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Brexit plan: Channel monitors developments amid uncertainty

The pending split between the United Kingdom and the European Union could dampen business prospects for channel companies doing business in the U.K. and complicate regulations.

Channel partners are beginning to see some early ripples from the United Kingdom's vote to leave the European Union, but exactly how the breakup will affect resellers and IT service providers remains unknown at this early stage.

Voters in Britain on June 23 elected to leave the European Union (EU) by a margin of 51.9% to 48.1%. The resulting separation process, dubbed Brexit, is expected to take about two years as the U.K. and the EU negotiate the split. The U.K. government must invoke the Treaty on European Union's Article 50 to begin the Brexit, but Prime Minister David Cameron announced plans to resign and has left triggering the clause to his successor. The resulting leadership vacuum and behind-the-scenes political maneuvering contribute to the uncertainty surrounding the transition. Channel companies and their customers have only begun to think about a Brexit plan.

Datapipe Inc., a managed hosting and cloud services provider based in Jersey City, N.J., has already encountered a bit of Brexit fallout in its U.K. operations. Tony Connor, head of EMEA marketing at Datapipe, said an organization from Spain recently contacted Datapipe to inquire about migrating its servers and data from its U.K. data center to one in Amsterdam, Netherlands or Frankfurt, Germany. He said the organization isn't ready to migrate to a different facility, but it is costing out that option.

From my perspective, organizations out there are doing due diligence, looking at their options.
Tony Connorhead of EMEA marketing, Datapipe

"From my perspective, organizations out there are doing due diligence, looking at their options," Connor said. He said such companies aim to position themselves to make "fairly quick decisions based on the outcome of those [Brexit] negotiations."

Connor said the Spanish organization's interest in migration stems from the EU's General Data Protection Regulation (GDPR), which received final approval in December 2015 and will go into effect in 2018. GDPR establishes data protection rights for EU residents, and channel partners -- such as cloud services providers -- doing business with member nations will need to comply with the law.

Connor said the Spanish company's view of the law is EU residents' critical and sensitive data needs to reside within the EU. The company may also be assuming that U.K. data protection statutes could lack adequacy with respect to the standards established under Europe's data protection regulation. And if that happened to be the case, "they would have to move data and applications back into the EU," Connor said of the prospective client in Spain.

Regulatory splintering

Charles Weaver, founder and CEO of MSPAlliance, based in Chico, Calif., said Brexit could potentially muddle matters for global managed service providers (MSPs). He said MSPAlliance has a number of members with offices and clients in the U.S., U.K. and Europe. He said such companies could eventually face three sets of regulations: One in the U.S; another in the U.K.; and a third, GDPR, covering EC states.

"It could make things more complicated for them, depending on how they are set up and how they deliver their services," Weaver said of MSPs.

Weaver added that this potential regulatory splintering, particularly if the EU unravels, would accelerate a trend toward data localization. Such a move would stand in sharp contrast to the earlier days of cloud computing, when data was indiscriminately blended, regardless of national boundaries, he noted.

The pending EU-U.K. breakup "ties back to localization -- data kept close to the locus of the customer," Weaver said. "That is what Brexit tells me."

U.K. channel fears

The U.K., of course, will feel the brunt of the Brexit, and channel partners in that geographic market might experience stalled projects and a decline in IT investment amid the uncertainty.

"For the U.K. channel, the biggest fears following the decision to leave the EU are that customers will halt investment plans, leading to a drop in spending that Gartner and IDC expect to last a couple of years, at least, and the country will enter a recession," said Simon Quicke, editor of MicroScope, TechTarget's channel publication in the U.K.

Cloud-based services, however, may see some resiliency and may play a role in a channel customer's Brexit plan. The flexibility of cloud offerings could prove a useful option for customers who need to meet their immediate IT needs, but fear the long-term commitment of on-premises technology investment.

"I am seeing a great opportunity for cloud, especially in terms of the uncertainty," said Till Brennan, vice president of EMEA at Egenera Inc., a company that provides wholesale managed cloud services for channel companies. Egenera is based in Boxborough, Mass., and has operations in the U.K., Ireland and Germany.

The cloud, Brennan said, gives customers the ability to scale up to meet their immediate needs and "the flexibility, in case things really go wrong, to scale back."

Carolyn April, senior director of industry analysis at CompTIA, based in Downers Grove, Ill., called cloud a "great solution for uncertain times," noting that the approach provides an IT arrangement that lets customers scale up or down without penalty.

Few companies, however, are likely to take decisive action in the near term, as the shape of post-Brexit Europe won't be known for some time.

"I don't think anyone fully realizes the ramifications," Connor said. "Everyone is waiting to see what the negotiations entail."

"Things in the U.K. are uncertain at the moment, with a political vacuum in the major parties," Quicke added. "All anyone wants, on both the Leave and Remain sides, is for some stability to quickly return."

Next Steps

Read more about GDPR from an MSP perspective

Find out about Brexit's potential impact on application development

Get the security professionals' take on Brexit

Dig Deeper on Channel business management strategies

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