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Analyst Q&A: Managed Services 'Came of Age' in 2018

Watch out for the new channel.

James Anderson

October 8, 2018

7 Min Read
managed services

Cloud has finally grown up.

That’s the observation of Alex Hart, senior vice president of strategic services for The 2112 Group. He’ll join a panel of analysts next week at Channel Partners Evolution to reveal their findings on the technology and go-to-market strategies partners are using.

The “Crystal Ball Bash,” part of the revenue and supplier portfolio conference track sponsored by Cyxtera, Oct. 10, will offer three predictions for 2019 and three habits partners need to drop as soon as possible. PartnerPath CEO Diane Krakora and Michael Diamond, The NDP Group‘s B2B industry analyst, will take the stage alongside Hart.

The panelist spoke to Channel Partners about the trends they are noticing in our industry.

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The 2112 Group’s Alex Hart

We have edited the transcript for length and clarity.

Channel Partners: This panel looks forward to 2019, but when 2018’s all said and done, what do you think will be the defining characteristics and trends of the year?

Alex Hart: 2018 was the year cloud finally grew up and managed services came of age. Cloud environments are maturing and, increasingly, we’re seeing customers adopt cloud platforms for their more complex, enterprise-critical applications. Per a 2018 IDG cloud study, 73 percent of surveyed organizations have either at least one application or a part of their enterprise infrastructure in a cloud, and 17 percent plan on doing so in 2019. Customers are now deciding how, not if, they plan on moving workloads off-premises — whether to hybrid, single, or multicloud environments. We are also seeing an increased adoption of public cloud platforms as acceptable for business-critical workloads. Average cloud budgets are up 36 percent year over year, and although security is a primary concern, cloud providers have done a good job of minimizing risk perceptions.

This maturing adoption of cloud as an integral piece of the IT production infrastructure (not just for testing and/or development) has also given rise to…… an increased comfort level among both large and small customers in outsourcing key service functions to MSPs. Security, disaster recovery and telephony/collaboration are among the areas with strong customer adoption, especially in the SMB and midmarket segments. SMBs and midmarket customers typically don’t have the specialized resources to dedicate to robust cyber or DR practices. Those are also the businesses most vulnerable to the negative impact of incidents should they occur. MSPs with multiple services in their portfolios are making themselves more relevant to their client base[s] and ensuring a continued seat at the table.

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PartnerPath’s Diane Krakora

Diane Krakora: A trend toward more pre-sales services – consulting, assessments, advice, your own IP – services that pull product sales, and the development of vertical specialties in these services that help to differentiate you from your competitors.
Michael Diamond: There’s an amalgamation of trends or key intelligence topics we monitor, but the one that’s top-of-mind for “everyone” is how is Amazon’s encroachment on the B2B channel going impact resellers, distributors, retailers, vertical markets, etc. For example, Amazon’s real beachhead in the IT channel besides cloud is the office supplies market targeting Staples, Office Depot, dealers, etc. We’ve seen countermeasures from the notable retailers (e.g., Office Depot buying CompuCom and Staples recently acquired two-tier distributor Essendant) to try and counterbalance the threat but the key question is will those movements thwart the threat?

CP: Could you give us one prediction for the channel or business technology in general in 2019?

AH: A trend we at The 2112 Group see as key in 2019 is the rise of nontraditional channels as a new breed of partner. We also see that most vendors today are unprepared to engage effectively with these customer influencers. The rise of cloud, IoT and new platform vendor ecosystems, and the shift in conversations from technology to business outcomes, are bringing to the forefront non-technology-focused consulting organizations that haven’t typically been a part of the traditional chain of influence in technology buying decisions. The CPAs, law firms, marketing service organizations, HR consultants, and business process re-engineering firms that make up the “new breed” partners have significant sway with line-of-business owners within an enterprise and are increasingly providing advice on the technology necessary to bring about desired business outcomes. Effective engagement with this nontraditional channel requires rethinking partner programs, enablement, joint business-planning models and overall route-to-market strategies.
MD: I predict there will be continued merger and acquisition activity between B2C retail and the B2B market (e.g., resellers, ISVs, etc.) in their pursuit of creating defensible barriers to address the Amazon threat;

According to our panels, the U.S. B2B or indirect market has grown north of 9% from the first half of 2018 versus the first half of 2017, significantly outpacing U.S. GDP. Thus, I expect the channel to outperform the traditional retail market, which means the channel is more resilient than most believe.

From a technology perspective, as resellers begin to sell different cloud applications…… such as customer relationship management, sales force automation, mid-market ERP, human resources management, analytics, enterprise content management and more, they will become departmental experts moving them into more IT and Non-IT categories and services which automatically sets them up for success whether they’re dealing with facilities department at a hospital, a postsecondary institution, a retailer or whoever – the line card of what the facilities manager buys is fundamentally the same (e.g., power, physical security, ProAV, office supplies) and this is where we see a lot of firms move into new areas – by accident or the firm wants to buy those products from them. Thus, my prediction is we will see resellers, distributors, retailers and others move into more adjacent categories as those interactions with myriad departments will become more common place.
DK: You will all have customer success managers by the end of 2019

CP: Name one of the “pet peeves” you have about how partners operate?
DK:Focusing on a sales push – and as a funnel and in a linear fashion.

AH: Partners that don’t take full advantage of the services their vendors offer through their respective partner programs, and focus on “leads” versus using the intellectual property available to improve their organization’s ability to compete in the marketplace. As a former channel chief, I had many conversations with partner executives that focused on the quantity and quality, or lack thereof, of leads received. When pressed on what their teams were doing to “fish rather than be fed fish,” few of these executives could provide concrete plans on how services offered through vendor partner programs, such as marketing/lead gen campaigns “in a box,” sales enablement and training, co-branding and MDF, were being used to enhance organizational skills and create a competitive edge when building their pipelines. When a partner is establishing a relationship with a vendor, vendor-provided leads are a key component in priming the pump, but at some point, the partner needs to build a level of self-sufficiency in generating accretive value to the vendor relationship.

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The NPD Group’s Michael Diamond

MD: One of the key questions I’m always asked is, how do I grow my business from targeting smaller firms to moving into larger organizations and geographies and significantly growing my revenue? A key pet peeve is a true strategic planning process starting with a situation analysis coming up with strategic objectives of where you want to be in the next 5 years, what market forces are working for and against you, what things are in or out of your control, etc.
Another is partners often ask is, how do I develop new business or find new sales leads or ideas for growth? Fundamentally, I think firms have a tendency to over-complicate life by thinking they need gargantuan marketing budgets that go beyond the typical 10 percent of sales a year. It’s actually quite on the contrary, and there is a lot of intelligence around you to help you develop those things. For example, if you’re a reseller in the education or local government market, every public school and local government’s strategic plan is online that allows you to see their strategy, what technologies they’ve deployed or going to deploy, etc.

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About the Author(s)

James Anderson

Senior News Editor, Channel Futures

James Anderson is a news editor for Channel Futures. He interned with Informa while working toward his degree in journalism from Arizona State University, then joined the company after graduating. He writes about SD-WAN, telecom and cablecos, technology services distributors and carriers. He has served as a moderator for multiple panels at Channel Partners events.

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