The annual Channel Partners Conference & Expo remains a pivotal event for professionals in the information technology (IT) channel. The 2024 conference in Las Vegas provided a crucial platform for IT partners, industry analysts, and vendors to discuss the current state and future direction of the channel. Key discussions at the event revolved around the evolution of supplier cloud marketplaces, the burgeoning influence of Artificial Intelligence (AI), and shifts in product and service distribution strategies that are set to define the Channel Partners 2024 environment.
This report delves into the major takeaways from the Channel Partners Conference & Expo 2024, offering insights into the business outlook for channel partners, the pressing issues they face, and the opportunities that lie ahead in 2024. The discussions highlighted a market navigating economic uncertainties while embracing new technologies and business models.
State of the Market: Growth Amidst Global Economic Uncertainty
Despite persistent economic headwinds stemming from fluctuating interest rates and global geopolitical instability, the IT sector demonstrates remarkable resilience. Market research firm Canalys presented an optimistic forecast, estimating worldwide spending on IT and telecommunications to reach a staggering $4.94 trillion in 2024. This projection underscores the essential role of technology in modern business and government operations, even amidst economic pressures.
Jay McBain, Chief Analyst for channels, partnerships, and ecosystems at Canalys, articulated the robust state of the market. He pointed out the impressive 6.2% overall growth rate in IT spending, significantly outpacing the global GDP growth. “This is double the world GDP,” McBain emphasized to conference attendees. “This is the fastest growing industry out of 27 industries or 297 sub-industries. So this is the right place to be.” His analysis positions the IT channel as a sector of significant opportunity, even as the broader economic landscape presents challenges.
However, McBain also acknowledged the ongoing economic uncertainties. “We’re facing headwinds, and they’re coming from all over,” he cautioned. He noted that while inflation and interest rates might be stabilizing in some regions, the global economic recovery remains uneven, creating both real and perceived challenges for businesses worldwide.
Channel Partner Ecosystem Projections for 2024
Despite the economic concerns, McBain adopted a decidedly optimistic stance regarding the prospects for Managed Service Providers (MSPs), solution providers, and Managed Security Services Providers (MSSPs). Drawing parallels with historical economic downturns like the dot-com bubble burst in 2001 and the 2008 financial crisis, McBain highlighted the channel partner community’s pivotal role in driving recovery and innovation. “It’s people in this room, the partners who have been the tip of the spear of optimism that have taken the tech industry and driven the world out of recession,” he stated, underscoring the channel’s historical resilience and forward-looking nature.
A significant demographic shift is also on the horizon, with millennials poised to become the majority of IT buyers by the end of channel partners 2024. This generation tends to favor integrated solutions over best-of-breed approaches, even if it means accepting solutions with slightly less comprehensive feature sets. This preference for streamlined, integrated technology stacks presents both opportunities and challenges for channel partners.
McBain supported his projections with compelling data points:
- A substantial 73.2% of the projected $4.94 trillion in IT spending is expected to flow through channel partners, reaffirming the channel’s central role in the IT market.
- Globally, 335,000 companies currently have at least one contract managed through an MSP, indicating the widespread adoption of managed services.
- An impressive 82% of IT buyers now outsource at least a portion of their IT operations, highlighting the increasing reliance on external expertise and support.
- Managed contracts are projected to account for one out of every ten dollars spent on IT by businesses and governments, showcasing the growing importance of recurring revenue models for channel partners.
- B2B marketplace transactions are experiencing explosive growth, with a Compound Annual Growth Rate (CAGR) of 86%, pointing to the increasing significance of digital marketplaces in the channel ecosystem.
CompTIA’s annual State of the Channel Report, launched at the conference, further corroborated these trends. Forecasting IT services spending to reach $1.5 trillion in channel partners 2024, with an estimated 8.7% year-over-year increase, the report painted a picture of continued expansion in the IT services sector. Key findings from CompTIA’s survey of over 1,000 channel provider leaders included:
- 50% of U.S. channel companies anticipate pricing pressures will be a significant hurdle to growth, emphasizing the need for efficient operations and value-driven services.
- 63% of North American channel partners reported business improvements, reflecting overall positive momentum within the channel.
- A significant 47% of U.S. channel companies are planning to incorporate generative AI-based solutions into their offerings, signaling a rapid adoption rate of this transformative technology.
- The number of IT channel companies has increased by 29% since 2020, indicating a dynamic and expanding market landscape.
Business Driving More Through Marketplaces in 2024
Channel partners are increasingly leveraging solutions marketplaces operated by hyperscale cloud providers like AWS, Microsoft Azure, and Google Cloud Platform, alongside major platform players such as Salesforce, Oracle, SAP, IBM, and ServiceNow. These marketplaces are becoming integral to how businesses procure and manage their IT solutions.
Interestingly, while vendor marketplaces were ranked as the top competitive threat by channel partners in 2023 according to CompTIA’s State of the Channel Report, this perception has shifted. In the latest report, marketplaces fell to the second position, surpassed by rival channel partners. More notably, the percentage of partners viewing online marketplaces as a threat decreased from 49% to 36% year-over-year. This indicates a growing acceptance and understanding of marketplaces as a beneficial component of the channel ecosystem, rather than a purely disruptive force.
David Markley, president of Stronghold Systems, an MSP specializing in Microsoft-based solutions, is among those who have embraced marketplaces. He highlights the collaborative nature of these platforms, stating, “From a Microsoft perspective, the marketplace isn’t really designed for an end user or a customer to work directly with Microsoft. It’s designed to be a place where partners can put solutions into the marketplace.”
