8th State of the Channel - Identity Maestro...2019/11/08 · analytics,verticalindustryexpertise,andmore. Overblown Some truth to it depending on the individual channel firm type

RESEARCH REPORT

8th State of theChannel

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Copyright (c) 2019 CompTIA Properties, LLC, All Rights Reserved | CompTIA.org | [email protected]

November 2016

KEY POINTS

Health of channel remains strong, but concerns loomFor years, industry pundits have offered some not-so-rosypredictions for the future of the channel, ranging from totaldemise to a modest shrinkage in size and relevance. The cloudera has intensified that outlook for some based on the easewith which customers can now self-provision much of theirtechnology and work directly with large cloud providers. Dochannel firms agree? Most adopt a measured attitude aboutthe prognostications. Sixty percent believe there’s some truthto them, but wholly dependent on the business model andsolutions portfolio a firm currently has or pursues. A quartercall foul on the gloom and doom, finding these predictionsoverblown hype. A small, but notable group (15%) think thenegative outlook is an accurate one for most of the channel.

Emerging technology progress slow, but steadyNo discussion of the channel’s future should leave out the roleof emerging technologies. Whether it’s blockchain, AI, VR,drones or IoT, these techs are capturing the channel’sattention in steadily growing numbers. Adoption, as it hasbeen on the end customer side, is mostly iterative, with a lot

The IT channel is in flux. New players, emerging technologies, different customers, blossomingpartnerships, and more, have combined to also make this a dynamic time to be in the businessof technology. But it’s also a tenuous one. The disruption of the digital age has changed how theindustry does business dramatically. There are fears about government regulation of the techindustry at large, along with general economic concerns. Such worries often prompt thequestion of the channel’s role and relevance in the future. The research report will explore thatquestion, while highlighting where today’s providers see opportunities and challenges, how theyare embracing new technologies, and how they are reacting to an expanding universe of playersthat now have a role in the sale of technology to the public.

Partnering behavior acceleratesThe incidence of partnering between traditional and non-traditional channel companies such as SaaS specialists,accounting firms and marketers is on the upswing. In 2019,the number of channel firms that partnered frequently withnewer entrants to the ecosystem increased from 20% to 30%compared to 2018. Those that did so occasionally edged upfrom 42% in 2018 to 45% this year. These arrangements helpfill gaps in skill sets or solutions portfolios, mitigate technicalcomplexity that prevents some companies from enteringnew markets, and enable an easier entry into the emergingtech arena.

Trends in the Technology Ecosystem

8th State of the Channel

October 2019

RESEARCH REPORT

of in-house experimentation at this point. That said, morethan half (56%) of respondents report selling at least onecategory of emerging tech to customers today, a jump offive percentage points from 2018. IoT hardware andsoftware ranked at the top of that list, not surprising giventheir relative maturity compared to newer emtechcategories. The main catalysts for entering one or more ofthese markets: greater revenue opportunity than existingofferings and customer demand.


MARKET OVERVIEW

Rapid change is happening across the IT channel today,affecting business models, the competitive landscape,customer types, buying patterns, M&A activity and more.

It’s also a fraught time for the tech industry as a whole.Privacy violations, data breaches, social media-enabledelection interference, and other controversies have thrustthe industry, and many of its leading corporations, into themedia spotlight and the government’s watchdog lens. Formany in the channel, downstream repercussions such asincreased government regulation are an obvious concern.Half of the respondents in this study said media reports theyhave seen about the channel’s future were positive in thelast year, but the other half described such accounts aseither a mix of good and bad prediction, or mostly negative.

Other dynamics are in play that affect the future. Thechannel community is broadening to include more non-traditional players. At CompTIA, we refer to something calledthe “business of technology,” a concept that applies to anyentity involved in selling, influencing and/or creating ITsolutions for their customers. The new players in thisuniverse include SaaS-related resellers/MSPs, digitalmarketers, and even professional services firms such asaccounting practices and law offices.

