What's Hot, What's Not In 2007

There are a few things you probably won't be able to do anymore in 2007. Sell VoIP as a cost-cutting measure is one. Another is price by the processor. Still another is ride the NAC wave to continued profits in security, unless you plan to fine-tune your message. Security is still the hottest game in town, of course, but the hype around NAC has made customers skeptical. The thrill is gone.

But, rest assured, in the IT world it remains true that as one door closes a few dozen more always open. This year will be no different. Virtualization, encryption and multicore processing will certainly help spur a lot of buying in 2007. And VoIP? It's not as if it has lost its luster among companies. If anything, the rising profile of unified communications will spur VoIP sales in the channel, it's just that it'll have to be positioned as a broader collaboration solution that incorporates video and mobility features.

2007 looks to be another year of consolidation in the channel, especially in the storage market. And managed services is an area undergoing huge changes, as MSP-ready platforms arrive on the scene and MSPs demand improved technical training, partner support and simplified product sets from vendors.

In the following pages, we take a look at six segments—hardware, managed services, networking, security, software and storage—to see what's important for solution providers to know as the new year unfolds. The year may just be beginning, but the trends are already visible. Read on and get ready for 2007.

—Timothy Long

Hardware: Quad-Core Encore In '07

OUT
• Square-screen displays: Gone the way of the CRT
• Single-core processors: Soooooo 2003.
• Dell's brute strength over system pricing: It's now the No. 2 PC company for a reason.

IN
• Wide-screen displays: Watch your Skype calls, YouTube vids and Excel docs with room to spare.
• Quad-core processors: Sure the market only needs two cores now. But it can't hurt to plan ahead.
• HP's brute strength over system pricing: Chairman and CEO Mark Hurd has vowed to stay tough in'07.

The world is headed toward a quad-core encore in 2007, as chip makers Advanced Micro Devices and Intel move their fight beyond dual-core platforms. But the epic battle between those two companies may be considered an undercard to what could be the real main event: the launch of Microsoft's Windows Vista operating system and its hunger for memory, processing speed and hardware.

Many solution providers and system builders say they're not expecting much impact right away from Vista, which requires 2 Gbytes of memory just to perform basic functions. But the market itself is expecting a huge spike in the amount of DRAM that will be needed to make Vista PCs run—adding to a growing belief that some PC prices may start to rise in 2007 for the first time in years. Keeping ahead of the curve early on DRAM supply could help out with a crunch later on.

Competition could start to heat up in the data center as well, where AMD, Intel, tier-one server vendors and system builders are readying for a potentially massive change. Evidence indicates that a surge in the number of servers used for VoIP and communications is continuing—American Power Conversion says half of all new kilowatt hours going into small data centers are for switches targeted at VoIP deployments. And with four-core processors, new cooling technology and blade offerings, the push will be on to migrate small, medium and large enterprises. Look for the disruption to build gradually through mid-2007, when AMD begins shipping its first quad-core chips following Intel's ramp, which started in 2006.

The peripherals segment isn't just growing—it's getting wider—as in "wide-screen" displays. As 2006 ended, indications were that sales of wide-screen displays would start outpacing "square-screen" displays in PC bundles and as upgrades. Many in the market are finding out that with more LCD real estate, they can simply get more done. And solution providers can get a slightly wider margin as well—at least early on.

— Edward F. Moltzen

NEXT: What's Hot, What's Not In Managed Services, Networking, Security, Software, Storage

Managed Services: It's Put-Up Or Shut-Up Time

OUT
• The break-and-fix reseller model: Though this method of waiting until something breaks to fix it isn't gone, VARs that cling to it soon could be. Let's face it, if a solution provider isn't going to be managing a product's life cycle, that product's vendor will be.

IN
• Managed e-mail and messaging services: If you think you saw spam in 2006, wait until you see your unprotected inbox in 2007.
• The rise of the nontechnical IT salesperson: Reports are they are popping up everywhere and, boy, are closers. This selling strategy is simple, relationship-oriented to-the-bone, and here to stay.

The managed services market in 2007 will undergo a collective moment of clarity now that the channel is sick of the hype and vendors are tired of losing frustrated partners. Vendors that cater to MSPs bankrolled big bucks last year as solution providers piled onto the MSP craze. Look for these same vendors to reinvest in their partners and woo those they lost. This, for two reasons: MSP vendors know it's put-up or shut-up time when it comes to improving the technical quality of their products and the level of post-sale support they provide. And way too many freshly minted MSPs can no longer afford to continue not making money. That's right, not making money. There you go, the truth is out there.

