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Channel companies enjoy solid business growth in 2015

Channel partners speaking with SearchITChannel say they grew revenue in 2015 and now aim to solidify their business strategies for the coming year.

Editor's Note: This is the last in a series of three articles that reviewed 2015 channel events and looked ahead at anticipated 2016 channel trends.

Prognosticators of channel trends for 2015 were emphatic about partners getting onboard with business transformation or risk falling behind industry developments. Well, it appears that channel companies have not only been listening but acting. Reporting strong business growth in 2015, increased managed services business, and customers buying into cloud and digital transformation, partners are in charge of their destiny and optimistic as they look ahead to 2016.

SearchITChannel caught up with a handful of North American channel companies to hear about how their businesses fared in 2015 and what is on their agenda for 2016. Not only did all partners report steady business as they wrap up 2015, but said they're solidifying their company's strategy and are adding new, or beefing up, areas of practice such as security, application development and Internet of Things (IoT) in 2016.

With just a few weeks left in December, Mark Wyllie, CEO of the Flagship Solutions Group Inc. in Boca Raton, Florida, said not only did his firm meet its 2015 revenue goals, which were admittedly aggressive, but expects to realize 65% to 70% growth over the previous year.

Taking a quick look at his business over the past 12 months, the IBM-focused partner said he saw an uptick in all segments of products and offerings, with services outpacing all areas of growth.

"What I found was that one business helps the others. What I mean is our hardware business is a good source to drive our managed services business, and for customers who were just doing managed services, when they need to do a refresh or upgrade they come to us because we're taking care of it all," Wyllie said.

The CEO also reported significant growth in the company's cloud business and noted that Flagship Solutions Group was an early adopter of cloud offerings from SoftLayer, an IBM company.

Alex Brown, CEO and founder, 10th MagnitudeAlex Brown, 10th Magnitude

As the market embraces cloud, Alex Brown, CEO and founder of 10th Magnitude, said his company also experienced strong growth for the year, exceeding forecasted expectations.

"We saw strong inbound demand from customers," he said, noting that the company's marketing and awareness campaigns were paying off with customers embracing cloud and transformation opportunities.

The wave of data center transformation not only grew but also continues to accelerate, he added. "Organizations realize that they have the opportunity to get out of the hardware and facilities business and redirect their internal resources to more constructive and customer engaged activities," Brown said.

A stabilized economy prompted more customers to invest in infrastructure, which was good for Clever Ducks, a managed service provider (MSP) in San Luis Obispo, Calif. that offers outsourced IT consulting, network support, desktop help desk and some hardware and software sales. The MSP saw top-line revenue growth and found more bottom-line efficiencies in 2015, according to Amy Kardel, who with her husband Peter founded the company in 1992.

What surprised Kardel in 2015 was a consolidation in the vendors that her company does business with. For example, she pointed to Intel ending the MX Logic/McAfee/Intel Security spam protection service and added that she expects to see more shifts as cloud activity picks up. Cisco's acquisition of OpenDNS was another change for the partner.

Peter Kardel, Clever DucksPeter Kardel, Clever Ducks

What that means to Clever Ducks is rethinking its solutions and tool sets as companies merge or go away. "Changing tool sets is kind of a big deal especially for those that are customer-facing," Kardel said. On the other hand, it's an opportunity to improve and look for efficiencies, she added.

Vendor mergers and acquisitions (M&A), such as the yet-to-close Dell-EMC deal will also impact Clever Ducks as the company has been a SonicWALL partner prior to it being acquired by Dell about three years ago. There's buzz in the industry that Dell will shed some assets, including SonicWALL, as it rethinks its product portfolio with the EMC acquisition.

Vendors weren't the only ones engaged in M&A activity in 2015. Partners like Jenaly Technology Group in Portsmouth, N.H., founded as a consultancy in 1997 and today, a traditional MSP, was acquired by Internet & Telephone, LLC in Methuen, Mass., earlier this month.

The owners of both channel companies go back more than two decades and during that time have had mutual customers. A deal was put together in eight weeks. "We saw the market changing and saw the acquisition as a win-win for our companies and customers," said MJ Shoer, former president and virtual chief technology officer of Jenaly Technology Group and now CTO at Internet & Telephone. The new company goes to market with a broader scope of products and services, 45 employees and expanded geographic reach in the Northeast.

Each party brings something to the deal to make the companies, better together.

"We tend to be more visionary on the tools and technology that are best to deploy both internally and for our customers. We also have a very high touch and personal business model that Internet & Telephone have been developing as well," Shoer said. What Internet & Telephone brings to the union is a strong telecom and broadband background, which was something Jenaly didn't have.