Size estimates of the U.S. IT channel vary. This is often afunction of definition, methodology or limitations withgovernment data. The blurring of lines within tech sector, aswell as outside the tech sector with non-traditional firms,compound the problem.

Tech-industryworkers

Agree or Disagree? Reactions to Negative Spin on Channel’s Future

Available data provides a proxy for what could be characterizedas the traditional IT channel; it’s incomplete though. Using theU.S. Commerce Department’s North American IndustryClassification System (NAICS), there are three primarycategories associated with the IT channel. The sum of thesecategories equates to 147,963 establishments with employees.This can be viewed as one interpretation of the size of the U.S.channel by the count of establishments.

It’s an interesting time to be in the business of technology, andthe channel specifically. The research in this report, CompTIA’s8th State of the Channel, will highlight a number of dynamicshappening across business models, go-to-market strategies,customer interactions, vendor relations, human resources, andtraining. Some of the more exciting findings this year focus onemerging tech adoption in the channel, which has moved froman experimentation phase to full-on production across anumber of disciplines including virtual reality and drones.While a broad category of solutions to decipher, emerging techis being hailed by many in the channel today as the direction tohead for future revenue opportunity and competitivedifferentiation.

Likewise, the incidence of partnering between firms saw ajump up from last year, which suggests that many in thechannel are recognizing that they can’t do it all. The complexityof technology today and the range of choices to work with canbe daunting – especially for smaller organizations. Morecompanies are beginning to map their solid infrastructure skillsaround networking, devices, and storage to more applications-specialists steeped in software as a service solutions, dataanalytics, vertical industry expertise, and more.

Overblown

Some truth to it

depending on the

individual channel

firm type and model

Accurate assessment for much of

channel

59%26%

16%

General Business Approaches Taken by Today’s Channel

28%

47%

22%

3%

Mostly specializing on anarrow range of vertical

industry services andsolutions

Mostly engaging across awide range of horizontal

services and solutions

Evenly split between somevertical specialization and

some general horizontalbusiness

Don't know


PROGNOSTICATIONS FOR THE CHANNEL

In 2018, three quarters of respondents to this study reportedhaving an optimistic outlook for the future of the channel.That represented a healthy jump up from the 66% whoprofessed the same rosy viewpoint in 2016’s version of thischannel study. The spike last year was likely due in large partto the robust economy of the last several years – especiallywithin the technology industry.

Now, flash forward to 2019 and the current study. Theperennial question of the channel’s continued well-beingremains front and center. The findings today, however, revealoptimism levels that are more nuanced and less positive thanpast years. For example, asked whether they concur withindustry pundits’ doubts about the channel’s future relevance,15% of respondents agreed in full, calling the predictionsaccurate. The majority, 59%, said the viewpoint holds sometruth, though it will depend on what type of business model achannel firm practices. Just 26% outright rebuffed the gloom-and-doom prognostications, calling them overblown andhyperbolic. On the whole, the numbers uncover at least sometrepidation about the future that has crept into the channelmindset.

Pundits aside, it does not appear that media coverage aboutthe channel is having a direct influence on these less-than-optimistic views of the future. In fact, half of respondentsreport that the news coverage they have encountered in thelast year related to the channel has been positive, while just11% say it’s been negative in tone. A third say it’s been a mixof good and bad commentary. And ironically, a whopping 71%of companies stating that negative predictions about thechannel’s future are accurate nonetheless say the mediacoverage they’ve seen has been of a positive nature.

So what is fomenting angst about the future among a solidmajority of respondents? Not what you’d think. Last year’sstudy found that respondents’ main concerns focused on newtypes of competitors in the market and a skills gap foremerging technologies. Those items still make the list thisyear, but the chief worries for the next two years lean moretoward general economic issues. Government regulation ofthe tech industry (37%) tops the list, while potential changesto today’s economic conditions (37%) emerge as the chiefanxiety inducers.

