The channel as we know it will not exist in as few as five years,
says Peter Sandiford, CEO of LPI Level Platforms, a managed services
platform vendor based in Ottawa, Canada. While technology will continue
to increase in complexity, product margins will continue to erode and
most professional services will be provided remotely from countries
like India where the labor costs will beat out local competition.

"The whole idea of professional services just goes away and
VARs, if they exist at all, will just become CIOs," he tells Channel
Insider. "So it will be the end of VARs as they exist today and the
creation of something new, advising customers on technology choices,
selling, advising and being a partner in the business."

He expects the local services business to collapse as the
big — and low-cost — players go directly after the SMB market and do
it over the Internet. Sandiford also believes that while the channel’s
future lies in being their customers’ trusted adviser and CIO,
specialization will be critical. If a service can be provided over the
Internet via a software-as-a-service (SAAS) or cloud model, then "a
specialist will always be able to beat the local generalist."

Obviously having a vested interest in the channel’s survival, Sandiford decided to write about seven megatrends that will reshape the channel.
The first two — Megatrend One: Large Corporations Enter the Market and
Megatrend Two: SAAS and Cloud Computing Change the Game — are already
written. In the works are: unified communications moves from buzz to
reality; collaboration becomes a core success strategy; system
integrators and offshore remote infrastructure management (RIM)
providers will enter the market; vertical market service providers gain
market share; and managed services growth goes international.

Large corporations are entering the managed services market and the
channel needs to understand who is offering what, says Sandiford. A
number of these organizations, including telcos, retail, ISVs,
enterprise service providers and Dell, "who plays lip service to the
channel" will look to go direct to their customers. Others, like Ingram
Micro, Intel, Acer/Gateway, Cisco, "have made a significant commitment
to support their channel partners."

He expects the rest of the vendor community to get involved. "Vendors
can’t just sit back." Other vendors will support managed services in
their customers and "put them at a permanent disadvantage."

VARs need to think of SAAS and cloud computing exactly as they would
any other product, says Sandiford. "But they’re not thinking of it as
that, nor are suppliers thinking of the channel, they’re looking to
sell direct. They don’t realize that in the sub-100 market, the VAR is
the IT guy, and if the SAAS is going to work, the VAR is required."

Through this series Sandiford wants to identify what he sees as the
threats and opportunities for everyone in the SMB IT channel and
generate discussion about the megatrends transforming the industry. The
channel needs to step back and understand the bigger picture, what’s
going on with the customer, and how can they help them succeed.