Partners Optimistic About Revenue Growth, Profitability to Year’s End

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The channel remains optimistic despite predictions of a challenging 2016, with three in four (75 percent) partners expecting revenue growth and 70 percent expecting profitability growth.

That’s according to a Canalys survey of 260 IT channel partners around the world. While the results highlight a bullish channel, overall optimism is less than at the start of 2015, suggesting a more difficult year could lie ahead for the IT market, according to the research firm.

Revenue growth opportunities for the channel remain abundant in most sectors, with hyperconverged infrastructure, cloud-based applications and software-defined infrastructure highlighted as important growth categories. Of all segments, IT security is expected to be the strongest in 2016, with 87 percent of partners expecting growth, according to the survey.

“IT security is already the No. 1 priority for end customers, and is only going to grow in importance as they invest in next-generation data centers, digital transformation, cloud, mobility and IoT,” said Jordan De Leon, Canalys analyst. “But this also illustrates the complexity of the security landscape – to capitalize, partners will need to develop much greater levels of expertise. Partners that build a powerful security practice, backed by a strong reputation, will find plenty of opportunities in a world that is unfortunately plagued by many threats.”{ad}

Most partners see themselves in a state of transformation, realizing that as the industry evolves, so must the channel landscape. Cloud and managed services are becoming more important to the channel business model, with managed services in particular now contributing significantly to partner profitability. For two in three respondents, managed services are now more profitable than product reselling.

Less than 1 percent of partners predict some form of exit in the near future, showing the level of confidence that most have going forward, despite the challenges ahead, according to the survey.

Macroeconomic uncertainty, ongoing currency volatility, geopolitical turbulence and the concerns raised by global terrorism and conflict are expected to affect customer confidence; however, the biggest challenge raised by survey respondents is reaching new customers, according to the survey.

“The channel needs to address both new buyers within existing customers – application developers and lines of business, for example – as well as casting sales nets wider to attract completely new customers,” said Alastair Edwards, chief analyst. “But new competitors are emerging in the channel, from cloud-only resellers to digital consultants serving specific verticals, such as banking and health care. These companies are application-literate and professional services-led. They are helping customers solve business issues, not just selling technology. Channel partners must invest in developing their own vertical and pre-sales capabilities here to stay ahead.”

For vendors, the results show the importance of building even closer, more integrated relationships with partners as they navigate complex industry changes, according to Canalys. Maintaining simple, easy-to-use partner programs and predictable incentive schemes, while adapting partner training and certification to reflect new customer demands, will be vital for success. Also, vendors need to work together with their partners through effective co-marketing and sales initiatives to develop healthy pipelines.

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