy because it's going to help me be more productive and set me up for the future." Some people just said, “no,” even if they knew it was good for them. Reimbursements from the government weren't meaningful, so they didn't [move.] I think that's a good analogy. Some traditional partners are just afraid to make the transition. They don't want to take that risk this late in their cycle, in their career or the timeline of their business—or they're just trying to sell and get out. They're just going to run it out because they've made enough money and they're fine. Maybe the business will slowly go away. But there are so many new people coming in to fill those voids that if they don't do it, it's kind of their own accord.
Doyle: Talk about the new people coming in. You guys have put a lot of energy and effort into recruiting new talent to the industry. What's been the net effect? Has it proven worthy? Have you guys seen at least increased interest, if not a modest influx of people thinking about this?
Thibodeaux: I think the challenge is that the tech industry in general is not seen as a great career field, and is not seen as a place that a lot of younger people want to gravitate to. We're doing a new program, “NextUp,” not dispel the myths but instead create a better pathway. The industry, for the longest time, didn't have to compete with any other industry for talent. If you were going to do something entrepreneurial, it was probably in the tech space. Now if you want to do something entrepreneurial, you can do it in any space. You can start a restaurant or a food truck. You could be an Airbnb provider, drive for Uber, etc. You can do something on Kickstarter or any of these sites. People dream of doing these things all the time. Our industry doesn't have a corner on attracting those people.
Doyle: How are the newcomers different?
Thibodeaux: The people that are coming in are much more like telecom agents. They're not purely technical people. They might come in with a little bit more of a business mindset. They're not necessarily geeks, whereas most of the people who started the early MSPs and break/fix companies were all technological geeks.
Doyle: That's not a bad thing, is it?
Thibodeaux: No, no. Are we getting enough people coming in to start new businesses? Yes, of course. That always happens, because the profit motive drives everyone. The thing I'm talking about is we're not getting enough people to fill the technical roles. The people who take A+ and those programs? That's where we're falling short. I mean, there're 650,000-700,000 open IT jobs in the U.S. About a third of these are programming jobs and about two-third are infrastructure jobs, including network engineers, help desk, cybersecurity professionals and all these people. We're clearly not filling that void, and we're going to have all these retirements we keep talking about. Chop off a third of the workforce today, and we're going to need to replace every single one of those, plus.