The new revenue streams set to disrupt the IT channel

By Richard Eglon, Marketing Director. Agilitas.

Revenue streams in the IT channel have experienced continued change as service propositions have developed over recent years.

The sector has seen revenue grow in the last decade as cloud and software-as-a-service offerings have increased in number. Hyper-convergence, cloud based applications and software-defined infrastructure have all been highlighted by Canalys as key areas where the channel is currently seeing growth.

With an election and market changes as a result of Brexit looming we're seeing continued market uncertainty - presenting both opportunities and challenges for businesses. In the last year alone price hikes and drops have forced many to re-examine margins and pricing strategies. Microsoft for example announced in October 2016 that cloud prices would rise 22% and on-premise by 13% in the UK due to the falling value of the pound. The software giant was far from the only one; Jabra, ASUS and Lenovo have also all announced price rises in the year following Britain's vote to leave the European Union on 24th June 2016.

Technology advancements in areas such as artificial intelligence, virtual reality, machine learning and on-demand services combined with economic changes are all working to evolve the channel landscape and as a result revenue streams. The trends we're currently seeing are a movement towards more support services through collaboration alongside service experts, which will ultimately be delivered through OPEX models.

Support services are becoming more important to channel customers as business continuity becomes evermore reliant on maintaining uptime. From disaster recovery to IT inventory management these services are all evolving to take pressure off businesses, and can come at significantly lower costs than the alternative: organisations managing these themselves. In the space Agilitas operates - inventory-as-a-service for example, organisations looking to manage their own IT service parts and engineering resource have to invest heavily in order to build up their support infrastructure to an adequate level. Outsourcing to a channel services partner immediately removes much of the risk and significantly reduces costs and the need for ongoing investment. Interestingly, according to research commissioned by Agilitas, channel leaders expect software and hardware support services to be the strongest new revenue streams by 2020.

We're already seeing the impact of increased demand for support services materialise in the form of white labelled IT service growth across the datacentre hardware space. As part of demand for greater performance driven contracts, there appears to be a general feeling amongst channel players that we can't all be a one-stop-shop for multiple customer requirements. The result has meant that we're starting to see different company types from VARS to Vendors and Distributors evaluate and adopt a more collaborative approach to servicing customers. At the same time, these companies are changing their relationships with one another, opening up more dialogue and increasing interdisciplinary collaboration.

Collaboration, both transparent and white-labelling means service providers can on-board credibility in order to better service a customer. The result for the customer is an enhanced service guaranteed by industry leaders. The trend highlights a wider recognition from channel players that each shouldn't be afraid to partner and focus on their specific areas of expertise. The sentiment is reflected in a comment made by Crayon's UK MD, Richard Lockey in which he argued that putting clients first is reliant on a cooperative marketplace: "if I don't have the expertise, I'll go and find someone with the relevant infrastructure to help."

The most significant change that we're set to see in channel revenue streams however is the way in which they are funded. Big one off capital costs are already well in the past for some companies however, according to our research we're set to see a big move from CAPEX to OPEX between now and 2020: IT services for example is set to see the biggest shift (30%), followed by hardware sales (19%). OPEX offers a more cost effective, agile and scalable approach to doing business. In changing markets, with continued technology innovation, business buyers do not want to be tied down to an expensive solution for five years. They want flexibility, the ability to swap solutions and services in and out, and grow their IT footprint as the business demand dictates.

Ultimately the outlook for the channel is positive, but businesses need to be ready to examine how they can futureproof their offering for the coming years. New revenue streams will continue to emerge for as long as we see innovation and market disruption. The key for businesses across the channel is that they must continually examine how they can meet these challenges by remaining aligned to both customer and market changes.

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