The 2112 Group provides detailed insights into the Shrinking Channel phenomenon that reveals through the experience and business performance of over 263 solution providers that the channel is contracting and becoming increasingly competitive.
At first blush, the channel looks to be getting stronger: Solution provider revenues and profits have steadily improved since the peak of the 2008-2009 recession; the number of $5 million-plus solution providers is climbing; new products and services have entered the market, giving solution providers more to sell and support; and new business models, such as cloud computing and mobility, are augmenting and stabilizing solution provider performance.
Overall, 2013 stands as an exemplary year of channel performance.
These are only surface trends, however. The channel is experiencing fundamental shifts that will reshape the reseller, service provider and professional services landscapes. Real revenue is flat and showing signs of weakness. Profitability is low as a percentage of revenue and continues to decline. And, for the first time in years, more companies identify themselves as value-added resellers (VARs) rather than managed services providers (MSPs), marking a return to hardware and software sales and the brokering of other companies’ cloud services.
The 2014 Channel Forecast examines the causes of this contraction, defines the qualities of high- and low-potential solution providers, and documents the shifts that will lead to a smaller channel. The report includes: