IT resellers, vendors and distributors are hungry for data. They need it to make business decisions that could be the difference between success and failure. But the IT channel is a complex, multi-stakeholder operation with many moving parts. This can make it difficult for these businesses to gain the insight they need to grow. Fortunately, there’s the CONTEXT ChannelWatch report, distilled from a comprehensive survey of 6,582 resellers operating across Europe, Turkey, Russia and South Africa.
What have we found this year? Resellers are more optimistic than they were twelve months ago and are exploring emerging technologies alongside traditional investments. Services and digital transformation in particular, offer cause for significant optimism, and distributors have a big role in driving success.
Resellers on the up
Despite a combination of macroeconomic challenges and industry factors such as the Intel CPU shortages, channel growth remains robust. We reported 2.2% growth in distribution in the year ending 31 December 2019. Although this is lower than the previous year’s figure of 6.7%, there’s definitely a feeling of optimism among resellers everywhere except Russia and Turkey. Nearly two-fifths (38%) told us they had no major financing concerns, up from 27% the previous year, and resellers in the UK and in Germany are notably more positive.
Where is this optimism coming from? It does seem that many resellers experienced much higher growth than the headline figure for revenues in the distribution channel. While some of this came from acquisitions, much more was generated by a mix of traditional drivers including Windows 10 upgrades and digital transformation.
Digital transformation drives optimism
We emphasise the growing importance to resellers of digital transformation. In fact, three-quarters (75%) of resellers told us they’re excited about the opportunities these initiatives will bring in 2020, as companies look to emerging technologies to drive innovation and growth. This is partly why B2B resellers are more optimistic about the year ahead than their B2C counterparts – digital transformation is predominantly a corporate play. The digital transformation ambitions of their customers are highlighted by the top four investment priorities: cloud (49%), networking (46%), cybersecurity (38%) and workplace optimisation (31%).
Countries such as the UK, Germany and Spain are leading the way, and this maps to their relatively high overall levels of reseller optimism. To give themselves the best chance of success, many resellers (20% of them) have developed their own intellectual property in areas like software and database development.
Yet not all are quite so enthusiastic. Over half (52%) are holding back on investments in digital transformation. Common roadblocks include a lack of understanding of the opportunities, and a reluctance to change traditional business models. This is where distributors have a key role to play. Resellers say that distributors could improve support in billing and cloud-related services – only 53% of resellers consider their distributor to be excellent or very good in these areas – and also offer more education and training (52%).
This gives traditional distributors have a tremendous opportunity to add value for their reseller partners, and they must grasp it in the face of growing competition from “born-in-the-cloud” rivals and etailers who can undercut them.
Going forward, our growth estimate for 2020 is 1–3%, lower than last year’s 3–6% guidance and influenced by low GDP forecasts, which hover around the 1% mark for the UK and the Eurozone. But with Brexit uncertainty starting to clear, and Germany avoiding a recession in Q3, we are cautiously optimistic for the coming twelve months.
© CONTEXT 2020