By now, it’s news to no one that the past few years have seena change in how the technology industry is viewed byconsumers, government and other markets. Once envied asthe brash start-up culture and given a wide berth to innovateunfettered, the tech industry now is maturing as all industriesdo. Which typically means more oversight. It’s hard to justifyWild West status forever when the top five corporations interms of global market capitalization sport names likeMicrosoft, Apple, Amazon, Google, and Facebook.

In addition to the immense wealth and power of those giants,broader concerns about data breaches, privacy violations, andother intrusions on daily digital life have cast a dark shadowover what is being colloquially dubbed Big Tech now. Capping itoff is growing worker anxiety over the unknowns of automationto future employment. In this environment, more governmentregulation is bound to happen. The trickle-down effect onsome of the largest tech manufacturers will unquestionablyimpact the massive supply chain and channel ecosystem thatsupports the broader industry. That worries channel businessowners, obviously.

But there’s also opportunity where there is fear. Many businessowners are taking actions regardless of a positive, negative, ormixed outlook for the future. High on the list? Investing inmarketing and social media. Four in 10 firms are investing inthese areas, including hiring people with marketing skills thatfit best with today’s omnichannel way of communicating withcustomers. Emerging technology is also an area where firmsare placing their bets. Thirty-eight percent of respondents saidthey dipped their toes or beyond into one or more of themyriad new tech disciplines. (More on emerging tech adoptionexplored later in this report)

Roughly a quarter to a third of respondents are engaging in thefollowing other tactics to prepare for the future: shifting torecurring revenue (33%), emphasizing project work (30%),changing target customer demographics (29%), adding verticalfocus (29%), or focusing on business consulting services (28%).

Not surprisingly given the resource constraints of smaller firms,the largest channel organizations have been executing abroader array of these actions to shore things up for thechallenges and chances of the future.


20162018

20162018

37%

37%

35%

34%

34%

30%

30%

28%

27%

Govt regulation of tech industry

Changes to general economy

Skills gaps exist for emtech

New types of competitors

Aging of IT channel owners

Difficulty hiring

Commoditization of certain categories

Customers taking business direct

Cloud disruption

Reasons for Concern about Channel’s Future


SERVICES & SOLUTIONS OFFERED

This year has ushered in some shifts and cemented somestability in portfolio offerings channel firms are selling, andamong those solutions generating the most revenue.

The number of respondents offering managed servicescontinued to grow in 2019, with the model remaining themost offered service by the channel and on par with lastyear’s top ranking. In the No. 2 position in terms of portfolioincidence sit Software as a Service-related solutions. SaaSsolutions are often offered in a managed services typedelivery model, so there’s likely heavy overlap betweenthose involved in MSP work and also SaaS. But other modelsexist in the SaaS world that do not include ongoingmanagement of the applications, including a referral feerelationship between channel firms and SaaS ISVs, andsubscription sales transactions and renewals commonlyseem with Microsoft Office 365 or Google Appsengagements.

Other tech categories that took up greater residence in thechannel’s toolbox in 2019 include digital marketingservices/solutions, which 37% of respondents said they soldin 2019, up from 27% that did so in 2018 when it was thesecond-lowest category on the list after hardware/devicesales. Entry into this market by more traditional channelfirms is an interesting competitive chess play. Digitalmarketing is a burgeoning business; to date being mostlythe domain of pure–play agencies that have gottenincreasingly technical in terms of website development andmarketing automation software. But some pure plays havemade headway in other types of IT services, especially withcustomers that prefer to work with one provider for theirtech needs. More traditional channel players seem to havegotten the memo and begun adding these in-demandmarketing services to keep pace.

Categories Most Expected to Experience Significant Growth in Next Two Years

1. Managed services (NET 81% predict growth)2. Consulting (80%)3. Internet of Things (79%)4. Data analytics (79%)5. Security (77%)

Security offerings maintained a steady presence in thechannel’s arsenal, increasing from 38% last year to 41% thisyear. That percentage is still low, however, considering thatsecurity considerations are integral to just about every typeof tech implementation. Ideally, it should be a practice areathat most channel firms at least offer on a basic scale, evenif they are not devoted specialists. This is especially true astechnology’s complexity increases, critical data becomes thecurrency of business, and new types of security threatsproliferate. It’s a lucrative discipline too. Nearly half of firms

selling security today expect significant revenue growth in thisarea in next two years.

