How is the channel ecosystem changing? Comms Business talks to the experts.

The channel ecosystem has shifted continually throughout its history. New technologies, new vendors and evolving partner programmes create new market dynamics all the time.

For Adrian Sunderland, CEO, Jola, what is distinct about current climate is the increasing competition between IT and telecoms resellers. He said, “The channel ecosystem is constantly changing. Some vendors are trying to do more business directly, whilst others are actively trying to do more business via the channel. Super resellers are buying up smaller resellers. Most telecoms resellers are starting to add more and more IT based services to their portfolios and competing with the traditional IT companies.”

Iain Sinnott, head of international carrier sales, Enreach for Service Providers, offered a similar perspective, although he highlighted four areas where he is seeing convergence. He said, “The channel ecosystem has gone through an unprecedented period of change in recent years and will continue to do so in 2024. More resellers are now responding to the market demand for them to become more like MSPs, which will help them compete against the hyperscalers who have entered the market.

“To reduce the impact of provisioning and the overhead of account management, turning to self-service, such as customer portals is a fast-growing trend. We are also witnessing the convergence of the four main pillars: IT, telco, mobile, and connectivity, with more channel providers responding to this opportunity, which is also something that the end user is demanding.”

For Dave Ferry, head of sales, ITS Technology Group, the age of full fibre is driving a lot of that convergence. He said, “The channel is being influenced by a melting pot of market dynamics including consolidation driven by macro-economic factors, convergence, and changing end-customer demands.

“Convergence, through the delivery of full fibre networks, is reshaping channel partners’ propositions, technologies, and solutions as next generation tech like XGS PON consolidates digital infrastructure to allow connections to be run over one pipe. The capabilities of this infrastructure is also increasing as 2.5Gb networks are now 10Gb, and 25 and 100Gb networks are also emerging allowing for a new wave of innovative services.”

The increasing footprint of full fibre networks also means the end of the road for ageing copper networks. The withdrawal of PSTN services and WLR will be a big change for many channel companies, with many communications providers (CPs) founding their businesses around those services.

Carl Fletcher, sales director, Gradwell Communications, said, “Resellers are looking for more from their vendors because of the upcoming PSTN switch-off and the changing Microsoft Teams landscape. Channel partners need to find ways to do more for less for their customers, and packaging products and services to be more commercially flexible.”

Fletcher pointed to the reduced gap between telecoms and IT resellers, as mentioned by Jola’s Sunderland. He said, “An interesting trend in the channel is the convergence of CSPs and MSPs. Channel organisations need to understand the opportunity in moving from being telcos to techcos and determine whether they can be in one or both to effectively serve their customers changing needs.”

Some stakeholders are of the view that rapid changes triggered by the pandemic are beginning to stabilise. Jamie Hughes, sales director for the UK, Evolve IP, explained, “Over the last 12-24 months the channel ecosystem system has begun to plateaux, mature and stabilise in terms of new vendors coming into the industry.

“The players with the right go-to-market strategy will remain and become stronger, as opposed to the agent model which doesn’t work in the UK. Different end user buying methods based on omnichannel technologies are also playing a part in reshaping the wider ecosystem.

Rapid cloud adoption is also reshaping the channel ecosystem. Will Morey, CEO, Pragma, explained, “Cloud is increasingly becoming the default option. As more end customers make the move to the cloud, this means more competition, which in turn means a growing need to personalise and find innovative ways to help end users to navigate unique challenges. With the use of cloud growing outside of just telecom, there’s a lot of potential emerging.

“This shift from simply selling a piece of technology, to providing a tailored service, enables partners to stay competitive and profitable. The move towards a cloud-focused future has presented opportunity, and MSPs and resellers can offer products that deliver business continuity, collaboration, security, and flexibility, whilst benefiting from a sustainable revenue model.”

Dan Cunliffe, managing director, Pangea Connected, added, “The ecosystem is shifting from a linear sales-driven approach to one that drives value for partners through collaboration, openness, and specialisation. The change is being driven by cloud migration and subscription-based consumption models, as well as a demand for high bandwidth connectivity.

“The richest developments are in IoT and they’re changing the shape of the Channel. With so many IoT devices in play – forecast to hit 25.1 billion globally by 2027 – the Channel needs connectivity, hardware, software, and systems that can scale at the same speed. Which means collaborating across different specialisms and sharing expertise. The transition to a services-focused Channel isn’t just a trend, it makes business sense too. Price wars and races to the bottom don’t cut it in today’s market.”

