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2018 State of the Channel Survey: Stepping Toward the Future of IT: Page 2 of 3

Experts have been advising channel pros to embrace high-growth markets like security and the Internet of Things for years. Our latest reader opinion survey suggests it’s finally starting to happen. By Rich Freeman
Reader ROI: 
SURVEY evidence suggests that profits are dropping on traditional IT markets like networking, PCs, and servers.
THAT TREND HAS CHANNEL PROS EXPLORING high-growth markets like security and the Internet of Things in mounting numbers.
SOLUTIONS THAT ARE NEW to many IT providers, such as telecommunications systems, are also gaining momentum.
MANY PROVIDERS OF LOW-MARGIN online services are adding higher-margin cloud offerings in areas like HR, ERP, and CRM.
MANAGED SERVICES, though hardly a new market, is generating increased revenue and profits for channel pros too.

New Markets Are Generating Interest and Optimism

Figures like those may help explain why channel pros appear to be exploring new markets in mounting numbers. For example, with demand for one-stop technology shopping on the rise among SMBs and once-separate technology channels steadily converging as a result, 47 percent of survey participants plan to add print or managed print services to their solution lineup in the future, even though 51 percent of them say profitability on print and managed print is merely average and 38 percent call it low.

About 43 percent of channel pros we polled, meanwhile, expect to add a digital signage practice someday, and a less impressive but still sizable 21 percent plan to enter the unified communications and VoIP space, which more than 30 percent think is in for stronger profits this year.

Interest in the Internet of Things (IoT) is climbing fast too. Though about 50 percent of survey participants describe margins on IoT solutions as average and just 14 percent call them high, over 38 percent expect profits to strengthen this year and over 47 percent expect to add IoT solutions to their repertoire eventually. (See “More Signs of IoT Momentum” for additional Internet of Things statistics.)

IoT receives constant attention in the media as a big new opportunity, of course, but channel pros are getting into other, less publicized markets as well. Some 21 percent of channel pros we surveyed, for example, plan to add training services in the future, while 32 percent plan to offer custom software development services and a whopping 58 percent plan to deliver analytics solutions.

All three fields require specialized knowledge or skills, and therefore command above-average margins. Indeed, 28 percent, 35 percent, and 38 percent of survey participants characterize training, custom application development, and analytics as high-margin offerings, respectively, putting all three well within the top third of services we asked about.

Channel pros who offer cloud services are shifting toward more skills-intensive fields too. Though nearly 88 percent resell Office 365 licenses and over 52 percent sell Google G Suite licenses, for instance, 58 percent anticipate providing cloud-based HR solutions, 54 percent plan to offer online ERP solutions, and 48 percent intend to provide hosted CRM solutions in the future.

That trend could help explain why fully 26 percent of the channel pros we polled call profits on cloud consulting services high, versus 18 percent last year; and 46 percent forecast even higher margins in 2018, versus 35 percent in 2017. Meanwhile, though a solid plurality of our survey base continues to make less than 10 percent of its revenue in the cloud, the percentage making half or more of its money online is up from just under 5 percent in our previous study to just over 11 percent in the new one.

About the Author

Rich Freeman's picture

Rich Freeman is ChannelPro's Executive Editor

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