What will the channel look like in 2018?

What will the channel look like in 2018?

Private equity firms, revamped vendor programs and software set to dominate the agenda

Following a year of sizeable change across global and local channel markets, the next 12 months look set for further disruption for partners, vendors and distributors.

Here’s my top eight predictions 2018:

1 - Private Equity will continue sweep of channel software space, creating some unicorns along the way

With blockbuster mergers on the partner-facing side like Autotask-Datto and on the vendor-facing side such as Relayware-Zift, we are seeing a new trend where point solutions across different categories are being combined to create a more holistic, horizontal approach to the channel software industry.

It is about time that these sectors get attention by Wall Street as 75 per cent of world trade flows indirectly.

2 - Do or Die time for smaller SMB resellers and VARs

With dropping numbers globally, huge demographic headwinds driving retirements, insolvency numbers creeping up, and a buyers market for M&A activity, smaller traditional IT companies will need to transform to survive.

New line-of-business buyers are making most technology decisions today and are demanding hyper-specialised business, industry, geography, sector, segment and business application technology skills to reap the rich downstream benefits.

3 - Vendors put in motion formal shadow channel programs

After watching the rise of software-as-a-service (SaaS) ecosystems and cloud infrastructure players, industry firms, professional services and management consultants, ISVs, born-in-the-cloud and start-ups, vendors will get serious about finding, recruiting and incentivising these powerhouses in front of the new business buyer.

4 - Long-tail strategies finally get chucked out the window

After years of trying, vendors now realise that the long tail of partners (80/20 rule) is not a ripe group of firms that with just the right magic touch would turn into gold partners. Instead, they are a casual set of companies that are really focused on something else.

The epiphany that many are having is that is just fine. A partner that only comes around once a year to do a deal may still be a loyal partner and you may enjoy 100 per cent wallet share – they just that aren’t into you.

Instead of dumping them, figure out how to manage them less expensively and when that yearly opportunity starts to take shape, go all-in for the time period required to win. Rinse and repeat.

5 - We reach 100,000 software companies, next stop one million

Queue up the Dr. Evil memes, we have grown from around 10,000 software companies 10 years ago to 100,000 in 2018. I believe that by 2028, that number will rise by another 10x to be one million firms.

As the shadow channels look to build their own brand and IP, and flex their hyper-specialised skills, this will create the code for over 35 million different customer solutions.

Building workflow, algorithms and business logic will be a key profit criteria for these new firms and spinning up a brand today can be done with pennies. Welcome to the world of one million potential new competitors (in the morning) and partners (in the afternoon).

6 - Hardware margins continue march to the bottom, SaaS downstream revenue is the saviour

If you carefully examine the programs being launched for 2018 by traditional players such as HP, Dell, Lenovo and Cisco, you will see a movement of program investment dollars away from infrastructure and into specific opportunity areas that partners will need to get in front of.

We will see downstream SaaS opportunities which install, implement, integrate, secure, make compliant and ensure continuity remain in the 40+ range for the right skills.

The average SaaS deal today drives 4X dollars of very sticky, long-term opportunity for every dollar of recurring revenue that goes to the platform. Hint: these are not managed services, it is almost 100 per cent project based revenue with endless (profitable) change-orders.

7 - A resurgence of partner communities

We have seen the amount of media properties, peer groups and tradeshows stay consistent for a number of years.

After many of the mega-deals (#1 above) shake out, there will be room once again for like-minded, specialised partners to share best practices and find strength in numbers.

Vendors who want into these niches will be happy to spend sponsorship dollars to get these critical endorsements.

8 - Distributor disruption continues

If you didn’t notice in 2017, Ingram was bought by a Chinese firm to kick off the year, Tech Data acquired Avnet shortly after and Synnex acquired Westcon Group.

This will not slow down in 2018 as several niche distributors will become attractive for broadline players and, as everyone is trying to hide the decade-long decline in hardware revenues that is coming, more of these consolidations will take place.

Later in the year we will start to learn how much value (margin) a distributor can earn by being the cloud matchmaker.

Jay McBain is principal analyst of channels at Forrester. Jay leads Forrester's research and advisory for global channels, alliances, and partnerships. He focuses on B2B marketing in the age of the customer; understanding and navigating the complexity of multiple routes to market; ensuring contextual and relevant content to accelerate the indirect sales process; and describing the technology infrastructure to build and support channel relationships.

Follow Us

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags forresterJay McBain



Reseller News kicks off awards season in 2019 with Judges' Lunch

Reseller News kicks off awards season in 2019 with Judges' Lunch

The 2019 Reseller News Innovation Awards has kicked off with the Judges Lunch in Auckland with 70 judges in the voting panel. The awards will reflect the changing dynamics of the channel, recognising excellence across customer value and innovation - spanning start-ups, partners, distributors and vendors. Photos by Christine Wong.

Reseller News kicks off awards season in 2019 with Judges' Lunch
Reseller News welcomes industry figures for 2019 Hall of Fame lunch

Reseller News welcomes industry figures for 2019 Hall of Fame lunch

Reseller News welcomed 2018 inductees - Chris Simpson, Kendra Ross and Phill Patton - to the third running of the Reseller News Hall of Fame lunch, held at the French Cafe in Auckland. The inductees discussed the changing landscape of the technology industry in New Zealand, while outlining ways to attract a new breed of players to the ecosystem. Photos by Gino Demeer.

Reseller News welcomes industry figures for 2019 Hall of Fame lunch
Upcoming tech talent share insights at inaugural Emerging Leaders Forum 2019

Upcoming tech talent share insights at inaugural Emerging Leaders Forum 2019

The channel came together for the inaugural Reseller News Emerging Leaders Forum in New Zealand, created to provide a program that identifies, educates and showcases the upcoming talent of the ICT industry. Hosted as a half day event, attendees heard from industry champions as keynoters and panelists talked about future opportunities and leadership paths and joined mentoring sessions with members of the ICT industry Hall of Fame. The forum concluded with 30 Under 30 Tech Awards across areas of Sales, Entrepreneur, Marketing, Management, Technical and Human Resources. Photos by Gino Demeer.

Upcoming tech talent share insights at inaugural Emerging Leaders Forum 2019
Show Comments