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IT channel research results: What your peers are doing

Channel research reveals key findings on solution providers' company structure, business challenges, revenue sources, choice of partners and more.

Running a channel business is a complicated endeavor with a multitude of factors -- some within your control and some outside of your control -- affecting success. To learn more about how business is conducted among IT solution providers and what the most pressing issues are, we surveyed 279 channel professionals around the globe in our 2013 Channel Directions survey. This channel research report focuses on results from United States and Canadian survey respondents.

Marketing and finance

To get a sense for how channel businesses are run, we asked respondents whether their company has an individual or team dedicated to marketing. Seventy-one percent answered in the affirmative, indicating the majority of IT solutions providers have a fairly sophisticated company structure -- somewhat surprising given that half of survey respondents work for small businesses, those with less than $50 million in annual revenue (with a full two-thirds of those respondents having less than $10 million a year in revenue). In addition, 70% of respondents reported their company has a chief financial officer, again suggesting formal company structures and illuminating the importance of budgetary guidance in managing channel businesses.


Our channel research survey asked respondents to rank 25 challenges they face as professionals on a scale of 1 to 5, with 1 as the least challenging and 5 as the most. Respondents also had a "does not apply" response option.

The results clearly listed the top challenges that channel companies are facing, as well as the issues they have under control. The top 10 challenges, descending in difficulty, are: the impact of the current economy on client spending, maintaining margins, winning new business, ensuring ease of integration with existing products/technology, recruiting skilled professionals, complexity of products, identifying managed services opportunities, obtaining adequate training for personnel, interoperability with existing products or services, and learning new technologies.

The least difficult challenges were keeping customers, troubleshooting technology problems, product setup/configuration issues, product reliability/performance, managing supplier relationships, attaching services to product sales, and talking about technology in business terms.

Revenue sources

An overwhelming majority of channel companies are at least wading in the managed services waters.

When it comes to where the money is coming from, services reigns supreme. That category accounted for an average of 31.28% of respondents' revenues. Product sales, meanwhile, accounted for an average of 26.97%, and consulting accounted for an average of 21.21%. An average of 3.48% of revenue was generated by other types of business, and the source of an average of 17.06% of revenue was unknown to respondents.

Business identity

Thirty six percent of respondents labeled their business as a VAR/total solution provider when asked how their business primarily defines itself in the channel, while IT consultant followed at 22%. Twelve percent of respondents defined themselves primarily as a managed services provider and 8% defined themselves primarily as a systems integrator. Of those who did not define themselves as managed services providers, 73% said they offer some managed services, meaning an overwhelming majority of channel companies are at least wading in the managed services waters. Less than a quarter of all respondents have no involvement at all with managed services.

Choosing a vendor to partner with

To find out how solution providers value vendor partner programs, we asked which factor was the most important part of the choice to participate in a partner program. Product quality reigned as the most important factor at 35%, which makes sense given it's a lot easier to sell and support a good product than it is a bad one. Revenue opportunity/margins garnered 26% of responses, and product experience took 14%.

Customers' spending plans

Knowing how clients plan to allocate their budgets can help solution providers in making strategic business decisions, so we asked participants where they expected customers' biggest spending reductions for 2013 to be. Allowed to select up to three responses, we offered hardware purchases, maintenance, outside services, software purchases and staffing as options. Over half of the respondents, at 57%, foresaw spending cuts in hardware purchases. Forty-eight percent of respondents expected spending reductions related to staffing, 27% expected cuts to software purchases, and 26% expected cuts to outside services.

Conversely, 55% of respondents expected to see spending increases related to outside services, suggesting a good year ahead for solution providers' services revenue. Thirty-five percent expected a jump in software purchases, again suggesting more IT organizations will increase spending on software than decrease it. Thirty-two percent said spending on maintenance will increase, and 29% said the same about hardware purchases, which, together with the prior question, portends lowered demand for hardware among IT organizations.

About the survey

SearchITChannel's Channel Directions survey was fielded in the second quarter of this year, garnering qualified responses from 279 IT solution providers in the United States and Canada.

Respondents came from a variety of roles within the IT channel, with technical/engineering staff having the highest single-classification representation at 13%. Collectively, CIOs and CEOs represented almost 20% of respondents, and sales and marketing managers, staff and engineers collectively represented about 25% of respondents. Among respondents, 61% recommend the products and services their companies offer to customers, while 58% evaluate the products to be offered. Fifty-four percent pitch products or services to clients, and 52% make product recommendations to customers.

Survey participants for this channel research came from a variety of business types and sizes, and with business models that target a variety of client sizes. Respondents catering to small businesses (defined by Gartner as those having fewer than 100 employees) and those catering to midsize enterprises (those having 100 to 1,000 employees, per Gartner) were about evenly split, with 31% in the former category and 32% in the latter category. Meanwhile, those catering to large enterprises represented about 29%. About 7% of respondents could not identify their most common customer size.

As for respondents' company size, about 49% reported annual revenues of less than $50 million, placing them in the small business classification, according to Gartner. About 23% work for companies with revenues of $50 million to $1 billion. About 14% reported annual revenues of more than $1 billion. About 12% didn't know their company's annual revenues.

Our survey asked participants to identify whether their company focuses on a particular vertical industry or industries; 64% answered "no" and 33% answered "yes." Among those who answered "yes," 16% reported their organization was primarily focused on the healthcare/pharmaceutical/biotech industries. Government garnered the next biggest response, at 15%. The financial/banking industry was the last option to see a double-digit count, at 12%.

The final question in this section also targeted those who answered "yes" to part one, further inquiring which vertical industries their organization sells to (rather than which vertical industries are primarily targeted). With 17 options available, the largest percentage of 48% again went to healthcare/pharmaceutical/biotech industries. Government followed again with 43%, financial/banking had 37%, and education had 36%. Rounding out the top five was legal/insurance/real estate, at 28%.

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