The past 12 months have been relatively stable economically, which means that resellers in the channel have been able to focus on business and the innovations bringing new opportunities in the sector, such as artificial intelligence.
And so 2023 draws to a close. For the first time in several years, it was one without a global economic shock such as pandemic or major invasion of a country, which is a relief for everyone – be they involved in the channel or not.
What it has meant is relative economic stability – there have been no dramatic spikes in prices, or major shortages of products or materials, for instance, even though economic growth in the UK has been poor, just avoiding recession. This has meant that resellers have been able to concentrate on what they are good at – selling products.
There have been numerous trends over the year, from the continuing development of videoconferencing equipment and facilities, to the advancement of artificial intelligence and its increasing number of applications for businesses and the growing threat from cybercriminals.
Over the following pages, various leaders in the sector give their opinions on the past 12 months and the major trends they have seen.
Alex Tatham, executive director, Westcoast
2023 has been tough and I would contend that it has not been a stable year economically with more than six interest rate rises, two wars, inflation, a cost of living crisis, a 6% rise in corporation tax – the only thing that it hasn’t had is a COVID lockdown. And, what is more, the latter gave the IT channel its biggest boost for 20 years – so it was inevitably going to be tough with comparatives in 2022 being so strong.
I would also contend that AI has nowhere near come of age. I am afraid we are at the top of the hype curve and still at the ‘spotty teenager phase’ well before we come of age. Business has been considerably harder in many device-related categories but excellent in some others such as software, networking and connectivity and services.
Customer demand has slowed this year – retail has been affected by the cost of living and commercial more by the scale down in headcount, tightening of budgets for new device rollouts and no big drivers of refresh. Cloud has performed well but many have made the transition already and are looking at managing their cloud costs more effectively. Customers too are changing from being VARs to MSPs and require different things from their distributors.
On the other hand, availability of networking devices has gone from 26-week lead times at the start of the year to fully available now. Excess stock of devices at the start of the year has also diminished to sensible levels. One of the biggest service demands is the ‘downgrade’ from Windows 11 to 10 to ensure devices mirror with the existing end user OS.
But here’s where the optimism comes in. Much of the above will lead to an increasingly strong 2024:
• Windows 11 will be adopted and as such will drive refresh and service requirements
• AI – more powerful devices will start shipping in the second half of 2024 and increased amounts of data storage will be required for the enormous data requirements
• Comparatives will look better
• More vendors will adopt a two-tier distribution model require an increasingly large/diverse ecosystem of channel partners – and we will have more things to sell
• Return to the office and refurbishment of offices will drive print
• Connectivity will continue to be huge driver with increased demands on the network and easier solutions (e.g. 5G)
• Further consolidation among channel partners and distributors will create opportunities for Westcoast here in the UK and in EMEA.
Plenty to be optimistic about in 2024!
Martin Ryder, Channel sales director, Northern Europe, Vertiv
2023 has had its challenges and opportunities for the channel in the UK, Ireland and Nordics. Because of the economic climate, customers have been more careful about the projects they undertake, which meant many of the ‘nice to haves’ such as new laptops, cars and phones weren’t a top priority. Therefore, the challenge for channel partners was to take the opportunity to diversify and sell broader and deeper into customers with class leading products. Partners had to work with vendors that have broad portfolios of best of breed products, great reward structures and solid partner programmes.
When it comes to critical infrastructure, one of the biggest concerns is power. Electric vehicle charging points, AI, IoT, our insatiable demand for data, all contribute to increasing pressure on the existing power infrastructure. Even short-term periods without power lead to major disruption in our lives, so ensuring continuity if or when the ‘lights go out’ is non-negotiable for most businesses and consumers.
Because of power concerns, uninterruptable power supplies (UPS) are a crucial component of any critical infrastructure environment. The bigger the need for power, the higher the likelihood that end customers need three-phase UPS to support their critical applications. According to Omdia’s UPS Hardware Market Tracker and Analysis 2022, there’s an increased demand for three-phase UPS in EMEA from markets outside of cloud, colocation and telco. These include retail, wholesale, healthcare, manufacturing and other industries. By 2026, the three-phase UPS market in EMEA is expected to grow from $1.66 billion in 2021 to $2.07 billion, a CAGR of 5.84%.