Consulting is another category with untapped potential. Whilejust 3 in of respondents reported consulting work (business- ortech-related) in 2019 – including 55% of larger organizations –7 in 10 said it is expected to drive significant or some revenuegrowth for them over the next two years. The possibility of afruitful consulting practice makes sense. Consider thealignment between consulting work and SaaS sales. As today‘scustomers self-provision cloud-based SaaS solutions in growingnumbers, they are also becoming overwhelmed by thethousands of choices at hand. Nobody wants to be the personwho buys an application that turns out to be all wrong. That’swhere third-party consulting acumen can come in to vetapplications and determine those that map best to individualcustomer needs, environment, and desired business outcome.

Categories that continue to find themselves declining as partof the channel portfolio are not surprising. Take hardwaredevices, the category that essentially built the channel.Twenty-seven percent of respondents included hardware as anoffering in 2018; that percentage dropped to 24% in 2019.Likewise, break/fix services fell, declining sharply from 37% in2018 to 23% in 2019. Still, channel firms that do includehardware and break/fix in their line cards remain sanguineabout the years ahead in those categories. Roughly 6 in 10predict either significant or some growth in hardware sales inthe next two years. Ditto for break/fix growth expectations.

Total Small1-49

Medium50-499

Large500+

Managed services 46% 32% 48% 59%

Software as a Service 44% 38% 47% 57%Security services 41% 33% 43% 59%Digital marketing

services 37% 34% 35% 42%Data analytics (i.e. drone data, etc.) 37% 25% 39% 54%

Back office function services 37% 43% 35% 46%

Integration services 33% 21% 41% 44%Consulting services 30% 23% 25% 55%Internet of Things 28% 26% 32% 45%

Custom application development 26% 23% 22% 37%

Hardware device sales 24% 19% 23% 28%

Break/fix services 23% 20% 24% 32%UC/telecom services 21% 19% 24% 24%

Vertical expertise 20% 15% 21% 31%

Solutions/Services Offered by Channel Firm Size


Artificial intelligence. Drones. Internet of Things. Blockchain.These are but a few of the emerging technologies disruptingthe industry today. Market momentum for this categorycontinues to expand as customers and providers alike seeopportunity in embracing the cutting edge. Consider thatbetween 2019 and 2022, IDC expects double-digit growthglobally from the full palette of emerging technologies,compared with traditional tech categories staying in the single-digit growth range.

While a slow, iterative process, most channel firms see majorpotential in emerging technologies, and have begun eitheradding one or more products or services to their portfolio orexperimenting in-house. Seventy-two percent of respondentsconsider newer tech categories a significant businessopportunity for the channel at large, on par with 75% thatreported this same level of optimism in 2018. Just 18% feelemerging tech represents a business threat, which may reflectfears that vendors of these newer wares might rely more ondirect sales to customers or that the learning curve and cost ofentry might be prohibitive to getting into these spaces.

Not surprisingly, the largest channel firms reported a higherincidence of production-stage status with emerging technology,

Channel Firm Experience with Emerging Tech

Two-thirds of channel firms in the medium- to large-size range are actively

selling emerging tech solutions today.

The reasons for embracing emerging technologies are largelythe same as they are for adding any new category to yourbusiness. Revenue generation is the primary driver,particularly as channel firms see greater margin potential inthese new solutions than with existing lines of business. Endcustomers represent another top driver pushing the channelin this direction. Customers are eager to take advantage ofthis new crop of technologies as a way to drive their ownrevenue growth or streamline their operations. Many areturning to their current tech providers to help them get there.And then there is competitive differentiation. Channelcompanies are always looking for ways to stand out amongtheir peers and avoid obsolescence. Emerging tech categories,along with actions such as developing vertical industryexpertise, offer a way to do this.