"The dirty little secret about being an MSP right now is not a lot of VARs are making money at it," said Amy Luby, CEO of Mobitech, an MSP in Omaha, Neb. "It's like, 'Yeah, I'm an MSP,' but the thing they don't talk about it 'Yeah, I'm not making any money.' "

This will change in 2007 as MSP product vendors such as LPI Level Platforms, N-able Technologies, Zenith Infotech, Kaseya, SilverBack Technologies and others put big bucks into improved partner support, simplified products and sharper technical training.

The ramp-up of hosted MSP platforms resold by distributors Ingram Micro and Bell Microproducts, and the arrival of an MSP-ready platform from Microsoft called System Center Essentials 2007, will likely apply considerable pressure on the popular MSP platform vendors that grabbed headlines in 2006. Smaller, upstart vendors will flood this same market with scrappy new competition.

MSPs themselves will become considerably more organized in 2007, creating communities and workgroups that will begin to put significant lobbying pressure on vendors to make the industry more profitable.

— Dan Neel

NEXT: What's Hot, What's Not In Networking, Security, Software, Storage

Networking: Beyond Routers And Switches

OUT
• Positioning VoIP as a cost-cutting solution.
• Videoconferencing: The trechnology showed strong growth in 2006, but customers will look for next-gen technology in the new year.

IN
• Selling VoIP as part of a broader collaboration solution that incorporates unified communications, video and mobility features.
• Telepresence: Building on the momentum of Cisco's product launch in the fall, the market for high-definition, lifelike vdeo solutions is poised for growth.

For networking solution providers, success in 2007 will come from looking beyond routers and switches to helping customers use their networks to do more.

One of the key growth areas will be video running over the corporate network, giving channel partners ample opportunity to build video-based solutions such as IP surveillance, on-demand training and digital signage. While some video traffic will be sanctioned, other video, like the latest "Saturday Night Live" skit attracting eyeballs on YouTube, will not. Solution providers need to help customers prepare their networks for both, giving them the ability to separate the wheat from the chaff by deploying WAN optimization and application acceleration. Those solutions will bring quality of service, traffic prioritization and bandwidth management to customers and help them keep video from breaking the network.

Jay Kirby, vice president of sales at Troubadour, a Houston-based solution provider, said WAN optimization products like Cisco Systems' Wide Area Application Services module are poised for big growth in 2007. "We're seeing a big push on offering that to control operational spending," he said.

Collaboration will also be a big buzzword, building on the widespread deployment of VoIP. Now solution providers are positioning IP telephony as just one building block in broader communications solutions that bring data, voice, video and mobility together, helping customers realize the promise of productivity gains.

With increased mobility comes the need for increased speed, something solution providers will look to offer with 802.11n-based WLAN networking. The standard isn't set for ratification until 2008, but the Wi-Fi Alliance plans to begin certifying prestandard products in 2007. Solution providers will need to counsel customers on its pros and cons.

— Jennifer Hagendorf Follett

NEXT: What's Hot, What's Not In Security, Software, Storage

Security: Have A Knack For NAC? You're In

OUT
• Stand-alone intrusion-prevention systems: They will increasingly be baked into unified threat management appliances.
• URL filtering: Prices dropping as startups, commoditization take a bite.
• Srabanes-Oxley compliance: Roolback rumors could still solution spending.

IN
• Encryption: Saves companies from PR nightmare of lost laptop data.
• Data leak prevention: Protects against disgruntled employees and corporate spies.
• Security incident management: Links disparate security event logs and gives unified view of security alerts.

When network access control first started imprinting itself in channel lexicon, many solution providers saw the technology as low-hanging fruit that would provide a long-term, sustainable revenue stream. But as the hype around NAC wanes, and companies realize the technology still needs some more time to ripen, many VARs are finding out that grabbing the fruit of NAC profits is a far more challenging task than they'd anticipated.

Solution providers say there's a growing perception among companies that there isn't much differentiation between NAC solutions from various vendors. This has led companies to look for the cheapest way of implementing NAC, as opposed to working with VARs to choose the one that best fits their needs. To combat this misconception, VARs are fine-tuning their NAC message and talking up the higher-level functions of the technology.

For example, a VAR that highlights NAC's ability to continually monitor for threats after the initial connection check, and to regulate access based on identity and policy, will be more likely to close deals than one that simply drones on about how NAC can keep malware off networks. And that's a potential differentiator that VARs can weave into their selling strategy to keep customers' attention and show a high level of expertise, said Steven Reese, security practice manager at Nexus Integration Services, Valencia, Calif.

