So Where's This Business Heading In 2006? Predictions For The New Year


Educated bets; looking ahead


When you wrap it up, 2005 was in many ways a better year than expected. But it&'s basically all over at this point, and it&'s time to start thinking about next year. So here&'s my take on some things to think about for your business, with a prediction or two thrown in.

ROBERT FALETRA
Can be reached at (781) 839-1202 or via e-mail at rfaletra@cmp.com.

Next year, the big theme in the channel and overall industry will be managed services. Just like every other trend that has come and gone, this, too, will be over-hyped. But it&'s important and real, and solution providers—as usual—will be in the middle of making it happen.

A considerable amount of business will shift to the managed services model. Software will be first, of course, but when we exit 2006 there will be a lot of discussion about hardware being sold as a managed service as well.

IT spending for the enterprise market will pick up next year, and I believe this will surprise a lot of folks. That&'s not to say the midmarket and small-business arena will not be market drivers, but sales into the biggest accounts will kick up more than most believe right now.

Dell will buy a services company in 2006. It has to, or it will become irrelevant. Its hardware strategy of not entering a market until a product has been commoditized and then going in with a strategy to be the low-cost provider doesn&'t work as well in a managed services environment unless Dell can provide service. For that reason, it will face increasing pressure to strengthen its services play either directly or through an indirect channel. The most likely target for Dell to acquire is Unisys. Regardless of the target, this will happen, and you heard it here first.

Mike Hurd&'s pay-for-performance theme is a valid one, but the reality he will face in 2006 is that this cuts both ways. There is nothing wrong with telling your channel partners you will invest in the ones that perform the best for you. Trouble is, the channel has to do the same thing. The question then becomes, can HP afford to make sure it is the most profitable partner for its channel?

Unfortunately, IBM, Cisco, Microsoft and other behemoths will continue to buy up small private startups with promising technology.

The venture capital community still has little appetite for initial public offerings and would prefer to take a sure thing and sell out rather than take a chance on an IPO market that may not produce the return it would like.

 
‘The big theme in the channel and overall industry will be managed services. Just like every other trend that has come and gone, this, too, will be over-hyped. But it&'s important and real.&'

Hopefully, the IPO market will improve in 2006 to the point where it looks more profitable and we begin to see more promising technology developers attempt to build their businesses independently rather than sell to larger companies.

Other than the Dell services acquisition I mentioned earlier, big buyouts will be few and far between.

Consolidation has pretty much run its course except for two possibilities. Microsoft could revisit the idea of an SAP buyout. In addition, the company will have to do more with open source, and if its strategy there doesn&'t come via an acquisition it will come via a move to open up more of its own code. The other wild card is Google, which is sitting on too much cash and is ripe to make a large acquisition.

The so-called direct market resellers (DMRs) will compete increasingly with the distributors. This will happen in a few different ways. In particular, DMRs will sell more hardware to solution providers and they will create services that can be resold by VARs to end users.

There you have it from my perspective. Have a Happy New Year, and let me know how my predictions play out.

Make something happen. I can be reached at (781) 839-1202 or via e-mail at rfaletra@cmp.com.