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State of the Channel Report: We're in the Midst of a Big-Three Channel Pivot

• By John K. Waters
• December 03, 2021

Three industry trends are "redefining the current state of the channel," say researchers at Ingram Micro Cloud.

In fact, the channel is at an inflection point that finds the big three cloud providers -- Microsoft, Google and Amazon Web Services (AWS) -- shifting their focus away from the end-to-end sales pipeline and dramatically increasing their investments in the channel partner ecosystem. Microsoft in particular is already using its partner ecosystems heavily to sell and deliver its technologies to end customers.

In its second annual industry research and analysis effort ("The 2021 State of the Channel Report"), Ingram Micro Cloud throws a spotlight on these trends, which -- along with this "big three channel pivot" -- include the rapid shift to remote work and the changing role of value-added resellers (VARs) and managed service providers (MSPs).

The dizzying lunge to remote work is the driving force behind the other two trends, the report's authors surmise: "In the blink of an eye, the pandemic has made good on the boldest forecasts for digitalization, rendering the myriad digital tools driving business transformation indispensable and vastly reinforcing the channel's central importance."

The report's authors cite two telling statistics around this trend:

• 42.8 percent of the American workforce is now fully remote
• 90 percent of B2B decision-makers predict that the remote model will persist going forward

"Within this new remote paradigm, channel partners will be tasked with the challenge of duplicating workers' experience at corporate headquarters inside their home offices, introducing multi-cloud and hybrid cloud strategies, ensuring connection speed and reliability, and expanding the security perimeter," the report states.

The report's authors advise partners to focus on "powering and protecting the work-from-home experience." Specifically, end customers will require strategies and technologies that keep their employees happy and productive, while also safeguarding a security perimeter redefined by remote work, the report states.

The second trend emerges from two decades of accelerating adoption of cloud technologies and subscription-based models, along with a significant shift in B2B buyer expectations. The pressure on VARs and MSPs to evolve to accommodate these changes has been increasing, and the pandemic has amplified that pressure.

"For VARs and MSPs, powering the work-from-home experience first means proactively guiding organizations' adoption of multi-cloud and hybrid cloud strategies, including infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), and remote communications and collaboration software-as-a-service (SaaS)," the report states.

Modern service providers must become "channel-first experience builders, specialized strategic partners, and ecosystem drivers." They must "evolve beyond the role of 'IT guy.'"

The report's authors also advise channel partners to identify instances where edge computing can help with their customers' network problems, and they quote Forrester analyst Jay McBain's observation:

Beyond the basic remote infrastructure delivered in response to the pandemic, the channel will capture the opportunity in edge computing. Next-generation communications, cloud-native technologies and edge computing architectures have come together to create breakthroughs in cloud-to -edge integration delivered by partners. Beyond the basic menu of manage d services , in 2021, the channel will star t to implement edge intelligence, edge management and edge networking technologies.

The third trend has obviously critical implications for channel partners: The top three cloud providers are dramatically increasing their stakes in the channel. This has been a slow-moving trend since the introduction of Microsoft Azure, AWS and Google Cloud, but the pandemic has accelerated this shift, the report's authors argue.

Microsoft, for example, has invested more $5.2 billion in its channel partner program (according to IDC) and has doubled its network in the past three years to include 90,000 partners. IDC expects the Microsoft network to deliver $1.2 trillion in revenue by 2024. That equates to approximately $10.04 in revenue from partners for every $1 of revenue Microsoft generates itself, IDC says. Microsoft partners generated an estimated $5.87 for every $1 of Microsoft revenue in 2016.

The report's authors urge partners to prepare for increasingly channel-centric big-cloud providers by, among other things, "capitalizing on increased demand will require MSPs to participate in partner certification programs offered by big cloud players."

"For MSPs, readying themselves for increasingly channel-centric providers starts with enrolling their teams in partner certification programs from the big cloud players," they write, "including the AWS Well-Architected Partner  Program, the Microsoft Partner Network, and Google Cloud's Partner Advantage Program. From there, MSPs must shift their mindset away from focusing solely on reseller margins to taking advantage of the multiplier numbers the big three cloud providers offer -- and how they can win a larger piece of this business."

Ingram Micro is a technology and supply chain services provider; Ingram Micro Cloud is the company's global cloud ecosystem group. "The 2021 State of the Channel Report" is available online.