56%

29%

11%

3%

51%

29%

13%

5%

Production stage (active partof portfolio)

Experimental stage (not yetoffering to customers)

Not involved yet, butconsidering for future

No plans to adopt at this time 2019 2018

56%

52%

43%

38%

36%

35%

32%

36%

44%

40%

45%

45%

12%

13%

13%

22%

19%

20%

Better revenueopportunity thancurrent portfolio

offerings

Customer demand

Competitivedifferentiator

To avoidobsolescence

Dovetails with ourexisting portfolio

Vendors are pushingus in this direction

Major Factor Minor Factor Not a factor

Main Drivers for Adding Emerging Tech Business Lines

EMERGING TECH AS CHANNEL OPPORTUNITY

meaning they are actively selling to customers. Two thirds of thelargest organizations are selling emerging technology tocustomers, compared with half of small-sized channel firms. It’skey to note two things here, however. First off, theoverwhelming majority of the channel sits in that small-sizedbucket so clearly there’s still a lot of room for firms to get intothis market. Secondly, those medium- and larger firms reportingproduction-level activity today don’t indicate how deep thatwork goes. It could be they’ve just started selling one solutionand have few active customers or they might have a bustling,multi-solution practice. On the whole, it’s safe to conclude thatthe majority of channel players are in the early stages withnewer technologies, with an exception for those involved in theIoT space, which is a more mature market compared to say,blockchain. (More on IoT practices in a separate research brief)


EMERGING TECH: SOLUTIONS & CHALLENGES

While it’s clear that the channel views emerging tech mostlythrough a favorable lens, many remain in the early stages ofsorting out which offerings to adopt, which technical skills toacquire, and how best to market and engage customers.

When it comes to experience with individual emerging techs,the Internet of Things (IoT) rises to the top of IT firm executives’list. Roughly half of respondents said they are currently workingor experimenting with either IoT hardware, software or both.IoT solutions and services are myriad, from hardware sensorsand other devices to data capture/analytics software that canappeal to a range of channel firm types and skill sets. Thecategory has also been on the market longer than most of theother emerging techs, so it is no surprise that this is the arenathe channel has the most experience in.

Virtual reality is a category that took a significant jump upamong respondents, with 45% reporting experimentation oractive selling, compared with 37% last year. VR may seem likean offbeat choice for channel firms when the technology mostcommonly brings to mind young consumers with headsetsplaying video games. But practical business use cases arecropping up, including VR as a way to improve communicationsbetween remote workers and main offices, as a replacementfor video conferencing, and even as a safer way to trainworkers on equipment in a manufacturing setting.

One of the more interesting increases in some form of adoptionyear over year is with 5G technology. Interesting because 5G is,to date, not widely available across the United States. It’smainly rolled out in parts of some major cities, includingAtlanta, Los Angeles, New York, and others. But savvy channelpartners appear to be at least preparing for 5G availability and

Emerging Tech Experimenting With or Currently Offering

Main Challenges in Experimenting with Emerging Tech

40%

38%

36%

34%

27%

25%

23%

59%

43%

45%

30%

18%

26%

23%

Need for technical training

Difficulty hiring staff with theright skills

Cost of entry

Need for business/salestraining

Unknown ROI/business case

Lack of bestpractices/standards

Lack of customerdemand/awareness

2019

2018

51%

50%

45%

40%

37%

32%

28%

27%

27%

26%

25%

23%

48%

43%

37%

42%

20%

23%

34%

27%

20%

25%

23%

24%

IoT software

IoT hardware

Virtual reality

AI

5G

3D printing

Blockchain

AR

Robotics

Drone hardware

Drone software

Biometrics

2019

2018

what that could mean in terms of upgrades to customer networks,devices, and applications. The faster bandwidth will also help fuelthe market for VR headsets, IoT and other sensors, and updatedsmart phones.

