Well, given that my job is to research channels, the fact that I recently heard this second-hand from someone I respect very much, made me cringe!
So, is the channel dead? The short answer is No. The long answer is hell no!
Of course, some channel partners have not fared as well as others. However, this is not endemic to the IT channel. The same is true for IT vendor (consider Apollo, Data General, DEC, etc.) Furthermore, this is not just in the IT community. Other industries face similar challenges (remember Sunbeam?)
This is just business. The world, the environment, customers, etc. continue to evolve. Companies in any industry evolve to meet new demands and they change to prosper. Those that don’t or can’t are forced to sell, merge or simply close up shop altogether.
For some reason that I don’t know, but wish I did, the question “is the channel dead” has been hovering as a dark cloud over the IT channel for many years. The first I remember hearing this back in 1997 when I started at IDC. Like a wave, this question flowed every so often, and then ebbed, but it has come to my attention very recently that the question is back. I intend to put this question to rest for the last time.
The question causes fear and uncertainty in some. Some suppliers are wondering if they should divest of channel investments. They are asking themselves, why invest if the channel is dead or dying? It will just suck the life out of the vendors.
I am here to tell you two things:
- The channel is not dead and
- Vendors, be careful what you wish for.
I will be publishing a research piece shortly what the IT market would look like without the channel based on an “It’s a Wonderful Life” theme.
A recent case in point is the news about Presidio, a major IT solutions channel partner. It was recently sold to Apollo Global Management, a New York based investment firm, from affiliates of American Security, a middle market private equity firm. The terms of the deal were not disclosed. The terms are not relevant here anyway because the fact that investment firms continue to make investments in companies like Presidio are reflective of the fact that they see it as a good – investment! No investment firm is going to invest in a blatant loser. Neither would they invest in a dead market.
The channel M&A activity is buoyant. There is an enormous list of these deals. Some are notable, like Avnet (IT distributor) buying GE Access (IT distributor). But, most are smaller and not public, so the data is not that readily available. Trust me, it happens all the time.
I believe that the channel is always changing, see the research note The Channel Challenge. As a group, the channel is very much alive. A word of caution for vendors – what if the channel formed a union, and started acting as a single unit? That would certainly raise eyebrows and concern for the vendors! This would mean the channel would be acting in aggregate – resulting in force to be reckoned with versus the current disparate group.