I-SIGNAL: Disruption From the Cloud

Opportunities and Challenges for SMB Channel Partners

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The great recession of the last year and a half has significantly increased SMBs’ interest in adopting various cloud-based services as they look for ways to meet their IT needs while keeping costs under control.

With this rapid growth of cloud computing have come changes in the way SMBs acquire and consume technology. Many traditional channel partners will not be successful in making the necessary transition to thrive in an “as-a-service” ICT marketplace.

As a result, SMB channel partners could lose more than 200,000 IT jobs over the next decade, according to AMI Partners’ recent Cloud Computing Research studies.

However, cloud computing cuts two ways for small SMB channel partners. It also allows them to offer new kinds of services and solutions to their SMB customers without having to incur high initial capital expenditures. But automated service delivery via the cloud will also reduce the need for internal IT staff.

New Cloud Players Bring New Threats

Compounding the diminishing job prospects for IT professionals is the fact that many new types of players are entering the market, including many with deep pockets. Some of these players—telecom service providers like AT&T and Verizon, retailers like Best Buy and Staples and vendors like Dell—are likely to offer various services directly to SMBs, cutting right into SMB channel partners’ business.

In other cases, however, vendors and distributors are likely to make it easier for the smaller SMB channel partners to offer cloud-based services by acting as aggregators and master MSPs.

Over the last 2 to 3 decades, the public perception has been that the IT industry will remain a high-growth rate area, viewing downturns (even severe ones like the post-Internet bubble crash) as ephemeral. However, high-growth industries inevitably face consolidation.

The 1990s saw consolidation in computing hardware and the last decade saw a significant consolidation in software, and the next will see consolidation in services. We have already seen some early signs of IT services job attrition at the high end of the market as a result of software automation. It is only a matter of time before this begins to affect the IT services jobs in the SMB market.

Channel Partners Must Adapt to Survive

To be sure, SMB channel partners will play a critical role in bringing cloud-based services to SMBs in the early years. However, as large companies scale up cloud-based offerings in coming years, they will make greater use of automation, reducing the need for IT staff employed by local channel partners, who have traditionally dominated SMB market spending, leading to significant attrition and consolidation in the industry.

While the channel partners will need additional sales and account management personnel to grow their business, reduction in IT staff will far outweigh growth in other jobs. As a result, AMI expects a net reduction of 200,000 - 250,000 jobs over the next decade, out of the over 1.3 million people currently employed by U.S. SMB channel partners.

FIRST ARTICLE HERE.