A “7th State of the Channel: Trends in the Technology Ecosystem” report from the industry trade association CompTIA suggests that managed services have finally emerged as the top driver of revenue for channel partners.

Specifically, the survey of 400 IT services providers in the U.S. finds the top five drivers of revenue to be managed services (33 percent), followed closely by Software-as-a-Service (SaaS) applications (32 percent), application development (26 percent), security infrastructure/application services (26 percent), and consulting (23 percent).

While very few channel partners are solely reliant on managed services to drive revenue, the CompTIA survey makes it clear that the modern channel is made up of organizations that are increasingly focused on services that drive recurring revenue opportunities

That shift is one of the primary reasons that three-quarters (75 percent) of the survey participants are optimistic about the future of the channel, compared to only five percent with a pessimistic outlook. The survey attributes much of that optimism to the rise of cloud computing (56 percent), broader usage of technologies (52 percent), emergence of new technologies (48 percent), complexity of IT solutions (48 percent), and demand for consulting services (43 percent).

The role of emerging technology

Emerging technologies are playing a larger role in the channel than they have historically. The Internet of Things (IoT), robotics, drones, 3D printers, and artificial and virtual reality all represent a revenue opportunity for the channel, according to 75 percent of channel partners. IoT software (48 percent), IoT hardware (47 percent), artificial intelligence (42 percent), virtual reality (37 percent), and blockchain (34 percent) are some of the emerging solutions channel companies are experimenting with or currently offering. The biggest obstacles to tapping into those opportunities are the need for technical training (58 percent), the cost of entry into the market (45 percent), and difficulty hiring staff with the right skills (43 percent). The challenge solution providers face today is customers are clearly expecting them to master emerging technologies much sooner than any previous generation of technologies.

The CompTIA survey also finds that 32 percent of respondents say emerging technologies are the primary catalyst for change in the channel, followed by customer demand for specialized expertise in specific vertical markets (25 percent). A full 64 percent of firms expect their mix of offerings to change to new types in next two years and over half of respondents (54 percent) say they expect the channel ecosystem to expand rapidly.

The ecosystem continues to expand

Much of the channel’s expansion is attributed primarily to new vendors and smaller companies such as accounting firms and self-employed individuals providing IT services, says Carolyn April, senior director for industry analysis at CompTIA.

“There are newer players,” says April. “The ecosystem has expanded.”

Based on data from the U.S. Commerce Department’s North American Industry Classification System (NAICS), there are roughly 139,354 entities that have employees providing IT services. But April notes there are hundreds of thousands of other organizations and individuals providing IT services.

Regardless of who delivers the solution, it is clear is that each solution provider is relying on a mix of business models to both survive and thrive. Most of them, for example, continue to resell hardware alongside managed services. In fact, one is often a means to the other and vice versa. The issue isn’t so much picking one business model over another; it is striking the right balance between them all.

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Photo:  Mathisa / Shutterstock.

Mike Vizard

Posted by Mike Vizard

Mike Vizard has covered IT for more than 25 years, and has edited or contributed to a number of tech publications including InfoWorld, eWeek, CRN, Baseline, ComputerWorld, TMCNet, and Digital Review. He currently blogs for IT Business Edge and contributes to CIOinsight, The Channel Insider, Programmableweb and Slashdot. Mike blogs about emerging cloud technology for Smarter MSP.

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