Channel is Growing and Optimistic
According to our new 2015 Midyear Channel Performance Report, solution providers are expanding at substantial rates even as sales in the rest of the IT market are slowing.
By Larry Walsh
The consensus is that the technology market is contracting. Analyst firm Gartner says global technology spending will shrink 5.5 percent this year as organizations cut spending on equipment and software. Raymond James says technology vendor profits rely more on margins than on increased product sales. And Computer Economics says U.S. IT spending will remain positive, but shows signs of erosion.
None of this is really good news. Yet there’s a sector of the technology market that’s defying gravity: the channel.
According to our new 2015 Midyear Channel Performance Report, North American solution providers this year will grow by at least 6 percent over 2014. Equally astounding, nearly four in 10 say their businesses will increase revenue by at least 15 percent. And the prevailing sentiment is that solution provider profitability will rise at least 6 percent this year.
The 2015 Midyear Channel Performance Report demonstrates that the collective community of solution providers — value-added-resellers (VARs), managed service providers (MSPs), systems integrators, IT consultants, and agents/brokers — is far more optimistic and is having an easier time conducting business than their suppliers/vendors.
The health of solution-provider businesses isn’t just reflected in revenue and profit. The report indicates that average sales cycles – the time it takes solution providers to originate and close a sales opportunity – are getting shorter. Meanwhile, average deal values – the total sale price or value of a customer engagement – are increasing.
While solution providers are growing, questions remain as to whether the growth is entirely healthy or sustainable. The data shows that most of the revenue expansion is coming from services sold into existing accounts. MSPs, in particular, say their most robust business comes from upselling existing customers to increase use of current services or to tack new offerings onto current accounts. Net-new account acquisition remains elusive for solution providers across the board.
The 2015 Midyear Channel Performance Report shows that opportunity still exists for vendors and solution providers alike. Vendors need to tap into the strength of solution providers by providing more support for expanding sales bases and delivering more customer-engagement resources. Solution providers, meanwhile, need to leverage their gains to invest in their businesses.
Full copies of our 2015 Midyear Channel Performance Report are available at http://the2112group.com/product/2015-midyear-channel-performance-report/ or by emailing [email protected].