3 min read

STATE OF THE CHANNEL: New revenue and new clients are priorities for 2012

Results from CDN's first State of the Canadian Channel report suggest partners will be focused on new revenue streams and finding new customers in the new year

Canada is home to a close-knit channel community that often shares many of the same goals, collaborates and networks more than perhaps any other group in the IT industry. In 2011, for the first time, CDN delved deeper into how members of the Canadian channel feel about their business, vendor relationships and strategies for the coming year.

Based on an e-mail survey of 200 members of the partner community, CDN focused on what business challenges partners expected to face and which management priorities the channel was focused on in the next year.The top challenges appeared to be sourcing new revenue streams, which roughly 70 per cent ranked as a challenge, and decreasing margins, with nearly half marking that as a concern.

“Cloud is a margin strategy for resellers,” said Mark Snider, vice-president and general manager of Ingram Micro Canada, which sponsored the survey.

Cloud and managed services can offer recurring revenue streams, though the cloud is still an emerging technology. The up-front margin on services is less than with traditional hardware and software sales, but “more like tending a garden,” Snider said.

Based on the channel’s major concerns, it’s unsurprising the top management priorities for partners are customer-centric. About 80 per cent ranked securing new clients as a priority and 75 per cent included maintaining their existing customer base as important for the coming year.

Increasing market share was the third highest priority for the channel. Partners appear divided among the market segments where there is the most potential to generate revenue, with financial services, retail and health ranking quite high.

Related story: 2012 a “Dragon Year” for channel growth: study

About 18 per cent did answer “other,” which includes areas such as manufacturing and transportation. Many respondents also included the small and medium sized business market and SOHO (small office/home office) market as areas with the most opportunity for revenue growth.

Another concern appeared to be vendors taking business direct, with 30 per cent of respondents seeing this as a potential threat. For Snider, this wasn’t surprising, since this is always a concern.

“I think it’s probably lower than it has been in the past,” Snider said, but the channel tends to have a long memory and remembers a time when more vendors were going direct.

At Ingram, vendors are actually becoming increasingly predictable about when they will go direct and clearly articulate when business will not go through the channel and when it will, according to Snider.

Another area that will prove challenging in 2012 will be a skills shortage. About 20 per cent of survey respondents listed training and developing staff as a management priority for the next year.

Specializations and having people certified from major vendors has always been important. “They’re in demand like never before,” he said, and those specialized employees allow partners to add more value. Retaining those employees is also critical for the channel.

This could also mean, among other things, that the channel will see more strategic consolidation. In the past, acquisitions in the channel had been more forced as a result of financial weaknesses, but now, it’s often about gaining the right skill sets to invest in new markets, he said.

In late 2011, for example, Softchoice Corp. acquired Unis Lumin, which meant gaining many cloud specialists. “In an acquisition like that, people are the greatest asset that come along,” Snider said, but only companies of a certain size can have a deal like that.

Interestingly, the lowest on the list of priorities was internal implementation of IT, with only about five per cent of respondents listing this as important for the coming year.

Innovation and research and development was also low on the channel’s list of priorities, with only about 11 per cent of respondents focusing on that for the new year.

“I think that Canadians by nature are just a bit more conservative,” Snider said. Here, partners need and want to prove a strong return on investment to customers and probably hesitate committing to a new technology before it’s proven.

Partners in Canada are usually more focused on the next 12 months. But, when new technology debuts at an event or conference, it is often up to 24 months away from being a proven source for revenue.

This is where they rely on the distributors for recommendations on which new technologies to pursue, he said. “I think this just shows the practicality of the resellers.”