Getting product to the end-user can seem like an easy feat, but as fast as technology evolves, so does the IT distribution channel. And it isn’t going to wait around for you to catch up.
Whether it’s a reseller, managed service provider, original equipment manufacturer or distribution partner, there are many things affecting the channel today.
Here are the biggest challenges in no particular order.
1.Shrinkage: The number of new service providers entering the channel declined by two-thirds last year, Channelnomics reported in January. Lawrence Walsh of 2112 Group and chief analyst of the 2014 Channel Forecast, told Channelnomics that compared with PC, Internet and business automation, the services model, mobility and business analytics “come with higher technology and investment requirements. The higher barrier to entry and adaptation…takes more capital, talent and business acumen to thrive, thus fewer solution providers are forming and many existing ones are failing.”
2. Marketing: “Technical people aren’t the greatest at marketing or sales, which also means they aren’t the best at managing people who are, either. The sales person asks for leads and the marketing people want to know what to market, but the management is only good on the technical side. It’s a classic scenario,” Aaron Lee, channel marketing manager at StorageCraft said.
3. Customer relationship: Though this one might seem like a “no-brainer,” Lee sees it all the time. Resellers will get a contract with the customer that’s on a per-project basis, meaning they’re paid as they repair and maintain. MSPs, on the other hand, may feel that if they don’t have a stronger relationship, they lose money. Instead, they’ll form client relationships that say each month, the customer will pay a recurring fee to the MSP in exchange for something like taking care of the servers each month.
Though it doesn’t seem as prosperous as getting one big chunk of dough, it does ensure constant contact with the client and I would assume a lot less work than waiting two years to go through a company’s server.
4. No more middle man: The cloud may be someone’s best friend, but to the reseller or MSP, it can seem more like a foe, right? You spend your time selling licenses for Microsoft Office, buying it from Microsoft for $800, but reselling it for $1,000. Now, Microsoft introduces Microsoft 365, and now your client can pay $75 a month to have access to whatever software they need at the time.
I asked Lee, then, why bother even going through the MSP? “You do still get a license, but instead of owning it outright, it is pay-as-you-go, meaning less money coming in every month,” he said. “The reseller is getting edged out by software because the end user doesn’t have to pay the middle man.”
5. Education: I am in no way implying that knowing your stuff is bad, but I bet there are MSPs out there somewhere remembering back to the good ole’ days of 2000 when they were the only ones who had the expertise. Thanks to the Internet and the tens of thousands of forum websites, the end user is way more informed than they used to be, Lee said.
6. Workforce: Millennials are coming out of college, and their expectations of working are different. They want to get paid for the work they do, want to work from home and think they are entitled to a big salary.
“Millennials are totally different and people aren’t quite sure how to manage these types of employees because there is that different set of expectations and work ethic,” Lee said.
Lee also told me that it will be interesting to see what happens in the channel market, raising questions like: what if more resellers enter the MSP space to try for recurring revenue models? Or, how will all of the entities in the channel be able to convey their value proposition to the now more educated end user? These are big questions, but time will certainly reveal the answers.
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