Channel Watch

Are We at 'Peak Channel' or Just Ramping Up?

Under pressure from trends like cloud computing and automation, how can the IT channel survive -- and what form will it take if it does?

One of the issues that's always in the back of my mind is the future of the IT channel. Specifically, I wonder whether the IT channel over the next few decades can continue to be what it has for the last few decades in the United States, an engine of American dream entrepreneurial opportunity and a source of good-paying work for technical professionals.

The question calls to mind a line from William Gibson's 2003 novel, Pattern Recognition: "This business of ours is narrowing ... There will be fewer genuine players."

The proximate reason for concern is the cloud, and the precipitous and accelerating drop in the need for the forklift upgrade projects that drove the IT channel top-line and bottom-line growth for years. To take the most obvious example, if you don't need to upgrade Exchange Server ever again, you don't need anyone to resell you the on-premises software, to recommend the beefier server, storage and networking hardware for it, or to handle the deployment and migration project.

The cloud offers lower margins, which can be just as, or more profitable, assuming a channel business overhauls its cost structure to adapt to the monthly payments. But that's not all there is to it. The big vendors that used to court the channel to push the software, and now offer services, aren't entirely convinced they need the channel to sell the cloud. We've seen this debate play out inside Microsoft with its ongoing dance over how much it needs sales and implementation partners for Office 365. Two steps back, one step forward, one step back, two steps forward.

Other big trends that seem to be exerting pressure on the tech channel include increasing automation of everything and IT departments' ongoing loss of control over technology spending in general.

I spent a few days in June in Orlando for the LabTech Automation Nation and got the chance to put the question to the irrepressible and influential Arnie Bellini, CEO of ConnectWise, which owns LabTech.

Bellini, who has been in the channel for decades, isn't having any of that doom and gloom. We're at an apex, he argues, on the cusp of the greatest era. "Everything is affordable, everything is ubiquitous." He points to a Gartner thesis that every company has become a technology company and must continue to use technology strategically and effectively to succeed in almost any business.

"Our feeling is that there is plenty of room," Bellini says. "In fact, there's probably a shortage of talent to take care of all the technology needs that we're heading toward in the future."

Because of commoditization and constant change, that means the IT channel will need to constantly shift what it does and to whom it sells. "It won't be all the things that we're doing today," he says. On that score, Bellini is alarmed by how many current channel businesses are still whistling past the cloud. "It's important for all serious managed services products to incorporate cloud," he says.

Wrenching change will be a constant, but that's always been part of the deal in the tech channel. It's good to hear somebody envision a future with a vibrant channel. Where do you see the channel in a decade? Let me know at sbekker@rcpmag.com.

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About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.