Two categories where channel firms pumped the brakes slightlyfrom last year to this year – artificial intelligence and blockchain –suggest that classic situation where companies move too quicklyinto a new technology or business model only to have a realitycheck in year two or three. AI and blockchain hold lots of revenueopportunity, but also steep learning curves and a need fordifferent skills than most channel organizations have in-housetoday. Hence, the slight pulling back in both categories in 2019.

Challenges are endemic to the adoption of any new technology.But some do abate. The main concern from last year, the need fortechnical training, dropped noticeably in 2019. Likewise,respondents this year downgraded their difficulty hiring staff withthe right emerging tech skills, as well as the general cost of entryto these markets, as major challenges. Business/sales training,however, grew as a challenge this year, perhaps reflecting the factthat the technical facets of adopting emerging products are beingaddressed first in the process.


MANAGED SERVICES & THE CHANNEL TODAY

Managed services hasn’t been the new kid on the block forbusiness models in a long time, having been a part of theindustry, and specifically the channel, for nearly two decades.Longevity aside, however, the market is still growing,especially worldwide and with the widespread embrace of ‘as-a-service’ tech solutions. Mordor Intelligence reports that theglobal managed services market is expected to reach $319.5Bby 2024, while researcher MarketsandMarkets predicts thespace to grow from $180.5 billion in 2018 to $282B by 2023.

In the United States, managed services is an establishedcategory in the channel, though one with slower growth thanin other regions, such as Asia-Pacific. U.S.-based MSPs havealso undergone a slew of consolidation activity. But far fromevery channel firm in the U.S. has adopted the model –roughly 4 in 10 have – which leaves plenty of space to get onboard. Or to expand. And has has been the case for years, asolid majority (60%) of MSPs today do not claim pure-playstatus for the business model; they continue to operate amore hybrid mix of recurring revenue, project work, andtraditional transactional product sales.

Larger MSPs tend to be most hybrid in nature given that theyoften operate discrete practice areas within their business –one group devoted to project-based work, another runningthe recurring revenue arm, with some overlap andcoordination where needed. Smaller MSPs typically operate asthe virtual IT department for their equally small-sizedcustomers, who lack in-house tech specialists such as a basichelp desk. That isn’t to say that small MSPs are completelypure play in nature– most won’t turn away a hardware sale,for example, other customer request they can ably fulfill – but


Today’s Managed Services Model – A Little Bit of Everything

they are not nearly as diversified as medium- to largeorganizations.

In terms of services offered, some of the biggest growth andopportunity areas have been around SaaS solutions andsecurity services.

SaaS has established itself as the largest slice of the publiccloud services market today and is still growing, according toGartner. Applications such as Microsoft Office 365, GoogleApps, and other giants have gained a strong foothold in thecorporate market, as have players such as Salesforce and aexhaustive array of smaller ISV applications based in the cloud.Many MSPs are learning to capitalize on this phenomenon byassuming the ongoing management of these SaaS applicationsfor their customers – regardless of whether they had anythingto do with the initial provisioning of the product.

For its part, security is the umbrella service that should operateabove all other solutions in the MSP’s portfolio, whether a SaaSapp they are managing or a disaster recovery solution.

Top Solutions/Services Offered by MSPs in Last Year1. Software as a Service (60% of respondents)2. Security (53%)3. Storage/backup (49%)4. Remote network monitoring and management (48%)5. Hardware as a Service management (44%)6. Disaster recovery/business continuity (41%)7. Help desk services (34%)8. Unified Communications as a Service (31%)

Expectations for Managed Services Revenue Growth Over the Next Two Years

Pure play MSP

Hybrid MSP

(mix of managed services

and other solutions)

Opportunistic MSP

60%

25%

14%

35%

50%

14%

Growsignificantly

Growmoderately

Stay about thesame


NEW COMPETITORS, NEW PARTNERS

The makeup of the channel has been changing now for years,quietly for the most part. The result has been the emergenceof a host formerly unfamiliar players now selling technology.And it’s not who you think. Accounting firms, law practices,marketers are in the game now, having become expert in aparticular tech discipline or software product and opting toparlay that knowledge into an adjacent revenue stream.

