2016 Rewind: The Good, the Bad and the Ugly

Every year, industry prognosticators offer their views about the technology industry, vendors, businesses and partners for the upcoming year. Industry predictions are often based on research, but also from watching the unfolding of day-to-day events. At the end of the year, we reflect on what happened over the past 12 months and how these events have or are likely to impact partner firms in the upcoming year.

So here we are.

Did industry participants’ expectations for 2016 come to fruition? What shaped up to be the good, the bad, and the ugly — as well as any surprises? Here we take a look at 2016 in review and some of the most relevant channel partner news of the year.

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The channel is beyond the inflection point; it has crossed the cloud chasm. Sixty-seven percent of channel partners made consistent and sustainable cloud profits. Sixty three percent had average revenue growth rates of 20 percent and only 34 percent did not see any revenue growth. Essentially, the gap between “haves” and “have nots” increased, Anurag Agrawal, CEO and analyst at Techaisle told us. The “haves” were able to successfully distance themselves from the “have-nots.” Most are able to strike a balance between recurring and non-recurring revenues, product and services revenue.

PartnerPath CEO Diane Krakora is on the same page as Agrawal.  She told us that in 2016, the industry got serious about cloud after five years of talking about a transition to subscription or on-demand solutions.

“Cloud-based solutions still aren’t the lion’s share of most vendors’ or solution providers’ businesses; however, everyone we talk to is serious about investing in these capabilities,” she said, adding that both vendors and solution providers realize on-demand or subscription-based models are impacting their businesses.

MSP Platte River Networks hosted a private email server for former Secretary of State Hillary Clinton and had their day before a congressional panel about it.

Overlooking the politics of the situation and going to the heart of the story is a technical question as well as a professional question for the industry — all to date unanswered. The question isn’t the liability of the MSP but is related to data privacy, to change and event management, such as what should an MSP do when – it’s been said – was instructed to delete certain accounts.

“No matter where you end up on the political spectrum, there’s an undeniable question that the MSP was involved; the MSP played a central role in the email scandal and whether they did the right thing or the wrong thing, there’s a huge lesson to be learned by other MSPs to say, you need to know who your clients are; you need to know what their data privacy and data security needs are; you need to protect yourself as an MSP,” Charles Weaver, CEO and cofounder of the MSPAlliance, shared with us.

“The big takeaway was that this MSP failed to take protection of itself by doing things that could be remotely considered obstruction of justice. There should have been some policies in place within the MSP’s organizational structure to say, “Wait a minute, should we really do this? Should we wipe a server? Should we be deleting files from a backup cloud provider? All of these questions – separate from politics – demand an answer,” Weaver noted.

Business customers are increasingly likely to ask their service providers about monthly support services to mitigate any risk and accelerate the resolution of potential IT environment problems rather than work in a break/fix mode.

It’s no surprise then that more solution providers with a traditional on-premises bent are now offering managed services, and that when it comes to managed services there continues to be upward growth, according to the MSPAlliance.

We had another year of high profile data breaches, data theft, and ransomware. To jog your memory, there were more than a dozen ransomware attacks on hospitals; a data breach on the IRS (initially uncovered in 2015) ended up with more than 700,000 taxpayers having their personal information compromised; the U.S. Department of Justice database; 10,000 Department of Homeland Security employees’ info was hacked and 20,000 FBI employees; and, Verizon Enterprise Solutions was hit by hackers who stole info on 1.5 million customers.

But 2016 also shaped up to be the year where we saw the democratization of cyber crime. It used to be that you had to be a pretty big or visible target to warrant getting hacked. Not anymore. Today, all you need is a connection to the Internet to be someone’s target.

“They’ll take something from you or use your system to hijack its processing power to launch an attack on something else. There are no safe spaces on the Internet and we all need to be more vigilant moving forward,” MSPAlliance CEO Weaver told us.

Cyndi Privett, principal at Viewpoint Research, also pointed out that security was a hot topic at every major IT vendor’s channel-partner conference.

