Potential Economic Slowdown Irrelevant to Channel

With gas at nearly $5 per gallon at the pump in some areas, a housing crash upon us and the weakest dollar we’ve seen in a lifetime, how can anyone think the 2008 economic outlook is bright?

Still, it seems no one has told our IT industry leaders the bad news. We hear a constant stream of technology industry success news mixed in with these poor economic indicators.

Did the channel contribute significantly to technology vendors’ growth and profitability this year? Undoubtedly. The proof? Arrow’s sales are up, and Synnex and Tech Data both beat Wall Street estimates.

We at Amazon Consulting are hearing three trends from solution providers and vendors that we expect will shape the channel’s success and profitability in 2008. First, we’re seeing more attention paid to the growing conflict around services. The quality of an implementation and configuration is becoming increasingly important to the vendor, and that hopefully leads to increased customer satisfaction and sales. Most software and hardware vendors believe their teams are the most qualified to ensure a successful implementation and a satisfied client. That leads to a large internal professional services team competing with solution providers for services.

This services conflict has been a channel reality for years. What Amazon Consulting predicts will affect channel conflict in 2008 even more is the increased adoption of the managed services provider (MSP) model and the move toward software as a service (SAAS). Two opposing forces are operating to increase the tension: the vendor’s need to ensure customer quality and satisfaction, which vendors feel best suited to provide, and the desire to present a full solution to the client’s business challenge, which most would agree is best accomplished by a solution provider.

Consider that more customers are demanding, and more vendors are offering, software and even hardware provided as a service, and it looks like we’re in for some fireworks over the next year or so as the industry sorts out the channel partner’s value in an SAAS offering.

We also see partner-to-partner initiatives blossoming over the next year and having an impact on the channel. As solution providers continue to focus on their core competencies while struggling to remain profitable, they will continue to rely on partnerships with other providers to increase their technical competencies or geographic reach. While providers have been doing this for years, what’s new and will continue to grow is the vendors’ interest and involvement in facilitating these relationships.

Lastly, there’s no doubt the SMB market is still hot and continuing to influence the programs and initiatives vendors offer channel partners. We’re seeing an increased vendor focus and commitment to training and partner enablement for 2008. Selling to SMBs takes an army of solution providers, and that army needs training. Along with enablement programs, vendors are also increasing their communications to solution provider partners in 2008 in hopes of bolstering awareness and mind share.

So is the economic forecast for 2008 gloomy or bright? My position is it doesn’t matter. Whether bullish technology industry leaders such as Cisco Systems’ John Chambers are right about their companies’ growth opportunities or the bearish Wall Street guys are right about the tightening economy, one thing is certain: Technology vendors will need to continue to invest in partners to quickly reach increasing market opportunities and to continue to “do more with less.”

One thing is certain about 2008: Solution providers will continue to be central to vendors’ ability to effectively reach customers with full solutions.

Diane Krakora is president and CEO of Amazon Consulting. She can be reached at dkrakora@amazonconsulting.com.