That’s not to mention the thousands of SaaS-focused resellersand referral partners that have blossomed around ISVs sellingtheir applications via marketplaces and hubs such as Salesforce.Many of those entities don’t identify as belonging to thechannel as most in the industry know it. They don’t attend thesame events and conferences. And some don’t yet belong toany official vendor partner programs. Yet, at a growing pace,they are selling technology and exist as both competitors andpotential partners to traditional channel organizations. What’spotentially interesting is that a large number of thosetraditional channel firms are in the SaaS game themselves,having added it to their managed services practices over theyears.

Six in 10 channel firms report encountering SaaS companies inthe landscape in the last year, a figure on par with 2018’sfindings. Roughly half report bumping into digital marketingagencies (49%) in the field, which reflects a slight uptick from2018. What has changed is that a growing number of traditionalchannel companies (35%) have added digital marketing servicesto their own line cards, recognizing demand streaming from line

of business buyers outside of IT departments that have techbudget and purchase power today.

Among the non-traditional tech players, accounting firmsexperienced the biggest visibility gains in the channelbetween 2018 to 2019. Thirty-one percent of respondentsfrom the traditional channel in this study said theyencountered accounting entities in the tech sales landscape in2019; that compares with 19% that said the same in 2018.Respondents saw more law firms selling tech last year, 22%up from 18% in 2018.

Daunting as it can be, new competition can be turned into apositive. One way is through partnering. A growing number ofchannel firms are joining forces with the newer players in theecosystem. These arrangements help fill gaps in skill sets orsolutions portfolios, mitigate technical complexity thatprevents some companies from entering new markets, andenable an easier entry into the emerging tech arena, amongother benefits.

Partnering can be particularly effective for small channel firmswith limited and largely horizontal infrastructure practices. Sixin 10 of firms this size that have engaged in partnering,primarily with organizations specializing in applications or aspecific vertical industry, said they did so to expand skills andbroaden their portfolio and rated the experience as positive.

The incidence of partnering between traditional and non-traditional channel companies is on the upswing, whichsuggests that they are working and beneficial to both sides. In2019, the number of channel firms that partnered frequentlywith newer entrants to the ecosystem increased from 20% to30% compared to 2018. Those that did so occasionally edgedup from 42% in 2018 to 45% this year. One of the keys tosuccess for partnerships with would-be competitors is formalprocess, terms, and accountability. In the past, suchrelationships often failed by being too handshake-casual.Eleven percent of respondent viewed partnering negatively,citing informality and a difficulty find the right matches.

General Benefits of Partnering with Non-Traditional Channel Firms

30%

45%

17%

7%

20%

42%

22%

16%

Yes, frequently

Yes, occasionally

No, but we are planning tosoon

No, and no immediate plansto do so

20192018

Incidence of Partnering With New Players

55%

54%

48%

40%

46%

63%

53%

47%

Expanded portfolio and skillssets

Competitive advantage

Introduction to new vendorrelationships

Legacyhardware/infrastructure

players can team effectivelywith newer SaaS/application

providers

20192018


RESEARCH METHODOLOGY

This quantitative study consisted of an online surveyfielded in July 2019 to 505 U.S. IT businesses, yielding anoverall margin of sampling error proxy at 95% confidenceof +/- 4.5 percentage points. Sampling error is larger forsubgroups of the data.

As with any survey, sampling error is only one source ofpossible error. While non-sampling error cannot beaccurately calculated, precautionary steps were taken in allphases of the survey design, collection and processing ofthe data to minimize its influence.

CompTIA is responsible for all content and analysis. Anyquestions regarding the study should be directed toCompTIA Research and Market Intelligence staff [email protected].

CompTIA is a member of the market research industry’sInsights Association and adheres to its internationallyrespected Code of Standards.