Whether it was a new deployment or a site refresh, the opportunities were (and still are) there for the channel to sell not just UPS, but a multitude of associated products and services to supply power to racks (switchgear and whitespace busbar), distribute power within (rack PDUs), cool, and manage the IT assets (KVM’s and IT management solutions). And let’s not forget the rack itself!
I am very confident about 2024. Intense, urgent demand for AI capabilities and its consequential impact on data centre densities and power demands will increase demand for critical infrastructure. Channel partners should look to find ways to work with vendors so they can help customers support the demand for AI and reduce energy consumption and greenhouse gas emissions.
Legacy facilities are ill-equipped to support widespread implementation of the high-density computing required for AI, with many lacking the required infrastructure for liquid cooling. In the coming year, more and more organisations are going to realise half-measures are insufficient and opt instead for new construction – increasingly prefabricated modular solutions that shorten deployment timelines – or large-scale retrofits that fundamentally alter their power and cooling infrastructure. Such significant changes present opportunities for the channel to provide more eco-friendly technologies and practices, including liquid cooling for AI servers, applied in concert with air cooled thermal management to support the entire data centre space.
Andrew Palmer, Enterprise Data & Cloud Solutions Group –UK channel lead, Seagate
2023 has been a more challenging year than the last, with a depressed disk drive market and profound downturn in demand, cloud inventory digestion and cautious enterprise spending amid the uncertain macroeconomic environment. Despite the challenges, we have still seen huge customer interest in the newest technologies and, in particular, high-capacity drives and self-healing and sustainable systems, which bodes well for demand in 2024.
There have been several major trends in terms of customer demand this year. We have witnessed a kind of wait-and-see mentality among many IT buyers this year, faced with the prospect of lending rate hikes that have stymied investment in new technology projects within their organisations. There has been a particularly dramatic drop in spending from public cloud providers. Elongated market correction, due to excess stock in the channel, has also led to a reduction in purchases of new hard drive equipment.
There have been diverse factors influencing 2023 trading, including an oversupply of HDDs in the channel, availability of adjacent components, more cautious demands from end users due to signs of an economic slowdown and various disruptions affecting consumer-facing markets. On a sector-specific level, this includes the writers’ strike in the media and entertainment market. Halted filming and TV projects had profound implications for industry profits and investment.
But it’s not all bleak. Investment in technology continues, including the EU’s key funding programme for research and innovation, Horizon Europe, with a budget of €95.5 billion. There have been major government tender awards for IT spending and partners announced for its ICT framework, TePAS 2, worth £12 billion.
With this in mind, we are optimistic about 2024 and well positioned to weather the near-term business climate to increase profitability and capture attractive long-term opportunities for mass capacity storage. Working hand in hand with our channel partners, the execution of our HAMR product roadmap, with 30+TB in 2024, will extend our industry leadership in areal density and improve the total cost of ownership for their customers.
Ongoing innovation such as self-healing technologies will mean we can offer customers simplified solutions that reduce e-waste and power consumption, helping them meet their sustainable targets.
Greg Jones, vice president of business development, Kaseya
While it has definitely been challenging, overall I believe 2023 has delivered for the MSP industry as a whole. Personally, for myself and Kaseya, it has been a great year. We have seen very strong growth across our partner base, and we have achieved incredible results across the business – a 30% year-on-year growth. This has a direct coloration with the MSP market as a whole; our success is an indication of what is happening in the MSP world.
Over the course of 2023, we have seen many MSPs expand into new markets and services. Cloud, security, Generative AI and machine learning have all seen huge demand, but there is still a long way to go. Also, the energy, information technology, healthcare and utilities sectors have experienced considerable growth overall. But most of all, SMBs are increasingly leaning into technology to drive growth and business efficiencies, presenting new opportunities for the channel.
