IT and Business Insights for SMB Solution Providers

2020 State of the Channel: Cloud and Managed Services Are All Grown Up

Results from our latest channel opinion survey suggest that the two defining markets of the decade just ended are fully mature ones as well. By Rich Freeman
Reader ROI: 
CHANNELPRO READERS are even more bullish about overall IT market conditions now than a year ago.
INCREASED DEMAND has more partners offering solutions.
MANAGED SERVICES and cloud computing now officially define the SMB channel mainstream.
THE HARDWARE MARKET is showing fresh signs of life.

THE CHANNEL as we know it isn’t very old.

After all, the first providers of managed services via RMM and PSA systems began showing up a scant 20 years or so ago, and the MSP business model was still a puzzling one in the eyes of most IT providers when ChannelPro debuted in 2007. Practically no one, moreover, imagined someday being a cloud service provider the next year when Microsoft’s Business Productivity Online Suite, which later became Office 365, arrived.

Today, private equity firms are pouring billions into managed services vendors, MSPs with regional and national footprints are multiplying, and Office 365 has north of 200 million monthly active users.

The markets that defined the decade just ended for channel pros, it seems, have grown up fast. According to our fifth annual State of the Channel report, channel pros have too. No longer a strange if promising concept, managed services has officially become the new normal among our readers, according to this year’s data. And cloud partners are steadily diversifying beyond low-margin offerings like Office 365 licensing into more demanding—and profitable—online opportunities requiring deeper expertise.

Meanwhile, younger markets with even brighter near-term prospects are gaining velocity even as frequently dismissed older ones like hardware march stubbornly forward. The complete picture, as always in IT, is complex, rapidly evolving, and reliably interesting.

Nothing but Blue Skies for IT in Aggregate

That picture begins with an appropriately bullish assessment by our readers of the overall IT landscape. Indeed, the share of participants in our survey anticipating much better conditions for their business in the next 12 months jumped from 23% last year to 33% in 2020, while respondents predicting merely stable conditions dropped from 31% to 24%. Similarly, 57% of channel pros expect their clients to spend more on technology this year and 11% believe the increase will be significant. That last figure is up from just 6% in our previous study.

The channel’s rosy take on the economy as a whole is undoubtedly contributing to that upbeat outlook: Though the 22% of survey respondents expecting significant improvement in 2020 is about the same as last year’s 20%, the segment predicting some improvement jumped from 33% to 43%, while the portion forecasting flat conditions plunged from 36% to 19%.

Numbers from last year’s balance sheets have our readers thinking optimistically too. Fully 53% of participants in our latest study collected more revenue in 2019 than the year before, and 50% earned more profit. Those figures are up from our previous survey’s already impressive 42% and 39%, respectively, and help explain why 64% of channel pros expect a fatter top line this year and 62% anticipate a bigger bottom line.

Decreasing concerns about wage growth could help explain that increasing confidence about profit. In an encouraging, if preliminary, sign that hiring qualified administrators may finally be getting a little less expensive, the share of readers forecasting pricier salaries for technicians dropped from 43% last year to 34% this year, even though the percentage of survey respondents planning to add headcount is roughly the same. The trend extends to salespeople as well: 66% of channel pros predict little change in what they pay their sales team this time out, versus 55% a year ago.

About the Author

Rich Freeman's picture

Rich Freeman is ChannelPro's Executive Editor

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