Changing Channel Landscape Demands That VARs Do Some Soul-Searching

The face of the IT solution provider is changing as VARs and integrators morph to adapt to changing business demands and to capitalize on growing technology trends such as cloud computing, mobility and virtualization.

That was one of the big takeaways in a keynote session Tuesday by UBM Channel CEO Robert Faletra at the COMDEXvirtual conference, running Nov. 15 – 16 online. The conference is run by UBM Channel, the parent company of CRN.

Two to three years ago, there were 240,000 to 250,000 solution provider organizations in North America. That number has declined to now around 189,000, Faletra said. ’We see that stabilizing and actually see an increase in the number of partners that are out there selling solutions in the next few years,’ he said.

One of the biggest shifts solution providers have seen is a change in who their most valued partnerships are with, he said. In the past, solution providers’ most important partnership was with an IT technology vendor. ’Now that has changed. Obviously now the most important partnership they have is with their customers. We believe the future channel is all about solution providers working with customers to solve problems they have in a different way than they have in the past,’ he said.

Another big change is in who they are targeting as customers for technology solutions.

’Going forward, we believe the ability of line-of-business to make those decisions in a capital expenditure type way is going to fundamentally change who solution providers need to call on in an organization. They need to be ingrained in the C-suite, in line-of-business and also in IT,’ Faletra said.

That shift in the target customer will result in a move toward cloud computing, he said.

’Line-of-business is clearly going to make more decisions going forward because they are the ones on the hook to actually return a revenue number, grow a business, and for them it’s less risky to buy a cloud service I can turn off if it doesn’t work than to make an argument to have to make a capital expenditure and then be wed to something that may or may not give me what I need,’ Faletra said.

UBM Channel research shows that the progressive VARs investing in new business models and winning new cloud computing customers is in stark contrast to the 56 percent of old school vintage VARs selling capital expenditure on premise IT solutions who have not changed their business model in the last decade.

Twenty five percent of those vintage VARs claimed they simply don't see any demand for cloud computing services, according to UBM Channel research. But that flies in the face of research that shows the cloud computing services adoption is accelerating with approximately $2 billion in cloud computing services expected to be sold in 2012.

’Half of companies claim to have looked at at least one business application in the cloud and two-thirds say they will in the next 12 months,’ Faletra said.

NEXT: The Price Of Staying Static

What's more, those customers adopting cloud computing services are growing at a faster rate than those sticking with the old school on-premise IT solutions.

Solution providers that are unwilling to change their business model are going to find themselves serving a shrinking market and may go out of business, said Faletra. "It’s an opportunity you’re giving up if you don’t have a practice [in cloud computing],’ he said.

Faletra expects those solution providers not embracing cloud computing services to find themselves being de-emphasized by customers who will turn to cloud-computing-savvy competitors without the VAR even knowing about it.

In addition to cloud computing, solution providers looking for the next wave of opportunity should be focused on mobility as well as desktop and server virtualization, he said.

’We all want to be wireless. Nobody wants to be tethered to a desktop ... I need that information wherever I am. It may be on a golf course; it may be in a customer’s office. It may be while I’m watching ballgame because I left work early so I could watch one of the games finally. That ability to distribute information is changing people’s lives. It also means we’re on 24/7.’