Partners report apprehension about the state of the economy and the potential impact on their businesses, while at the same time are showing excitement for business growth by adopting emerging technologies and partnering with other, nontraditional, firms.

That’s a key takeaway from CompTIA’s recently released 8th State of the Channel report.

But that’s not all. This year’s research also examines channel partners’ own view on the long-term viability of the indirect channel, how some partners are reshaping their business, changes in portfolio offerings, and insight on managed services and managed service providers (MSPs), for example.

This year’s State of the Channel report doesn’t show dramatic year-over-year change, but partners participating in this year’s research are forging ahead and are building their businesses in ways that are in tune with changes shaping the IT industry. The report is based on 505 U.S. companies engaged in the business of technology.

After years of a healthy growing economy, partners see a few potential red flags that spell concern for the future of the channel. In fact, 37% of partners expressed concern about today’s economic conditions and changes to the general economy. At the same time, 37% of partners view potential government regulation of the tech industry as cause for concern.

These top two reasons for concern about the channel’s future differ from the concerns from last year where new types of competitors and a skills gap in emerging technologies were top of mind. While these two concerns still worry partners – skills gap (35%) and new competitors (34%) – they’ve just dropped a few notches in this year’s survey.

Other concerns that partners have about the channel’s future — aging of IT channel owners (34%), difficulty hiring (30%), commoditization (30%), customer taking business direct (28%), and cloud disruption (27%).

While partners have a number of concerns about the future for their businesses, their take on the negative spin about the channel’s future is that 59% say there’s some truth to it, depending on the individual channel firm and business model, 26% say it’s overblown and 16% of survey takers says it’s an accurate assessment for much of the channel.

CompTIA’s Carolyn April

“There is some economic apprehension that the channel is feeling right now but there are a lot of positives is this year’s report, as well,” Carolyn April, senior director of industry analysis at CompTIA, told Channel Futures.

Seventy-two percent of survey respondents consider emerging tech a significant business opportunity, on par with last year’s sentiment about emerging tech (75%). Other reasons for adding emerging tech to the business portfolio — customer demand (52%), competitive differentiator (43%), to avoid obsolescence (38%), dovetails with existing portfolio (36%) and vendors pushing us in that direction (35%).

“We’re also seeing that partners are moving more into production with emerging tech rather than experimenting,” said April.

In this year’s report, 56% of partner firms’ experience with emerging tech is in production, compared to 51% in 2018; 29% are partners are experimenting with emerging tech this year, the same percentage as in 2018. The report notes the largest channel firms reporting being in the production stage with emerging tech; in fact, two-thirds of the largest organizations are selling emerging technology to customers, compared to one-half of small channel firms.

“A caveat — if only 1% of your business is emerging tech and next year it’s 2% of your business, that’s enormous …

… growth, but the reality is that 98% of your business is still coming from traditional sources,” said April.

IoT hardware and software are the top two emerging technology areas – 51% and 50%, respectively – that partners are involved with, followed by virtual reality (45%). Virtual reality is a category that took a significant jump up among survey respondents — 37% last year to 45% this year.

“The virtual reality piece was a surprise for me, but we’re finding that more of the channel is realizing that there are practical business use cases for VR,” said April, pointing to VR as a way to streamline and improve communications at remote sites, as well as an increase in the use of VR for training workers in manufacturing and industrial businesses.

For all the industry talk about new channel partner types, also referred to as shadow channels, and the threat they pose to existing partner businesses, the threat can be real. For example, both this year and last year, six in 10 channel firms reported encountering SaaS companies, 49% reported bumping into digital marketing agencies, 31% report encountering accounting firms in the tech sales realm – compared to 19% in 2018 – and partners report bumping into law firms selling tech – 22% – up from 18% last year.

More partners are seeing the benefit in partnering with these nontraditional partner types. In 2019, 30% of partners said they frequently partner with these new players, compared to 20% last year, while 45% said they occasionally partner with new players, compared to 42% last year.

CompTIA says partnering can be particularly effective for small channel firms with limited and largely horizontal infrastructure practices. In fact, six in 10 small partner firms have partnered with these new players, particularly those specializing in applications in a vertical industry, or these small partner firms report this new partnering activity to expand skills and broaden their portfolio. They rated the experience as positive.

If you can’t beat them, join them.

Taking a look at the managed services section of the CompTIA State of the Channel report, authors note that although managed services is an established category in the channel it’s still growing, more so globally than in the U.S.

However, looking at the managed services model, those that offer managed services report the following: Sixty percent have a hybrid business model — for example, managed services and another practice area such as project work or traditional transactional sales, compared to 25% who report being a pure-play MSP.  Another 14% operate an opportunistic model.

Top solutions/services offered by MSPs in the last year, according to the report: SaaS (60%), security (53%), storage/backup (49%), remote network monitoring and management (48%), hardware as a service management (44%), disaster recovery/business continuity (41%), help desk services (34%), and unified communications as a service (31%).

“The explosion of SaaS solutions is a natural add-on to any existing MSP or new MSP that wants to get into the business. It’s a no brainer,” said April. “Still, managed services have been around for a long time and it’s surprising to me that there’s still space to fill.”

Shy of one-half of partner firms say they do managed services in some capacity and another half aren’t doing it at all.

“You’ve got to wonder what they are staking their business on,” said April, who also noted that in terms of the adoption of managed services the needle hasn’t moved dramatically in the last 10, even five, years.