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The traditional channel is fading, while a new shadow IT channel consisting of cloud consultants, tech-oriented professional services firms and startups is on the rise.
That's the analysis of Jay McBain, principal analyst for global channels at Forrester Research. McBain, speaking at CompTIA's ChannelCon 2018 conference, said this emerging shadow channel is adding thousands of new companies to the partner ecosystem, while conventional resellers of hardware, software and services are slowly dwindling in number.
"The traditional channel isn't dead; it isn't dying, but it is declining," he said.
McBain said the population of traditional channel players has dropped 36% since the 2008 recession. He also noted that 40% of channel partner owners plan to retire by 2024, noting that the average age of an owner or principal is 58.
In contrast, shadow IT channel companies are rapidly growing in number. McBain cited several categories of such companies. He termed one group everything-as-a-service (XaaS) ecosystem consultants. Those companies help enterprises install, implement and secure software-as-a-service and infrastructure-as-a-service platforms.
According to McBain, XaaS ecosystem consultants are line-of-business experts who understand cloud-driven best practices and typically partner with a handful of vendors, such as Salesforce or Amazon Web Services.
McBain pointed to the surge in growth in the AWS ecosystem. AWS said it added 10,000 new AWS Partner Network companies in 2017. He said AWS could have a total of 100,000 companies in its partner ecosystem in the next 18 months.
"People are flooding into these ecosystems," he said.
Industry-based professional services firms are another aspect of the shadow IT channel. Accounting firms, digital agencies, architectural companies and law offices are moving into IT services to support their clients in industries undergoing digital disruption.
"They're technology companies," McBain said, who noted that there are about as many certified public accountant (CPA) firms as there are value-added resellers.
Jay McBainprincipal analyst for global channels, Forrester Research
While the depth of the CPA-as-IT-provider shift may be a recent development, the largest accounting firms were rolling out IT strategy consulting and systems integration services 30 years ago.
Other participants in the shadow IT channel include ISVs, an area also seeing explosive growth. Bain estimated 100,000 ISVs exist today worldwide, compared with 10,000 software houses a decade ago. He predicted the number of ISVs will grow to 1 million by 2027, a rise driven by customers' demand for increasing levels of specialization.
Large IT vendors such as Cisco help fuel the ISV trend. As Cisco pursues a software-led strategy, the company is encouraging its traditional channel partners to develop software and is cultivating expanded ties with ISVs.
In addition, McBain identified born-in-the-cloud firms that focus on back-end project-based services as another example of shadow channel companies. He also said he sees the potential of companies stemming from the startup community as channel disrupters.
The traditional partner response to the shadow IT channel trend could include partnering or merging with the new channel players, McBain suggested, noting that channel partners may be better at such things as business continuity than a digital marketing firm. Such skill set combinations are already coalescing in the emergence of digital consulting firms, which combine elements of traditional systems integration and digital marketing.