In terms of influences on trading this year, the co-managed IT space and outsourcing have seen unprecedented growth in the market, far more than I was expecting. Personally, I think security failed to live up to its potential in 2023: although it has been great for many MSPs across the globe, I believe there is still money left on the table. In addition, some leading edge and bleeding edge technology has not had the focus it deserves. We still have a long way to go with AI and machine learning. They are going to revolutionise the MSP market in the next five years.
We are living in exceptional times with regards to business and technology and I believe the opportunities are endless for the MSP community. It is easy to focus on the negatives in business, but we work in an exceptional industry. I am looking forward to seeing what 2024 brings for co-managed IT and outsourcing: I think it is going to be huge.
Jamie Hughes, UK sales director, Evolve IP
2023 has been great for us, our channel partners and their customers. The main impact has been around integrations and verticalisation on an international scale. We’re also selling more hardware such as handsets and headsets as end users look to upgrade and ‘level up’ their technologies across a range of sectors, from retail to legal. The traditional handset isn’t dead! Refurbished equipment is growing too.
We work in partnership with many of the world’s biggest tech companies to provide highly scalable carrier-grade voice solutions and utilise an international platform and specialise in securely integrating unified communications, collaboration tools, voice and omnichannel contact centre solutions into the cloud. Customers want a single partner whether domestic, European or global to provide their voice services, connectivity, mobile and IT etc. This is where Evolve IP shines.
Platform stability and longevity are very important for customers. It’s a competitive market where margins are getting slimmer. Innovation is crucial too. We are a profitable and innovative business with an evolving roadmap. We’ve attracted a record number of new partners this year.
Looking forward, we are excited about 2024 and we are expecting many more opportunities ahead. With some partners already putting forward proposals for more than 15,000 users. 2023 was a great year for us and the momentum will only continue. We have many exciting things in the pipeline such as fixed mobile convergence and PCI compliance technology for example, plus a new training platform is being developed for our partners and their customers.
David Watts, senior vice president and regional managing director, UK and Ireland, TD SYNNEX
As we entered 2023, we knew that the economic conditions were going to be challenging and that was always going to have an impact. It’s been important – as always – to retain a clear focus on strategic priorities and to be flexible. I think channel companies have adapted well and that’s really helped to maintain stability.
While there has certainly been a drop in demand for certain categories of hardware, high levels of activity on cloud and security have acted as a counterbalance. End user organisations continue to invest in digital transformation and increasingly the approach now is a hybrid one. As solutions become more complex, channel businesses have realised that they can’t do it all. There is an increasing openness to forming collaborative partnerships to achieve better outcomes.
We have also seen the industry make big strides forward on ESG and I expect that to continue. Customers are starting to include requirements for carbon reduction plans and refurbished equipment in ITTs. This is a positive change that should be seen as a real opportunity to advance the circular economy.
We are cautiously optimistic about the year ahead. A recent report from CONTEXT said that distribution should start to see a return to growth in Q2. I think we will see further investment in transformation, cloud and cybersecurity. AI is playing an important role and will be a factor in driving hardware upgrades.
Neil Langridge, marketing and alliances director, e92plus
Cybersecurity has been growing strongly in 2023 – and that’s meant growth for e92plus and our partners, but also a rise in the threats and challenges for customers of every size. It’s a budget line that is difficult to shrink when belts are tightened, as cybersecurity is core to every IT project from cloud to IoT to enabling a remote workforce, meaning we’ve seen solid performance in cyber fundamentals that businesses of all size need.
Alongside that, growing investment in new areas of digitalisation such as IoT/OT and continued migration to cloud services has given rise to new, disruptive technologies and new revenue opportunities.
For channel partners, there’s regular discussion of the opportunities around services and the rise of the MSP. However, the opportunity is not just delivery, and we’re seeing partners leveraging vendor managed services to be able to scale without the constraints of their own engineers’ capacity. The need for expertise and consultancy to be able to leverage vendor integration (native, API or just data sharing) and consolidate the technology stack without losing key functionality is of huge value to customers. This has meant an associated major trend of the increasing convergence of VAR, MSP/MSSP and CSP.
