Techaisle Blog

Techaisle’s survey of 2115 partners shows that while many VARs offer managed services to their customers, only a small percentage successfully achieve consistent growth and profitability. In contrast, MSPs have been more successful in their managed services business model and have also begun to achieve success in the cloud. MSPs are well aligned with the business requirements associated with cloud sales. They can act as a logical extension to partner activities by providing discrete services that can be delivered efficiently. However, unique business requirements and partnering practices associated with cloud suppliers have proved challenging for MSPs.

Techaisle data shows that 65% of VARs offer managed services to their customers. Still, only 50%, less than one-third of all VARs, successfully achieve consistent growth and profitability within managed services. The data is similar to 2018. Conversely, 71% of MSPs have succeeded in their managed services business model, and 29% are still striving to achieve profitability and success. Unlike the last several years, MSPs have begun to achieve success in the cloud. 89% of MSPs currently offer cloud, and 72% have achieved cloud success. It is two-thirds of all MSPs, up from less than half in 2018.

The predictions rely on an extensive research initiative conducted throughout 2021 – the year in which the impact of the pandemic on economic activity and IT consumption was becoming more apparent. Leveraging a panel of over 250K partners, Techaisle surveys more than 5000 partners and has qualitative conversations with hundreds of partners. Techaisle's 2022 in Focus research series illuminates issues and requirements in the vast and complex partner ecosystem.

1. Cloud economics and cost optimization consulting will challenge channel
Cloud cost optimization and economics will be the top cloud consulting service demanded by customers, challenging partners (and their vendors) to provide transparency into cloud costs and ensure that customers receive the best available Ts& Cs. To deliver value to the customer, both partners and suppliers will need to define the current state of workloads and a forecast for the future state, adding value through the development and deployment of processes to support cost optimization and compliance/risk management.

2. MSPs will expand their portfolio to include cloud managed services
Cloud technology velocity will open new services opportunities. For example, as businesses will increase their reliance on cloud-managed services to align IT with business strategies, deep-pocketed, progressive MSPs will increase investment in staff training to grow their professional services revenue. As a result, the MSPs will focus on containers (Kubernetes), microservices, open-source, agile development, API management, hybrid cloud workload management, and security and compliance management.

3. The gap between the cloud "haves" and "have nots" will increase
Cloud vendors will invest in cloud channel leaders rather than in the channel as a whole which will accelerate the gap between leaders and laggards and stress the viability of channel firms left behind. As a result, the year will see a separation between channel partners that have the expertise to combine transformative and traditional business models and those that do not.

4. Vendor and partner equilibrium will be unstable
Vendors have been mitigating channel conflicts through "double bubble" compensation models, creating clear guidelines around where the vendor will sell direct and reducing competition between dissimilar channels. However, the complexity associated with cloud consulting and digital transformation adoption acceleration will have vendors questioning the role of partners. Channel partners will be present in several accounts coveted by direct sales teams – increasing vendor/channel conflict. Vendors will manage conflicts and will not eliminate them.

5. The cloud marketplace will be lots of smoke, but the fire is nearer
ISVs and channel partners will have a tough time finding each other and ultimately finding the end customer. Despite low barriers to entry, few will find immediate profitability. Both partners and marketplace operators will need to build and manage relationships, plug into sales and marketing programs, drive investment in the implementation and support for end-users, and fund all of this on a fraction of the monthly fee associated with each service sold. A high percent of end-users will be marketplace curious and not committed customers. It is not how enterprise customers purchase, as yet. Marketplaces will not kill the channel; instead, channel partners will be a vital link in the buyer's journey.

In all sectors, the last two years were tough – and as a result, 2022 is challenging from a market planning perspective. As we enter 2022, IT product and service suppliers are looking to create a context for understanding the range of outcomes that the new year may bring. Techaisle is launching its "2022 in Focus" research series to support that effort, which illuminates issues and requirements in the vast SMB and midmarket segments. To begin with, here are our top 10 (and additional 3) predictions for 2022. After surveying thousands of SMBs and midmarket firms, having hundreds of depth calls, we identified over thirty trends. After that, we systematically prioritized ten predictions for your consumption.

We look forward to working with you in the year(s) to develop fact-based perspectives on the issues that shape the success of the IT industry.

It was once thought that the cloud would reduce the technology deficit SMBs face relative to larger firms – but it is difficult to say that this has proved to be the case. Indeed, the cloud has lowered the barriers to adopting new systems, giving SMBs access to applications and infrastructure resources that would have been well beyond their means five years ago. However, Techaisle’s SMB and Midmarket Cloud adoption trends research data show that cloud, and hybrid IT, has posed other challenges: difficulties in integrating systems with each other and with business processes, and in integrating data across applications (ensuring that data created by one application is input automatically into others); difficulty in securing systems that are based in multiple locations and managed by various organizations, each with their own set of operational rules; difficulty in applying appropriate levels of security and governance to an ever-expanding pool of data that moves at accelerating pace through an ever-more-complex constellation of systems, users and locations. Large organizations have IT teams dedicated to addressing specific issues within this shifting and complex set of requirements. SMBs rely on limited internal resources (often, small groups of generalists), supplemented by fractional headcount support from third-party channel members, to keep pace with the change that results from the constant advance of cloud and hybrid.

Despite these challenges, though, evidence suggests enormous scope for cloud growth in the global SMB segment. Data indicates an apparent leader/laggard dichotomy between midmarket and small businesses concerning IT-enabled innovation. Over 20% of midmarket firms have internal teams dedicated to “finding ‘what’s next?’ technology-driven innovations,” and 40% “have IT budgets specifically for technology-driven innovation;” 11% report that they have embedded IT professionals charged with finding innovations into business units. Small businesses are, on average, about half as likely to have taken these steps; instead, nearly half of firms with 1-99 employees state that their organizations do not expect IT to drive innovation actively.” Making the assumptions that a) midmarket firms will benefit from the express linkage of IT and innovation, and b) that the gap between large enterprises and midmarket firms is likely as significant as the delta between midmarket and small business. Additionally, large enterprises will, over time, capture IT-enabled business innovation benefits even more rapidly than midmarket competitors. Data illustrates the foundations of a cascade, where IT-enabled innovation drives business success and further cloud investments in larger firms, defining success patterns that small organizations then adopt.

The findings also expose the uncertainty that SMBs face as they structure their IT/business strategies. The most significant proportion of SMBs – 42% of small businesses and 32% of midmarket firms – state that they are unsure of what the next 10-15 years will look like for their industry. Other SMBs worry about their ability to cope with the pace of change: an average of about 25% of SMBs report that they “are struggling to keep up with the pace of change,” and nearly 20% state that they “do not know if they will be able to complete over the next decade.” Against this backdrop, a cadre of forward-looking organizations – 15% of small businesses, roughly a quarter of midmarket firms – “are battling barriers to become a digital business by 2030.” The successes that these firms realize over the next several years will increase their appetite for further cloud investments and encourage their peers to commit additional resources to cloud-based business initiatives. Techaisle expects that if and as these digital leaders realize tangible benefits from cloud and hybrid, the cloud will become an essential element of SMB business operations. As a result, SMBs will become a significant force in the cloud market. Moreover, suppliers to the SMB market and the SMBs themselves can align to bring about this positive change. Techaisle believes that mutual benefit will drive commitment and innovation on both the supply and demand side of the cloud equation.