Meeting Cloud Consumption Requirements Through Marketplace Apps in 2024
Markley elaborated on the strategic advantages for partners utilizing cloud marketplaces. He explained that when a partner lists a transactable offer on Microsoft’s cloud marketplace, midmarket and enterprise clients can apply these transactions toward their Azure consumption commitments. “It’s our own IP in that marketplace that we can deploy to customers,” Markley noted. “They can purchase it and get credit towards Microsoft spend.” This mechanism allows customers to optimize their cloud spending while accessing partner solutions.
Dai Vu, Google’s Managing Director for Marketplace and ISV Go-to-Market Programs, further explained the broader appeal of cloud marketplaces for customers. “They are seeing a lot of benefits around things like being able to have a very scalable and repeatable procurement [and negotiation] process,” Vu said. He emphasized the efficiencies gained through marketplaces, including vendor relationship consolidation, streamlined billing, and faster time-to-value. Additionally, marketplaces offer robust platform benefits such as enhanced access control, security, governance, and pre-approved configurations for end-users.
New ScanSource Subsidiary Puts Partners in Play in 2024
A significant announcement at the conference came from ScanSource CEO Mike Baur, who unveiled plans to establish a new subsidiary that will engage in direct sales to customers. This move has sparked considerable discussion and some concern within the channel, particularly regarding potential conflicts with ScanSource’s technology services distribution (TSD) subsidiary, Intelisys, which traditionally serves partners including VARs and MSPs.
Baur clarified that the new subsidiary, currently referred to as “NewCo,” is envisioned to cater to the increasing demand for more sophisticated and professional partner services. NewCo will be built either organically or through acquisitions of existing partners, targeting businesses whose operators are considering exiting the market.
“This is not ScanSource selling to end users,” Baur asserted, aiming to allay concerns about direct competition with existing partners. “We believe NewCo will buy from the TSDs, that’s the way the model should work.” This model suggests a commitment to maintaining the traditional distribution channels while addressing evolving customer needs.
AI: Hype Versus Business Opportunity for the Channel in 2024
Artificial Intelligence (AI) has been a dominant topic across the IT industry, gaining unprecedented mainstream attention since the launch of ChatGPT by OpenAI in late 2022. The integration of AI into various platforms and applications is rapidly transforming the technology landscape. Reflecting this trend, nearly half (47%) of respondents in CompTIA’s State of the Channel Report indicated plans to sell AI products and solutions in channel partners 2024, with an additional 34% actively considering this expansion.
Major platform and application providers have been actively developing AI partner ecosystems throughout 2023, now actively incorporating MSPs and systems integrators into these initiatives. MongoDB, a leading cloud database provider, exemplifies this trend.
Greg Maxson, MongoDB’s Global Go-to-Market Lead for AI, participated in a panel discussion on the future of AI at the conference. He noted that with the ease of developing AI proof-of-concepts, the focus is now shifting towards enabling MSPs to deploy these solutions effectively and at scale to meet growing customer demand.
“The real challenge is how to deploy it scalably in a secure way to thousands of users globally,” Maxson explained. “And that’s where we see an opportunity for service providers to provide more AI-specific wherewithal and guidance to their customers to help in those major deployments. That’s where we’re leaning on that ecosystem.” This perspective highlights the critical role of channel partners in bridging the gap between AI innovation and practical business application.
Partners Move Toward Building Up AI Skills in 2024 and Beyond
For channel partners of all sizes, enhancing AI skills and knowledge is becoming increasingly crucial. Adapting to the influx of new AI tools and platforms is essential for remaining competitive and relevant in the evolving IT landscape. Companies like HPE are stepping up to support this need, offering AI inference tools with pre-built models, tuning solutions, and comprehensive training programs for their channel partners.
Tom Wall, an HPC and AI specialist at Hewlett Packard Enterprise (HPE), emphasized the significant opportunity in consulting and advisory services related to generative AI solutions, leveraging HPE’s high-performance computing (HPC) capabilities. “Generative AI uses a lot of resources,” Wall stated. “It’s going to be very difficult for people to get into these LLMs [large language models on their own]. I’m looking forward to a great run over the next couple of years.” He anticipates substantial growth in AI-related services and solutions within the channel.
Recognizing the nascent stage of AI adoption among many channel partners, HPE is investing in resources to facilitate partner development. Wall mentioned the introduction of AI certifications, training programs, and dedicated support initiatives designed to equip partners with the necessary expertise.
“My advice is to invest, look at your business and determine where you’re weak,” Wall advised. “And [determine] what are you going to do to augment that.” This proactive approach to skills development will be key for channel partners seeking to capitalize on the AI revolution in channel partners 2024 and beyond.
Bottom Line: Challenges and Opportunities for Channel Partners 2024
Channel partners in channel partners 2024 are navigating a complex environment characterized by ongoing economic headwinds and the continuous evolution of solution sales and delivery models. The increasing customer demand for AI-driven solutions presents significant opportunities, but also necessitates proactive adaptation. Partners must actively engage with training and certification programs offered by vendors and strategically adapt to the growing influence of online marketplaces.
To gain deeper insights from channel leaders, explore our video and podcast series, Channel Insider: Partner POV, featuring exclusive interviews with leading solution providers. Episodes are readily available on YouTube and all major podcasting platforms.