“Some said it better than others but everyone talked about security software services,” she told us.

The convergence of the voice and data channels has been on the radar for a few years now but has been slow in coming.

This year, however, we felt the earth in this space shake a bit with the acquisition of master agent Intelisys by ScanSource. The industry witnessed the first marriage between a compute and a connectivity distributor, a bold move that many industry pundits believed would take place sooner than later. ScanSource acquired Intelisys in an all-cash deal of approximately $83.6 million dollars plus earn-out payments.

Cloud and emerging technology platforms are driving new type competition in the channel — for example, in the software-as-a-service space, are ISVs who tend not to work with the traditional channel but rather with some of the newer entities such as digital-marketing agencies and pure consultancies.

Human-resource departments, legal, accounting … these professional services-type verticals are also shaping up to be new channel competitors. They leverage their familiarity and experience with vertical software and solutions to take on selling these solutions, as well.

“A lot of this is being driven by the customer changes we’re seeing, such as a sharp move in procurement trends away from IT department technology purchasing to all kinds of line of business (LOB) non-IT executives, department heads having their own tech budget,” Carolyn April, senior director, industry analyst at CompTIA, told us.

Taking this a step further, these LOBs often have their own technology staff, such as a web designer or someone who is dealing with data for that department. It’s these new buyers of technology that new partner types or traditional partner types might find themselves dealing with.

This trend impacts the types of marketing that partners have to do to win customers, and it also impacts what they sell and who they sell to, and also requires retraining sales reps or hiring new ones.

IT skills shortages continued to afflict the industry in 2016. Partners, as well as vendors and end-user organizations, had difficulty recruiting the right skill sets, particularly in security and emerging technology areas. New partner types are also competing for the same talent as traditional channel players.

Industry experts suggest that vendors and distributors have a role in helping channel companies retrain existing staff. As an industry, technology companies need to take responsibility and action to encourage the younger generation of people to pursue IT careers and careers in the channel.

If the ScanSource acquisition of Intelisys wasn’t enough to shake up the IT distribution landscape, how about Tech Data’s $2.6 billion bid for Avnet’s Technology Services unit and Ingram Micro’s acquisition, in a $6 billion deal by Tianjin Tianhai Investment Company.

As of this month, $43 billion Ingram is now part of the HNA Group, a $100 billion company.

Looking at the vendor space, particularly at some of the top players who experienced a lot of shake-ups, i.e. expanding, shrinking and refocusing – Dell/EMC, HPE, IBM and Microsoft – Microsoft turned out to be the clearest example of how a single individual as a corporate leader – Satya Nadella – could change the entire mindset of a company in a very a short period of time.

“Microsoft continued its resurgence and as a result has re-energized its channel community in what is one of the most significant developments among vendors … and not too long ago everyone was saying that Microsoft is dead,” Jeff Kaplan, managing director of Thinkstrategies, told us.

Related to this, Privett noted that Microsoft partners are done kicking the tires with Azure as they were doing this time last year. 2016 is the year that doubts about Azure were put to rest.

As for IBM, HPE and Dell/EMC: In 2016, it appears that IBM is finding itself, and Dell/EMC has a ways to go.

AWS continued its momentum, demonstrating that it will build on that momentum to provide more tools for partners to capitalize on its services.

The industry has been talking about the Internet of Things (IoT) for years now and has moved through the hype cycle from expectations to disillusionment and may now be recalibrating. With all the IoT talk, customers just haven’t been ready.

“The IoT itself will help digital transformations, but will take five to 10 years to gain mainstream adoption,” said Alfonso Velosa, research vice president at Gartner in a recent company blog. The IoT remains on the peak of inflated expectations for the third year in a row as vendors push the hype even higher, but most companies struggle to find use cases beyond proof-of-concept.

With every coming year, expect to see projects that are more focused on the immediate needs of business and more realistic expectations — even in 2017.