Identifying challenges

Amidst these changes to the channel ecosystem, resellers, MSPs, distributors, and vendors are grappling with new challenges. Sinnott, from Enreach for Service Providers, discussed how telecoms resellers can protect their business as new competitors enter the fray.

He said, “As well as the arrival of hyperscalers, IT channel specialists are now turning their attention to comms, meaning that the market will be even more crowded than ever. Comms resellers need to make sure they are protecting themselves through converged portfolios that span IT, telco, mobile, and connectivity.

“At the same time, end users — especially business customers — have greater expectations from their technology providers. The economy, of course, presents some hurdles, but it also presents opportunity to help customers survive and thrive, for instance, through better productivity and customer service.”

Fletcher, from Gradwell Communications, agreed with that perspective and explained how vendors can support their partners. He said, “The market has become increasingly saturated, so buyers can find it difficult to understand their options and determine what solution is best placed to solve their problems.

“As a result, MSPs are relying on vendors to have more involvement in the deal cycle to effectively pitch the right solution. MSPs need partners who can provide a wholesale managed service to cover a broad spectrum of technology, and effectively support it.

“There is growing competition from global software vendors in the SME space, from the likes of Microsoft and Zoom, as a result, it’s a complex market for to navigate. They need to align their solutions to address the collaboration opportunity in Teams or Zoom and the PSTN switch-off.

“To ensure all options for their end customers are covered, partners need to have a collaboration option like Teams/Zoom, an alternative telephony product and a switch-off solution.”

For Cunliffe, from Pangea Connected, vendor consolidation is a key objective for many partners. He said, “In the shifting ecosystem partners don’t want to deal with multiple different companies. And with the speed of technological change and ever-growing number of solutions it’s hard for them to keep up. The challenge for vendors and service providers is to make it easier. We need to concentrate on creating value rather than simply revenue.

“Partners want consolidation. They want to be offered a range of options that will serve as many customers as possible, from specialists who have a strong understanding of their market.”

Sunderland, from Jola, added, “All channel participants face similar challenges. Regulatory changes are a constant. Technology changes provide risk and opportunity such as PSTN switch-off. Commercial models have shifted from capex plus opex to opex only in many cases. Customers expect and demand more such as assurances about data security and sustainability.”

Differentiation also continues to be a challenge for many channel companies. Hughes, from Evolve IP, said, “Differentiation is key to standing out in a crowded market and avoiding a race to the bottom purely on price. This is one of the biggest challenges.

“For me, some distributors need to diversify more and are a little bit late to the game in the sense of SaaS-style models, especially around hardware that could be leased and replenished over three years for example – moving away from a one-off purchase. Flexibility is key.”

From a hardware perspective, resellers are finding existing customers require less extensive deployments, so opening up new opportunities in new verticals is crucial.

Fredrik Hörnkvist, co-founder, Boom Collaboration, said, “The pandemic shook up the market and created more opportunities in more vertical markets. For traditional resellers how many phone seats are they selling today compared to five or six years ago? They need many more tools in their kit bag now.

“Equally there are many more conference room environments to consider from boardrooms to huddle rooms through to individual workstations. One size doesn’t fit all. Hardware that can transition between multiple platforms is crucial too.”

Tackling challenges

Stakeholders across the channel are responding to these challenges in various ways. This ranges from changes to partner programmes, through to offering different training for partners.

Cunliffe, from Pangea Connected, explained that just having a partner programme is not enough. Vendors must go further to ensure their partners are set up for success.

He said, “Partner programmes are important in supporting partners to find new deals in their base, win new business, and feel confident in their relationships. But it’s not enough for vendors to simply have a partner programme or offer marketing collateral. We need to take a real interest in growing our partners’ business and developing their market value. That’s why our partners have always been at the heart of our business model.

“We know it’s all about relationships, authenticity, and credibility. You can’t just incentivise sales, hand out badges or talk about partner revenue. Vendors and service providers have to build trust through transparency and being the best at what we do. We also need to leverage our alliances across the ecosystem to bring that crucial value for partners.”

