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Channel partners choose managed services over public cloud

A new Canalys survey shows the channel is embracing IT as a service (ITaaS). It displays how managed services are seen as more important to the channel than the public cloud while the transformation of the technology channel continues to accelerate.

Of the 352 channel partners who were surveyed from around the globe, 96 percent said they already deliver some form of ITaaS. This includes managing customer assets on premises, off premises hosting, or public cloud services.

For the majority of partners, this accounts for less than a quarter of revenue, but according to the survey this is set to change. By 2017, two thirds expect ITaaS to account for more than 25 percent of revenue.

Rachel Brindley, Research Director, Channels, notes how managed services are made up of new world and old world IT.  "Printing, for example, is now heavily driven by managed services contracts,” she says.

“Product resell is still the most important business model for over 60 percent of channel partners," she says. "But they rate the importance of their managed services to their businesses very highly, just behind reselling products. 58 percent of partners also believe that their managed services business is more profitable than reselling hardware and software,” she says.

Furthermore, the survey displayed a general feeling that public cloud is not as important in the channel’s business models.

“The perception of most partners is that reselling third party cloud services is less profitable than reselling hardware and software," Brindley says.

"This also reflects the fact that most channel partners see the top two cloud opportunities as productivity applications such as email, and infrastructure as a service (IaaS), both of which are under growing margin pressure. Higher value applications are not yet seen as the primary opportunities.”

According to Canalys, channel partners consider cloud providers, and the fact that they could bypass channel business models, a threat. In fact, 62 percent of those surveyed identified this as the biggest challenge faced when selling ITaaS.

When selling cloud services, 40 percent of partners find the primary concern of customers is over cloud security and the potential difficulty to find skilled consulting staff.

“We are clearly moving to a world where channel partners will have a varied portfolio including hardware, software, public cloud services and their own managed service offerings,” says Alex Smith, Senior Analyst.

“Vendors developing go-to-market strategies for cloud must ensure they are not increasing competition with their established partners, but recognize that this is typically delivered as part of a hybrid IT offering,” he says.