Could the Channel Bubble Burst?

I had a meeting with my financial adviser this month, doing annual retirement and investment planning with my wife. It’s a big-picture discussion, one of several regular talks we have during the year. Our adviser doesn't see any bubbles bursting in general, which is interesting compared with some of the realities of the IT services business.

June 29, 2015

3 Min Read
Could the Channel Bubble Burst?

By MAXfocus Guest Blog 1

I had a meeting with my financial adviser this month, doing annual retirement and investment planning with my wife. We’ve made this a regular part of our year ever since we started our businesses: my MSP, which I founded in 2002, and her videography business, which she took full time in 2003. It’s a big-picture discussion, ensuring we are saving to the right levels and that our moves help drive us to our eventual goals.

Part of that conversation is always a market update, talking about how the market is performing and what we should expect ongoing. Our adviser showed us a lot of charts and graphs, particularly about the recession in 2008 and the realities of the current landscape. His take was a bit brutal: These have been hard times, and he wasn’t expecting things to dramatically improve for a bit. The upside of his commentary was when he stated he didn’t believe there were any impending “bubbles” to be burst, and while growth might be a bit slow, we shouldn’t anticipate implosions, either.

Realities of the IT Services Business

This larger reality was interesting to compare against some of the realities of the IT services business. Every year, IT spending continues to grow. Customers continue to buy new technologies. Some of the fastest-growing companies in the world are technology ones. Data on service provider performance continues to show median performance delivering profitable results. Despite repeated predictions of gloom and doom from some pundits, the IT solution provider market continues to be a solid one.

This leads me to continue to be very bullish on the channel. Delivering IT solutions to small and midsize businesses is a solid business model, and delivering those services on a contractual basis, via ongoing engagement (commonly referred to as managed services), is an even more stable and predictable model for success.  

Transformational Challenges

There remain transformational challenges, to be sure. The specific types of work being done by solution providers have changed–from laying networks initially, to installation of onsite services, to the migration to and management of cloud services. The specific service offering delivered by solution providers may have changed, but the business model hasn’t for those who have already moved away from product resale as their primary revenue stream to focusing on services.  

A services-based business will continue to evolve. The most challenging hurdle now for solution providers is that of delivering on business services rather than purely technical ones. The measurement of success against business outcomes versus raw technical capability is a challenging one.  

Unlike some of my peers, I’m very optimistic about the channel’s ability to adapt. Those who have successfully transformed into managed services providers lead the pack in potential to embrace business services, and this remains a sound strategy for engagement. Personalized engagement, deep relationships and strong customer service are a solid strategy to building a business.  

It would be naïve to assume there are no pressures on the channel, and I certainly don’t mean to dismiss those. The potential remains very strong, however. And while the general market may be slower, the trend remains positive–and building a business now on sound principles positions that business well for when (not if!) the market accelerates.

Dave Sobel, Director of Partner Community at MAXfocus, is responsible for fostering the growth and success of MAXFocus Partners. As Director of Partner Community, he helps promote collaboration, education and innovation among MAXfocus Partners and among the industry as a whole, ensures they have access to business, technology and market resources, and are utilizing the MAX Platform to achieve positive growth, enhance their offerings and become best-in-class solution providers. Guest blogs such as this one are published monthly and are part of MSPmentor’s annual platinum sponsorship.



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