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Forrester Research analyst Tim Harmon recently wrote in his blog that 12 to 15 percent of the channel will “wash out” as a result of the murky and unchartered migration to cloud computing services. That means 18,750 solution provider and reseller businesses will go under in North America alone. Is this a bad thing, or is a little Darwinism in the channel a potential benefit?

Harmon isn’t the first analyst to predict a mass channel extinction. In 2006, Michael Haines – then a Gartner channel analyst – opined on the coming changes in the channel between then and 2010, predicting a narrowing of tech suppliers through consolidation and resellers through attrition. “These status-quo firms will be bought out, or worse, cease to exist because they will become irrelevant. At the same time, these changes are encouraging new entrants into the channel, while serving as an accelerator for established players to reinvent their identities and business models,” wrote Haines, now a channel executive at Microsoft.

In 2007 for a project I worked on at VARBusiness called “Channel 2.0,” then-Logicalis CEO Mike Cox made a stunning prediction that the pace of change would wipe out the middle-class channel. “There will be 10 mega-VARs that own 75 percent of the space, with 25 percent of the market served by regional or specialty VARs,” he said.

Actually, Haines’ predictions weren’t too far off the mark. In the past year, we’ve seen an increase in the level of peer-to-peer collaboration, the emergence of new types of channels and channel relationships, distribution taking on new roles in the value chain, and repaid consolidation among the major and mid-tier vendors. And, sadly, we’ve seen a number of solution provider businesses fold as a result of the recession and the pace of change.

By some estimates, the North America channel lost as much as 10 percent of its business population in the last two years. Some companies were rolled up through acquisitions. Others were crushed under the weight of economic pressures. Attrition is a natural part of the business cycle. The channel is primarily a small business community, and most small businesses fail if they don’t make it to their first five years. Even then, businesses that fail to achieve a critical mass of revenue remain vulnerable to market and economic disruptions.  So it’s not inconceivable to have 10 percent attrition a year or 30 percent attrition over five years.

But is this necessarily a bad thing? What Harmon and Haines before him failed to recognize was birth and rebirth within the channel. As businesses fail, others rise to take their place. Where solution providers didn’t evolve to meet the changing operational models or desires of their customers to make them competitive, others will replace the dying breed with innovative ideas and approaches that fill the void. A little more than three years ago, former Microsoft Channel Chief Allison Watson was talking about a new breed of partners who didn’t sell products or services, but rather simply influenced the sale.

Even if replacements weren’t coming to the fore, what are the consequences of a narrowing of the channel on the industry? In a conversation with Harmon last week, he said it would increase competition among vendors for reseller partners. Haines had the same prognosis nearly five years ago. While a potential problem for the vendor, it’s really a potential benefit for resellers. Vendors are rapidly transitioning their channel programs to “value”-based systems through vertical alignments and technology specializations. Vendors say they want partners who are committed and vested to their programs and product sales. The truth is vendors want to work with a handful of high performing partners and leave the “registered” partners to distribution and automated systems for support.

If there is higher competitions among vendors for channel partners, it will give solution providers something they don’t have today – leverage. Today, vendors dictate terms to their channel partners on the terms and conditions they’re allowed to operate under. Vendors set prices. Vendors control the marketing and regulate profitability. In a consolidated channel, solution providers will force vendors to compete for their business in ways they don’t today. And solution providers won’t be forced to accept “one-size-fits-all” partner agreements.

Won’t fewer resellers lead to greater competition? As it stands, many solution providers don’t have real competition. Larger integrators and services companies bump into each other and their vendors in the field all the time. On the mid-tier and small end of the channel, solution providers will run up against a handful of like-sized companies. In reality, though, there are 100,000 to 125,000 solution providers in North America servicing roughly 27 million businesses. That works out to roughly 200 customers per channel capita. A thinning of the channel herd would likely mean more business for the remainder. Besides, a little competition never hurt anyone – except those who couldn’t compete.

Constantly changing market dynamics will fuel Darwinism in the channel, through which only those solution providers able to adapt their business models will evolve to their next epoch. Those who don’t survive will give way to new species of partners who will come to market with innovative ideas, business models and products. Where Harmon and Haines were correct is that the catalyst for change is in the customers’ needs and desires, and the will of the solution provider to make the evolution investments.

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Lawrence M. Walsh is CEO and president of The 2112 Group, a technology business advisory service that specializes in optimizing indirect channels and partner relationships. He’s also the executive director of the Channel Vanguard Council, a thought leadership group and advisory committee to CompTIAon channel issues. He is the former publisher of Channel Insider and editor of VARBusiness Magazine. You can reach him at lmwalsh@the2112group.com.