The 2112 Group Forecasts Reveals a Merging Between Managed and Cloud Services in The IT Channel
According to 2112’s Annual Midyear Channel Performance Report, solution providers are preparing for the sales models that accompany automated services
PORT WASHINGTON, NY, Aug 5, 2016 – A new report by The 2112 Group, the 2016 Midyear Channel Performance Report, finds the majority of solution providers will see a 6 percent or better expansion of sales and revenue, and steady profits – likely in the range of 11 to 20 percent of net revenue. 2112 expects the channel to end 2016 in positive territory, despite slightly longer sales cycles and falling average deal values.
“According to 2112’s 2016 Midyear Channel Performance Report, the average partner earns 43 percent of its revenue through the sale of hardware and software products,” said Lawrence M. Walsh, CEO and chief analyst of The 2112 Group. “Nearly four in 10 partners earn more than 50 percent of their gross revenue through managed and cloud services. And the balance is typically made up of professional and consultative services.”
In the 2016 Midyear Channel Performance Report, solution providers reported that their year-to-date revenue and profits are trailing the same period in 2015. Further, average deal values are down more than 10 percent, and sales cycles – the amount of time between first customer contact and sale closing – are getting longer. The following are some of the highlights of the report:
- Roughly 60 percent of solution providers reported not having sales plans or goals, and 40 percent don’t have full-time sales management staff.
- Approximately 7 out of 10 solution providers say their managed services sales are expanding.
- Solution providers expecting steady sales and revenue this year increased by 9 percent.
The data contained in the 2016 Midyear Channel Performance Report reveals that the average solution provider is earning more than one-half of its gross revenue from automated services, and those with that focus are generally growing faster and have higher profitability than businesses dependent on product sales for their earnings.
“Partners aren’t necessarily differentiating between managed services revenue and cloud services revenue, as the two categories are quickly consolidating in the channel. Customers aren’t just looking for hosted infrastructure and cloud-based applications; they want third parties with the competencies and scalable resources to manage those things for them,” Walsh said. “For solution providers, the 2016 Midyear Channel Performance Report is validation that recurring revenue from highly automated services isn’t necessarily dependent on a hardware or software product sale.”
The full 2016 Midyear Channel Performance Report is available for download on the 2112 Website or by request at [email protected]. The full report contains detailed information on economic conditions and the outlook of solution providers through the first half and end of the year, as well as the indicators that are driving or inhibiting growth in the channel.
The full 2016 Midyear Channel Performance Report, is available for download on the 2112 Web site or by request at [email protected]. The report contains detailed information on economic conditions and the outlook of solution providers through the first half and end of the year, as well as the indicators that are driving or inhibiting growth in the channel.
About The 2112 Group
THE 2112 GROUP is a business strategy firm focused on improving the performance of technology companies’ direct and indirect channels through our portfolio of market-leading products and services. We leverage proprietary intelligence with qualitative research, market analysis, tools, and enablement programs. Our industry experts approach each engagement by applying innovative solutions customized to meet the needs of our clients. By looking at the technology market from the viewpoint of vendors, partners, and end users, 2112 is uniquely positioned to develop go-to-market strategies that are beneficial to all parties from both a channel and enterprise perspective.