There’s certainly confidence in the channel moving into 2024, due to the growth in the market size and the value that collectively we can bring to customers having to balance constrained budgets, limited internal resource and skills and an evolving threat landscape. Increasing compliance – with NIS2 and DORA due in 2024 – will add additional layers of complexity and administration, but that certainly further increases the value that channel partners, supported by VADs and vendors, can bring to the customers to define and deliver their cybersecurity strategy.
Fredrik Hörnkvist, co-founder, Boom Collaboration
2023 has been a really good year for Boom and we have experienced substantial growth through our ongoing strategic market expansion. Our customers/partners have taken advantage of the growing market for collaboration and elevated their video conferencing capabilities by strategically adding Boom solutions to their portfolio.
In terms of trends, AI has been the prevailing buzzword throughout the year, but customer demands have remained consistent. There is a continued need for robust video capabilities, excellent audio quality, simplicity and ease of use, all while avoiding being locked down to a specific collaboration platform provider. This has been key to Boom’s platform agnostic approach. Regardless of the industry, essential quality requirements are crucial.
In our sector with workplace collaboration technology top of mind, the interplay between returning to the office, adopting remote work, and embracing hybrid models has been a profound influence this year. Balancing productivity with employee engagement and happiness are paramount and certainly influence decision making.
We are highly confident in the channel’s role as we venture into 2024. We see a significant impact in educating and supporting the evolving landscape of workplace technology, education, healthcare and many other sectors embracing video collaboration technologies. The channel remains key in navigating these transformations.
Rachel Rothwell, senior regional director, UK and Ireland, Zyxel Networks
The past year was, overall, just about what we expected. There were some real challenges, but we did see some positives. Interest in managed services continued to rise and we’ve seen more partners adopting our Nebula platform and taking the opportunity to get themselves established as MSPs. We will be looking to build further on that and help those partner grow in 2024.
Sales of WiFi and security gateways have been better than we expected they might be at the start of the year, and small multi-gig switches have also been popular – especially among SMBs.
We expect to see a distinct improvement in market conditions in 2024, but I think we may need to be patient as it could take time for confidence to return. Once it does, we expect to see much of the investment that is needed and has been held back in the past year, released.
For partners, Q1 of 2024 is an ideal time to start talking to customers about their plans and sowing the seeds of growth. There is a lot to talk about – WiFi 7, new cybersecurity products now coming to market, switching to managed services, and ensuring the network has the throughput needed to support hybrid working.
We can also see good opportunities emerging in some vertical sectors, where there is a need for businesses to provide faster, more reliable wireless connectivity to guests. More investment is needed in hotels and guest houses, and in the growing number of coffee houses, restaurants and bars, and smaller independent retailers that are now starting to take over the high street. There is also good potential in education, where further investment in infrastructure and security is certainly needed, but budgets are tighter than ever.
Miguel Rodriguez, managing director, SYNAXON Hub
Of course, 2023 was a difficult year in some ways, but, by and large, resellers have simply got on with the job of meeting the needs of their customers. We are quietly confident that 2024 will be considerably better. The channel and IT generally has been in a period of transition over these last two years – moving further towards an as-a-service approach, migrating workloads to the cloud, and embracing managed services. That’s going to continue and, in my view, accelerate in 2024.
The growing dependency on technology means that end customers and partners now need to work together much more closely – and partners in turn, need their suppliers to support them in the right way. We’ll be looking to do that with our pre-defined managed services and DaaS offerings and we see good potential for growth in this area.
“At the same time, we should not forget that to make use of any IT system – cloud or on-premise – you need a way to access and use apps and services. While hardware sales in the channel overall were down last year, we saw significant growth in our SYNAXON Hub business. We expect to see that grow even more in 2024 as businesses release the purse strings and upgrade to the latest technologies.
Being able to source the right products at the right time and at competitive prices will be important. We’ve seen significant organic growth in usage of our EGIS stock checking and order management system in this past year. The data is personalised to its users, so they see their own live pricing that’s available from each distributor. That makes a real difference. I think partners are now looking harder at how they can automate processes and take costs out of their business, while continuing to get the best pricing and availability across all distributors, and I think we will see them move further in this direction in 2024.
