Those are among the insights gleaned from CompTIA's annual State of the Channel study, which the organization released Tuesday. CompTIA's study is based on a July 2015 survey of U.S. IT channel executives and professionals from 350 companies. While that survey was mainly conducted online, a qualitative portion of the study was based on one-on-one interviews with senior-level channel executives.
CompTIA's channel research depicts an industry that continues to transition, but not necessarily to a particular, well-defined business model. Few companies emerge as pure-play managed service providers (MSPs) or cloud service providers, a finding consistent with other studies published this year. Instead, channel players tend to span a number of business lines, ranging from IT consulting services to old-school hardware sales. As the business shift continues, partners appear more willing to spend on marketing to get the word out on their eclectic offerings.
Here are some highlights from the survey:
- Forty-four percent of the IT services companies CompTIA surveyed said they plan to increase their marketing budgets, and 46% said they were developing new materials to educate customers on emerging technologies.
- On the business-mix side, CompTIA reported that business and technical consulting services "are becoming a primary line of revenue for channel firms." Consulting topped the list of primary revenue sources, with 48% of the survey respondents citing that service as the main way they make money.
- At the same time, channel partners reported that hardware remains a key part of their operations, with 55% of the respondents identifying hardware as very important to today's channel and 37% describing hardware as somewhat important. Interestingly, two-thirds of cloud-oriented partners participating in the CompTIA study said hardware sales are important.
Marketing gets a boost
"Marketing matters," the CompTIA report flatly states, noting a "new focus on marketing effectiveness."
The survey said 55% of the respondents referred to their marketing efforts as moderately effective, 11% said "hit or miss," and 2% acknowledged their marketing was ineffective. The findings demonstrate considerable room for improvement and, hence, the planned increase in marketing budgets.
Carolyn April, senior director of industry analysis at CompTIA, based in Downers Grove, Ill., said marketing has become a "front-and-center" concern for channel companies, whereas it was previously often an afterthought. She suggested it is particularly important for partners to market themselves, given that nearly half of the channel firms surveyed expect revenue growth to stem from net-new customers versus existing clients.
Carolyn Aprilsenior director of industry analysis, CompTIA
"If you're going after net-new customers, you have to be leading with your own … brand," April said.
Stanley Louissaint, president of Fluid Designs Inc., an IT services provider based in Union, N.J., said he has joined industry associations as part of his market outreach, but plans to go beyond that approach in the coming year.
"What I'm looking to do … is spend more money on traditional marketing," he said, citing mailings and cold calling as examples.
Louissaint said he anticipates spending perhaps 30% more on marketing starting this quarter and into 2016.
Consulting focus, hybrid IT services companies emerge
The emergence of consulting as a dominant revenue source was a standout data point in the survey results, April said. She said she believes the cloud and the as-a-service business model have helped fuel that trend. She said partners offering cloud-related services aren't taking title to products anymore and, therefore, focus on consulting as the main value they provide customers.
But while channel partners emphasize consulting, that's typically not all they offer. Dominant money-makers, such as consulting, may account for roughly half of a company's revenue, but the other half is generated "by any number of alternative business lines," according to the CompTIA report.
One of those business lines may be hardware sales, which many partners were advised to move away from over the past couple of decades. April said hardware sales remain "a foot in the door for a lot of solution providers."
MSPs, for example, may upgrade a customers' aging IT infrastructure before committing to a service-level agreement, she noted.
Louissaint said his company sells hardware from time to time, but those sales are almost always a means to provide services to customers.
"We hardly, if ever, sell hardware without having an installation service attached to that," Louissaint said.
But as cloud-based technologies become more prominent, the demand for hardware will naturally decline, he added.
Insight into creating a marketing and lead generation strategy.
Tips for getting the most out of marketing automation tools.