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STATE OF THE CHANNEL: Meat and potatoes still drive bulk of partner revenue

New technology areas may get the hype and the margin, but when it comes to revenue, traditional infrastructure is still partners' bread and butter

While emerging technology areas such as cloud are scoring high on the hype curve, CDN‘s The State of the Canadian Channel 2011 survey shows that, for most Canadian partners, it’s the traditional meat and potatoes infrastructure sales that still drive the bulk of their revenue.

The survey results show that what partners are providing to their customers today remains pretty standard fare. While topics such as business intelligence, cloud computing and data centre automation tools may resonate with IT managers and CIOs as their priority areas for 2012, partners seem unconvinced they’re ready to open their wallets.

(RELATED STORY: View our State of the Channel infographic)

When partners were asked what areas they expect to represent the bulk of their revenue in the next year, the overall emphasis was more on departmental hardware such as desktop PCs and fundamental corporate computing, such as servers. Networking led the projected sales pack at 60 per cent, followed by servers, desktops, storage and security. At the bottom of the pack was some of the more strategic enterprise systems that could run on that infrastructure, such as content management and enterprise resource planning.

It’s important to note the study asked which areas represent the bulk of partner revenue, not partner profit, and many of the infrastructure areas that ranked highly tend to be low margin business. Many of them are also core infrastructure pieces that need to be in place with a client before they can consider layering-on more advanced offerings, such as BI or hybrid cloud.

Looking at the numbers shows partners and their clients are indeed getting ready for future cloud business said Mark Snider, general manager of distributor Ingram Micro Canada, particularly the level of interest he has seen from resellers and the number of proposals they’re making to clients.

“I think it’s on pace to be pretty significant. Cloud is a broad category and it will motor up (in 2012),” said Snider

Cloud is still emerging as a technology area, added Snider, with vendors such as Microsoft just bringing their full solutions to market. He expects it to be a more prevalent revenue generator within 12 months. And it may not lead the revenue pack, but it will provide impressive margin potential.

“Similar to managed services, it will depend on where partners want to focus. It’s recurring revenue with higher percentage margin, but you don’t get it all at once,” said Snider. “Partners are testing things like commission structure (in preparation).”

CDN‘s research showed 46 per cent of VARs expected managed services to grow in 2012, and 42 per cent expect growth in their cloud revenue. For most partners though, the meat and potatoes will remain on the plate for some time.

Follow Jeff Jedras on Twitter: @JeffJedrasCDN.