MJ Shoer, CTO at Internet & TelephoneMJ Shoer
Internet & Telephone

Aside from the company acquisition, Shoer saw 2015 as a typical year for his business with general business confidence improved. Microsoft Office 365 was a big focus for the MSP and Jenaly migrated 30% of its clients to Office 365 and expects to migrate all but 10% in 2016. "Office 365 is a huge opportunity for our business that also increases services," he said.

He expects that integrating the two companies will be a top focus in 2016.

For 15-year-old LPS Integration based in Nashville, Tenn., this was the year that the company revamped its managed services and infrastructure as a service (IaaS) offerings. "In 2015 we saw that this [managed services and IaaS] was big in the industry and decided that we need to better define what we do and go to market with it -- and we did," said Frank Pulliza, chief operating officer and co-founder. According to Pulliza, the company always had some sort of managed services type offering in addition to traditional value-added reseller (VAR) services, but it was never well defined.

The result? The partner surpassed its revenue goals. At the same time, the managed service and IaaS strategy didn't impede the company's traditional VAR business that focuses primarily around EMC storage, Cisco networking and Citrix and VMware virtualization.

What's new in LPS' product and services portfolio are flash, hyper-converged systems and additional security services.

2016: Channel companies look ahead

With the New Year around the corner it's full steam ahead for these channel partners. They're on target for growing their businesses and scratching off the checklist boxes for being relevant players in the era of digital business.

Services, cloud, security, analytics and IoT are where these partner firms expect to make investments in the coming year.

Wyllie, CEO at the Flagship Solutions Group, plans to continue in 2016 with Infralytics --Infrastructure + Analytics -- delivered as a customized customer dashboard. The company trademarked Infralytics earlier this year.

By layering a set of tools on top of a customer's IT infrastructure, Infralytics provides access, via key performance indicators, to the real-time health of physical, virtual and cloud IT environments. The data allows customers, and different departments within an organization, to optimize their IT infrastructure, improve planning, improve communication between IT and executive management, help make the business case for future IT projects, and optimize expenses, for example.

Mark Wyllie, CEO, Flagship Solutions Group Inc.Mark Wyllie
Flagship Solutions Group Inc.

"The reality is, we were doing a lot of these things but we just hadn't put it into a marketing umbrella. And, as opposed to reports and print outs, customers want real-time information," Wyllie said.

The number one objective for the partner in 2016 is to develop its own intellectual property. "In a sense, this is what we've done with Infralytics -- we've taken some tools and put them together to provide a customer with a unified view. I think the world is moving toward everything being connected via APIs and so we're going to focus heavily on API integration," Wyllie said.

The forward-looking channel company is also looking at IoT. "IBM has the back-end databases, the mainframes, the Power Systems, Wintel and the software with SoftLayer. What they don't have are the things," he said. For components, he'll turn to Avnet, his distribution partner.

10th Magnitude started an IoT practice in 2015 and has a number of clients in the pilot phase of building and deploying solutions, according to 10th Magnitude's Brown. He expects IoT to gain momentum in 2016.

The born-in-the-cloud partner is already seeing indications of a strong 2016 and is planning to increase staff in 2016 by at least 40%. The partner firm increased staff by 40% in the last half of 2015, up from about 20 to 35 employees.

In particular, Brown is looking for IT professionals with cloud or Microsoft Azure skills. However, he called that task a fool's errand because they don't exist in the market. "We look for strong core technical consulting skills, aptitude around infrastructure and the core application development concepts, attitude around embracing change and ambiguity -- and we apprentice them around the core technical skills," he said.

Both LPS Integration and Clever Ducks have security in their sights in 2016.

Amy Kardel, Clever DucksAmy Kardel, Clever Ducks

Pulliza said LPS is going to get heavy into security and solidify its security messaging in the upcoming year. Kardel expects the ransomware, phishing and security breaches that came to light in 2015 are just the tip of the iceberg. "I expect that the intelligence gathered will be used for more targeted attacks," she said.

Not only is Kardel solidifying her security vendor partnerships but the company also has plans to introduce clients to a recently released cybersecurity training module by CompTIA.

And, finally, both LPS and Clever Ducks are also poised to hire more employees in 2016.

Expecting to see its managed services and IaaS grow, LPS expects to hire additional technical resources experienced in hardware and software as well as dedicated sales professionals.

As Clever Ducks grows as an MSP, Kardel expects to hire professionals with business experience and business analytics experience. "We need to have people who can help clients work with their data as things get more automated," she said.

Next Steps

Learn how to achieve the optimal MSP revenue mix

Find out about what pitfalls to avoid in an MSP or cloud transition

Read about digital marketing techniques for boosting partner revenue

This was last published in December 2015

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