Channel Transformation to Drive Acquisition Wave

By Michael Vizard  |  Print this article Print
channel M&As

NEWS ANALYSIS: Changes in how companies consume IT are bringing about a transition in how solution providers are valued. This channel trend will spur growth in M&As.

In a similar vein, Nimesh Dave, executive vice president of Ingram Micro, warned solution providers at the recent Ingram Micro Cloud Summit that if they don't pay attention to how these business and technology trends are evolving, it won't be too long before they will get disrupted from their business model. The ultimate goal should be for partners to bask in the channel transition—to take advantage of the disruption in the market to expand the scope of their reach, Dave said.

 "We want to help partners do more with more," Dave said. "We are moving into a services economy."

Michael O'Neil, principal analyst for the boutique research firm InsightaaS, added that solution providers really have no choice at this point when it comes to focusing more on LOB executives.

Channel Transformation: Impact on MSPs

MSPs may be hit hard in the channel transformation.

"All the MSPs are getting squeezed on margin," O'Neil said. "And thanks to the cloud, there's also a decline in actual product spending."

That doesn't necessarily mean that solution providers should focus on LOB executives to the exclusion of IT professionals. However, it does mean that as more IT projects are funded directly by the LOB rather than the internal IT organization, solution providers need to expand their relationships within their customer base.

In fact, Matthew Preschern, chief marketing officer for HCL Americas, said the solution provider now has a decidedly bi-modal approach to IT, in which legacy systems are managed are differently from new, emerging applications.

"A lot of our customers are on a digital business journey," Preschern said. "But in a lot of other instances, the CIO is still the decision-maker."

But as relevant as the internal IT organization might still be in many instances, solution providers that still focus only on traditional managed IT services will continue to see the valuation of their company decline as competition across the category becomes increasingly intense, said Tommy Wald, president of channel consulting firm TW Tech Ventures.

"The unfortunate truth is that most MSPs are still selling into IT," Wald said. "It's going be a bloodbath."

The best way to avoid falling victim, Wald said, is to make the services being provided more valuable to the business as whole. Otherwise, he added, the future of solution providers in the channel will look very bleak indeed.

Michael Vizard has been covering IT issues in the enterprise for more than 25 years as an editor and columnist for publications such as InfoWorld, eWEEK, Baseline, CRN, ComputerWorld and Digital Review.