Morey, from Pragma, added, “The end customer’s success story is a key objective for MSPs, and in turn, our goal is to help channel partners navigate challenges, retain customers and generate more sales. For this, MSPs need to deliver end customers with a seamless experience, such as quick onboarding and a tailored portfolio of highly relevant products and tools. Here at Pragma, we provide additional support such as marketing packs, which include email HTML templates, social media toolkits, and other marketing collateral.

“And we go even further. We recognise that technology is no longer a one-size-fits-all formula. With the increase in cloud uptake across the UK, which will only set to increase with the ISDN/PSDN switch-off on the horizon, we’ve launched a range of solutions that provide resellers with the opportunity to cross-sell products and install out-of-the-box solutions with ease. These innovative products migrate end customers to the cloud, enabling MSPs and resellers to leverage existing relationships and generate new sales.”

Sunderland, from Jola, discussed how resellers look to their suppliers for guidance. He said, “I think resellers really look to their suppliers to guide them through the changing landscape. In our case, we specialise in mobile data. The PSTN switch-off has created a huge opportunity, but no one service and no single network solves all the problems that the PSTN switch-off causes.

“We work with resellers to look at their customers so that we can recommend the right solution for each type of customer that any of our resellers deal with. Then we do the sales training, help them with their marketing and provide them with the confidence that what they’re selling is compliant and secure.

Hörnkvist, from Boom Collaboration, said, “It’s important to work with manufacturers that understand the market and the challenges resellers face. It’s about opening customers’ eyes to the power of the latest technology.”

He gave the example of the user experience improvements that can be delivered with the addition of a webcam. He said, “Showing how a simple webcam compared to a camera on a laptop can massively enhance the user experience, is one easy example. Equally there’s often a misconception that video bars are suitable for all room environments just because they are an all-in-one device. Sometimes optical camera zoom and expandable audio are required.”

For Sinnott, from Enreach for Service Providers, there is plenty of room for optimism despite the shifts in the market. He said, “While the current market situation can seem daunting, it is also a time of huge opportunity. Channel companies who position themselves as an asset to their business customers, who not only add value but continually reinforce and demonstrate that value, will be the winners. Ways in which they can achieve that include more education for their customers, and focusing on more tangible business outcomes.”

Fletcher, from Gradwell Communications, added, “With a changing market comes opportunity. If channel partners can monetise large industry trends, like the Teams and the switch-off opportunity, they can take advantage and not be left behind. Vendors can effectively support the channel by providing packaged solutions that address these market trends, providing competitive advantage and better commercials for the end customer.”

Staying competitive

One issue the channel will have to content with is the reality that many businesses are looking to reduce the number of suppliers they work with. Fletcher, from Gradwell Communications, said, “The evolving channel landscape provides end customers an opportunity to consolidate suppliers. In the past, they may have had separate suppliers for desktop support and for telephony, but the evolving landscape means they can reduce complexity and have one supplier providing a range of IT and communication services.

“The growth of the channel and recent trends means that end customers have more choice than ever before. This can result in more complex deal cycles but as a result, they are seeing more competitive commercials and opportunities for consolidation.”

Sinnott, from Enreach for Service Providers, agreed that better choice is a key benefit for end customers. He said, “The evolving channel is extremely good news for end customers, because channel providers are having to become easier to work with, offer more choice, and compete in a crowded market. End users are advised to take a hard look at their existing providers, and if they are not moving with the times, such as offering more comprehensive solutions, perhaps it is time to move on.”

The increased understanding and access to artificial intelligence will also make its mark on the Channel. Tony Martino, CEO, Tollring, expects AI to help businesses make the most of the data available to them. He said, “The latest analytics equipped with AI and automation will enable the channel to deliver easy access and aggregate previously siloed data. By providing AI intelligence to multiple data sets, they will become a valued partner, revealing insights that are beyond what is currently available.

“With an understanding of patterns, applying context and knowledge of a customer’s business, alongside multiple sources of information, the channel can help their customers gain a much greater understanding of operational elements and how to ensure the customer experience is maintained.”

To stay competitive as the ecosystem evolves, channel companies must be strategic and keep an eye on the long-term. Cunliffe, from Pangea Connected, said, “The word seismic is often overused. But when we’re talking about the Channel it perfectly describes the changes we’re seeing. We need to meet those challenges and opportunities with flexibility, confidence, and long-term strategic thinking.”

This market report appeared in our January 2024 print issue. You can read the magazine in full here.