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APPENDIX I

Types of Media Coverage About the Channel Seen In Last Year

Mostly positive

Mostly negative

An even mix of bothHave not seen

coverage

11%

48%

33%8%

Source: CompTIA’s 8th State of the Channel | n = 505 IT industry businesses

Actions Taken In Last Two Years to Position Business for the Future

41%

38%

36%

33%

30%

28%

28%

26%

Invested more heavily in marketing efforts, including social media

Entered an emerging technology space (i.e. Internet of Things, artificialintelligence, drones, etc.)

Hired new employees with different skills sets to embrace newmarkets/technologies

Changed business from mostly product transactional sales to recurringrevenue models such as managed services or cloud services

Placed an emphasis on project-based work

Changed customer demographics (i.e. moved from SMB focus enterprise orvice versa)

Shifted focus into a vertical market specialty (i.e. retail, manufacturing,healthcare, etc.)

Placed an emphasis on business consulting


Actions Taken In Last 2 Years to Position Business for Future (By Co. Size)

26%

28%

28%

30%

33%

36%

38%

41%

25%

28%

26%

30%

29%

32%

32%

34%

25%

28%

26%

24%

39%

44%

47%

43%

32%

37%

38%

36%

38%

50%

52%

47%

Placed an emphasis on business consulting

Shifted focus into a vertical market specialty (i.e. retail, manufacturing,healthcare, etc.)

Changed customer demographics (i.e. moved from SMB focus enterprise orvice versa)

Placed an emphasis on project-based work

Changed business from mostly product transactional sales to recurringrevenue models such as managed services or cloud services

Hired new employees with different skills sets to embrace newmarkets/technologies

Entered an emerging technology space (i.e. Internet of Things, artificialintelligence, drones, etc.)

Invested more heavily in marketing efforts, including social media

Total Small Medium Large


Services Most in Demand by MSP Customers Today60%

53%49%

46%42% 41%

34% 31%

Software as aService

applicationsmanagement

Security services Storage, backupservices

Remote networkmonitoring andmanagement

Hardware as aService

management

Disasterrecovery/businesscontinuity services

Help desk services UnifiedCommunications

as a Service

Source: CompTIA’s 8th State of the Channel | n = 437

Current Involvement in Emerging Technologies By Company Size

11%

29%

56%

16%

30%

50%

8%

26%

65%

3%

31%

65%

Not involved yet, but consideringfor future

Experimental stage (not yetoffering to customers)

Production stage (active part ofour portfolio)

Total Small Medium Large


Perception of Emerging Technology Impact to Channel Ecosystem

18%

72%

9%

14%

75%

9%

A threat to how the channel does business

A business opportunity for the channel

Neither a threat/nor an opportunity

2019

2018

Source: CompTIA’s 8th State of the Channel | 2019 n = 505 IT industry businesses; 2018 n = 400


APPENDIX II

Main Challenges Faced Working With Emerging Technology (By Co. Size)

31%

24%

29%

37%

32%

35%

35%

23%

36%

29%

34%

32%

39%

44%

23%

34%

32%

43%

46%

55%

50%

Lack of customer demand/need forcustomer education

Unknown ROI/business case

Lack of best practices/standards

Need for business/sales training

Cost of entry

Difficulty hiring staff with the right skills

Need for technical training

Small Medium Large


New Partner Types Encountered in the Competitive Market Today

57%

47%

42%

31%

24%

59%

46%

33%

19%

18%

Cloud-based ISVs/SaaS partners

Digital marketing agencies

Vertical industry-specific applications firms

Accounting firms

Law firms

20192018

Source: CompTIA’s 8th State of the Channel | 2019 n = 505 IT industry businesses; 2018 n = 400

Perception of Partnering with Other Businesses in Channel Ecosystem

47%

31%

12%

67%

17%

11%

80%

16%

3%

Positive (i.e. expands business

opportunities, fills skills gaps etc.)

Good in theory, but hard to do in practice

Negative (i.e. too informal, no

accountability, hard to find partners, etc.)

Small Medium Large


8th State of the Channel - Identity Maestro...2019/11/08 · analytics,verticalindustryexpertise,andmore. Overblown Some truth to it depending on the individual channel firm type

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