2017 Indirect Channel: A Love-Hate Relationship Heats Up
Michael Diamond , Director, Industry Analysis ;
For 20+ years the IT industry has predicted a cataclysmic event known as the end of the indirect channel. Reporters, analysts, influencers, and even some high-profile vendor executives have predicted the death of distribution and value-added resellers. And when the internet got its makeover to cloud, and SaaS started to scale, the doom and gloom rhetoric around the indirect market got worse.
Yet, here we are, in 2018, and hardware sales for the U.S. IT channel for 2017 versus 2016 grew from $55 billion to $57 billion, outpacing the U.S. GDP; and the IT channel is more relevant than ever. It’s obvious the indirect channel is not going away anytime soon. Why? Because even though it appears every company is becoming an IT company, clearly not every person is becoming a tech expert. Our economy, our businesses and our way of life – personally and professionally, has become reliant on technology and integration. The more we rely on IT, the more we need channel partners to make IT work.
Also, not every firm wants to move their infrastructure to the cloud, which again doesn’t mean IT just happens. Behind the scenes integrations, security measures, policies, and management are needed. Adding to the complexity in cloud are the millions of small businesses in the U.S. with different models and vertical applications to boot (pun intended). To think that any one vendor will hire experts for every sub-vertical or departmental application that can understand the economics and vernacular of those sub-industries, is unrealistic. It’s never going to happen - another reason why the channel is commanding more attention and value.
When looking at the 200 plus technologies that NPD tracks in the channel, we often categorize them into higher level segments. For example, the general office worker’s desktop, the mobile worker, conference rooms, data center infrastructure, general campus infrastructure (e.g., lobbies, passage ways, parking lots). We also look at how each department is using technology and the verticals and sub-verticals that use them.
In 2017, on the general office productivity side, we saw companies deploying technology solutions coupled with facility upgrades to help them find and retain talent. For example, companies are making their employees’ workspaces more open and collaborative, connectivity friendly, multi-tasking oriented, analytically driven, ergonomic to reduce stress levels, and cost efficient to keep operating expenses in check.
Organizations are also adjusting the way they collaborate by growing their huddle room strategy, which often mimics a coffee house atmosphere for employees to “collaborate.” This increasing trend, in turn, promotes sales of the large format commercial display market, where firms are trying to offer employees a means to instantaneously communicate and share ideas with one another to foster innovation.
From a data center, or wiring closet perspective in the networking market, firms are seeking ways of more efficiently managing virtualized infrastructure, as well as improving access point throughput while protecting critical infrastructure (e.g., next generation firewalls). This extends to the enterprise storage market, as companies look for ways to add scalable infrastructure in order to prepare for the onslaught of data that will be used to provide analytic solutions in the organization.
As more companies work to upgrade their internal and external customer experiences, the IT channel will continue to be a key player in deploying solutions such as a truly software-defined data center, enhanced collaborate solutions (e.g., unified communications), analytic solutions, and network security, and offering services that keep businesses moving forward, people connected and transformation happening. It’s these increases collectively that should continue to drive the channel’s relevance and sales of technology categories, leading to another strong growth year in 2018.