What The Channel Can Expect In The New Year

Since this is the last issue of VARBusiness for 2005, what better time to make some predictions and commentary regarding the year ahead. In the coming weeks, you're going to be bombarded by every type of expert commentary about the fate of everything from the stock market to celebrity couples. But such predictions pale in comparison to what's going to happen in the channel, right? So, brace yourself.

Channel Momentum Will Continue

First, let's just discuss channel momentum, which shows no sign of slowing down one iota. IT vendors, large and small, are focusing more executive time, money and effort around their channel and partnering activities. From the top of the VARBusiness 500 to the small consulting shops in tertiary markets, vendors want to engage them all and understand just how critical the channel is to their success. Major Japanese and Korean manufacturers are going to pour more money than ever into the channel, while their U.S. counterparts try to extend their channel reach. By the way, this trend is not confined to North America; vendors are increasing their focus on partners from a worldwide perspective, with solution-provider growth in South America, India and China more important to them than in years past.

Managed Services Are About To Explode

The next thing you're going to be reading and hearing about until it drives you absolutely crazy is managed services. If VARs weren't already services-oriented enough, this trend wouldn't amount to all that much. But with the average VAR generating about half of its revenue and profit from services, and vendors pushing hard into the software-as-a-service model, managed services are going to have a big impact in 2006. Now, don't argue that managed services are just services repackaged--because they're not. In some cases, solution providers who helped clients with network monitoring or e-mail management did so by leveraging a variety of software products and platforms. What's going to change is the number of vendors those managed service providers support. Suffice to say, a bunch of folks are going to get squeezed out.

Vendor CEOs Are Counting On You

Sam Palmisano and John Chambers may not know you personally, but they're counting on you to deliver very large numbers. The chairmen of IBM and Cisco, respectively, aren't unlike other vendor executives who are putting a great deal of pressure on their channel leaders to deliver high levels of growth from solution providers. In some cases, CEOs expect the channel to hit growth rates in excess of 10 percent. One executive at a major networking vendor told me his chairman wants to get his company on track to deliver 20 percent annualized growth. Sounds ambitious--and it is. While some of that may come from acquisitions, a great deal is going to come from channel partners. It's going to be up to today's top channel executives to find a way to accelerate the channel growth of companies they acquire to achieve those growth rates.

The Quest For Loyalty

You know the old saying, "If you want loyalty, go buy a dog"? Well, vendors are sidestepping Spot in search of ways to build more loyalty among their channel partners--and they're not going to stop till they get it right. Believing they have conquered the issues of measuring and rewarding employees on customer and partner satisfaction, loyalty is their next frontier, with the power to impact a solution provider's intent to recommend. Loyalty could turn into the coming year's biggest issue.

The Next Services Wave

I mentioned managed services earlier, but let's talk about another kind of service you'll need to offer your customers: business consulting. If you're watching the service leaders carefully, you will notice their movement from technical and professional IT services to ones more focused on business processes. In doing so, they're helping your customers make strategic technology decisions that are core to their success and future. No wonder why so many services-oriented organizations are diving deeper into business consulting. Leading-edge solution providers are figuring out how to migrate into such service initiatives now.

Read my online column for more predictions about the coming year and trends you need to know about. E-mail your own predictions to me at rdemarzo@cmp.com.