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Channel rewind: IT industry 2014 highlights and the impact on partners

As 2014 wraps up, take a look back at the important events and developments in the IT channel. Industry experts weigh in on the big vendor moves, partners' bumpy transitions to a cloud business model and more.

As much as channel business execs want to control their own destinies, the past year brought evidence that only so much is under their control, with industry bigwigs engaged in a variety of structural changes that promise to alter the way partners do business with them and with developments around cloud computing demanding partners' attention.

As the year wraps up, SearchITChannel turned to industry experts for commentary on the highlights of the IT industry in 2014 and the significant events that took place -- events that impacted channel partner firms and will likely continue to reshape their businesses in the coming year.

Vendors stole the spotlight for industry news in 2014, particularly news coming from Hewlett-Packard Co., Symantec Corp., IBM and EMC Corp. Both HP and Symantec announced company breakups, while IBM shed its x86 business and EMC acquired control of VCE.

Beyond organizational structure changes by the big vendors, the vendor community at large seemed to have become enamored with the word "enablement." Channel companies, meanwhile, continued to grapple with the question of how to transition to a cloud-centric business model, while many of them found there's still plenty of profitability in a traditional channel business model.

Big vendors' moves impact channel

In a one-two punch back in October, HP announced plans to split into two separate companies, Hewlett-Packard Enterprise and HP Inc., while Symantec announced it would split into two businesses, one focused on information management and the other on security.

The financial community applauded the moves, predicting that HP would become a more nimble company and Symantec could, basically, clean up its act. The respective companies' channel partners expressed cautious optimism, as did industry analysts at the time. The going sentiment was that the vendors needed to bring stability to the channel -- both people and programs -- ASAP.

But momentous vendor moves could try the patience of partners, as their main focus is to satisfy their customers' needs. "Although many HP partners have worked with the company for a long time, their loyalty will be tested by the restructuring, which will raise concerns among their customers and inevitably disrupt HP's day-to-day operations, traditional go-to-market tactics and technological innovation," said Jeffrey Kaplan, managing director at Thinkstrategies Inc., a cloud computing strategy consultancy.

Ditto for Symantec.

IBM's $2.3 billion sale of its x86 server business to Lenovo reinforced IBM's transformation objectives, which are to focus on higher-value products for enterprise clients. The vendor retained a strategic partnership with Lenovo and IBM partners, some of whom already do business with Lenovo and know where to find x86 product when they need to.

Vendors want all of their partners to go to the cloud and the partners are trying to figure out how. Some have been successful but many are still struggling with it.
Jeff Hiltonfounder of the Alliance for Channel Success

The IBM sale of its x86 business proved trickier for both Dell and HP, which continue to vie for new business customers and partners as Lenovo and its channel becomes a force to be reckoned with.

Another highlight of 2014 was EMC's decision to assume control of VCE, which was good news for partners. "It will make it easier for channel partners to sell and support the VCE solutions because there will no longer be a debate or uncertainty about which vendor is driving the company's product development, sales and services strategies," Kaplan said.

Last year, Dell started a new chapter as a private company, and this year, the vendor celebrated its one-year anniversary. Similarly, in just a few months, February 2015, Microsoft CEO Satya Nadella will hit his one-year anniversary at Microsoft. Kaplan gives a thumbs-up to both vendors.

"The privatization of Dell has enabled the company to align its product portfolio and restructure its go-to-market strategy," he said, adding that any uncertainty in the channel over privatization has shown signs of being alleviated as Dell more clearly defines its new direction," the industry watcher said.

Nadella has signaled to partners that Microsoft will be a strong player in the cloud and mobile markets. "This will enable Microsoft partners to capitalize on growing customer demand to adopt cloud and mobile solutions using Microsoft offerings," Kaplan said.

Enablement: A means to an end

Many vendors did a good job of retooling their partner channel in 2014.

"The vendor community was focused on enablement in 2014. It seemed that everywhere we turned, we were hearing the importance of helping solution providers succeed," said Diane Krakora, CEO of channel consultancy PartnerPath. That included marketing enablement, technical and sales enablement, and even business transformation enablement, she added.

On the flip side, however, in their quest to enable partners to be more self-sufficient, the vendor community might have gotten distracted from its real mission around channel partnerships. "That's to ensure partner profitability. Enablement success does not necessarily translate to profitable partnerships," Krakora said.

The long, bumpy path to cloud

A few industry watchers agreed that in 2014 both vendors and partners struggled to figure out how to go to the cloud.

Seth Robinson, senior director and technology analyst at CompTIA, noted the challenge vendors faced trying to move the channel ecosystem in a new direction. "These vendors aren't abandoning their partners (as some may perceive); they just see the shift in IT and they need their partners to come along with them," he said, adding that the vendors realize that that means business transformation for those partners, some of which might need help with that process.

Partners that tested the cloud waters in 2013 or 2014 did not necessarily see success with the new business models, Krakora said. "Vendors are sorting out their business models for the cloud as well. Big issues like field rep compensation are still plaguing the opportunities to engage channels in cloud offerings," she stated.

Jeff Hilton, founder of the Alliance for Channel Success, an organization aimed at channel education and training, agreed. "Vendors want all of their partners to go to the cloud and the partners are trying to figure out how. Some have been successful but many are still struggling with it," he said, adding that partners have to relearn their value proposition.

Managed services providers (MSPs) in the channel continued to embrace cloud in 2014, but not necessarily in the way vendors wanted them to. "There are a lot of vendors that want MSPs to become VARs again -- a push that MSPs have resisted heavily because they went through too much trouble evolving from a VAR to an MSP," said Charles Weaver, CEO of industry member group MSPAlliance. The thin margins, like those currently being offered to resell public cloud, are what these MSPs left 10 to 20 years ago, he noted.

This makes for an interesting shift with MSPs trying to figure out what cloud solutions make sense to resell -- but not as a main business model. "That's the transition we're seeing this year and we'll see it continue in 2015," Weaver said.

While he noted that indicators show that private cloud is where things are moving in the future, in 2014 issues like price and delivery of private cloud remained unsolved. "Companies like IBM, Lenovo, Cisco, Dell, HP and a few others are working very hard to crack this problem, which is, 'How do we get real private/hybrid cloud infrastructure into the hands of MSPs in a relatively risk-free way?' That's a financing problem more than it is a technical problem," Weaver said.

In 2014, the private cloud space began to heat up, exposing greater opportunities for partners to build or host private clouds for their clients. "We're beginning to see companies warm up to that idea as they have applications that are more secure and they want to enjoy the benefits of cloud without going into the public cloud," Robinson said.

In 2014, CompTIA kept an eye on how the public cloud vendor space shaped up. The three giants -- Amazon, Google and Microsoft -- continued to dominate this space. "I think that these three companies are continuing to define what public cloud computing means, and they're making it difficult for other companies to become public cloud providers," Robinson said.

What that means to channel partners is that as they consider the public cloud, they need to consider what services they'll wrap around the three giant cloud providers' offerings.

Feeling nostalgic for tradition?

In early 2014, CompTIA expected to continue to see hybrid business models in the channel -- in other words, companies offering both break/fix and managed services -- and basically, that's what happened. "If anything, there was even less of a land rush towards the managed services model that we've been talking about for some time now," Robinson said.

He explained that multiple business models still exist in the channel and will continue to be there for some time to come. "There are a lot of people still doing the more traditional models that are seeing a lot of business."

Next Steps

Check out 2015's channel events calendar

PartnerPath maps out key trends in the channel

Study highlights cloud-driven business transformation in the channel

This was last published in December 2014

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