However, solution providers that don't revisit their NAC sales pitch risk being tuned out by skeptical customers and kicked back to commodity box-moving, said Dave Gottesman, founder and CEO of San Francisco-based solution provider TDR.

Gottesman recommends partnering with NAC startups that demonstrate innovative use of technologies such as packet inspection and virtual machines to handle NAC testing. "Getting one or two of your engineers up to speed on these advanced feature sets is important because it's these extended feature sets that are going to make a difference down the road," he said.

— Kevin McLaughlin

NEXT: What's Hot, What's Not In Software, Storage

Software: Feeling The Urge To Virtualize

OUT
• NetWare: God knows it has had itss run, and some maintain it's still more reliable than Windows. But it's done.
• Per-processor pricing: Vendors and buyers will have to get to common ground on software licensing.
• SaaS hype: OK, OK, so you can rent software to customers by the month rather than charging for it up-front. We get it Let's move on.

IN
• Melding of telephony/e-mail: Holy grail of unified communications. It may finally happen. Go figure.
• SOA sense: VARs that can show how to "wrap" legacy apps and data, exposing them as services linked to newer services, will make hay.
• SaaS reality: No one delivery model will completely prevail. So study up.

The urge to virtualize may be the single largest tech driver in the 2007 software world, and solution providers that develop virtualization expertise can be certain to raise their profile—and value-add—to customers.

"We are all over virtualization in a big way," exults Ron Herardian, chief software architect at Global System Services, a Mountain View, Calif.-based solution provider.

Virtualization is the ability to divide up a single resource—be it a storage device or a server or an operating system—to work as more than one independent entity but be managed centrally. Disk partitioning is an example of simple virtualization technology.

The increasing use of virtualization is "an inevitable consequence of Moore's law," Herardian says. "A single PC today can have four processor cores running at 3 or 4 Gigahertz and address 64 megs of RAM. As these devices get more and more powerful, you have to utilize that power."

Virtualization-savvy solution providers can harness that horsepower and extend the life span of legacy applications. The big driving force here is consolidation of resources and the resulting cost savings. A skill set in VMware could pay off for solution providers that more typically install, customize and maintain business software and infrastructure.

Compliance will remain a big concern of companies this year, so solution providers that can help customers get their e-mail and instant messaging compliant with federal and industry regulations will be in big demand.

Unified communications and managed services will also make their presence felt in the software market in 2007. A renewed marketing push by Microsoft, IBM and others is likely to spur many companies to finally move to integrate their VoIP and e-mail. Also, midmarket software solution providers are preparing for an uptick in managed services, especially those tailored around patches and fixes.

— Barbara Darrow

NEXT: What's Hot, What's Not In Storage

Storage: The Many Faces Of Consolidation

OUT
• ILM (information life-cycle management: Tt's not that customers don't want their information managed according to the value of the data, it's just that people don't like this acronym. EMC made it a popular one, but then threw it in everyone's face too many times.

IN
• VTLs (virtual tape libraries): A lot of customers want to give up the tape but not necessarily change the tape backup process. They will continue to turn to VTLs for disk-based arrays that can be backed up to, using existing processes.

The storage industry is consolidating in many ways, and each of them will impact how solution providers do business in 2007 and beyond.

• Vendors are consolidating. Many small companies with a single big idea—Topio with long-distance replication, Avamar and Rocksoft with de-duplication, StoreAge with tiered storage, SilverStorm with clustered server networking—were acquired by larger vendors in 2006. And there's no end in sight.

That's good for you if you work with one of those larger vendors, or if you can transition to their channel programs, as those vendors legitimize the upstart technologies. But the beauty of this consolidation is even if you don't or can't, no worries—there are more small one-hit wonders hitting the ground running and looking for sharp solution providers to bring them to customers.

• Customers are consolidating. They may be merging and acquiring and need help combining their storage environments. Or they may be tired of managing many different SAN environments, and consolidating into a few larger SANs, or adding a layer of virtualization on top.

There's extra work for you, in the good sense of the word "extra." This kind of consolidation means bringing hardware and software from multiple vendors into a combined infrastructure. Customers can either turn to a vendor that will try to sell their solution, or to a solution provider that understands storage and works with whatever solution the customer brings in.

• You are consolidating. The M&A activity in the channel has never been stronger. However, unlike the post-millennium wave of closures of VARs that couldn't handle the transition from the boom days of the dot-com era, today's VARs are being acquired for specific skill sets and geographic locations, making for a stronger channel able to better serve midrange and enterprise customers.

— Joseph F. Kovar