CRN editor Josh Budd unpicks the big decisions resellers will have to make in 2021
The UK begins 2021 in another national lockdown. Although the channel has returned to home working for the foreseeable future, and things may feel very similar to how they did back in March 2020, there's no reason for resellers, distributors and vendors operating in the UK market to be anything but optimistic about their prospects for the year ahead.
Resellers end 2020 and start 2021 in rude health. EMEA channel partners logged their most profitable calendar year to date in 2020, according to Canalys' CEO Steve Brazier speaking at the Channels Forum last year, as COVID enabled them to reduce expenses and overheads while customer demand remained high.
With partners' bottom lines looking healthier than ever before, resellers begin 2021 with a sense of optimism.
I've spent the last few days having casual off-the-record conversations with UK reseller bosses to find out what key issues are on their radar this year - and here's what I found out.
Brexit will shape important decisions in 2021
Channel bosses have had to endure four long years of uncertainty on what the UK's future relationship with the EU will look like.
The channel begins 2021 with some reassurance as the UK government managed to clinch a last-minute trade deal.
Many hardware vendors began work on solving the great Brexit conundrum after the referendum results were announced in 2016 - with many considering bringing product into the country by air rather than by sea, or using multiple ports to enter the UK market.
But although a deal has been agreed "on paper", challenges still remain for channel partners - and particularly distributors - as to how much disruption they will face in getting goods into the UK. Any products entering the UK will undoubtedly face more paperwork and more delays, which could impact the supply chains of UK resellers and distributors.
Brexit not only matters from a supply chain perspective; it will also impact the business decisions of any channel business that wants to grow in the European market.
Only yesterday, Presidio entered the European market through closing its acquisition of Irish player Arkphire. What's striking about this acquisition is that Presidio chose to enter Europe not through the UK like its fellow US peers CDW, WWT or SHI, but from a country that is still part of the European Union.
Will Brexit mean fewer US players will choose the UK as their point of entry into the wider European market? And will UK-based firms now look to expand outside of their home market in order to continue supporting their customers in mainland Europe?
Supply chain issues rumble on
Intel's chip shortage issues have been a thorn in the channel's side for years. In 2019, Intel said that it would take longer than expected for supply to return to normal, claiming that issues could persist until Q1 2020.
But, speaking to reseller bosses, Intel supply constraints continued to be a problem even in Q4 of 2020, leaving resellers unable to keep up with demand.
Resellers are facing more supply chain disruption in 2021. The government's management of the COVID pandemic and plans to roll out a vaccine will perhaps mean goods such as IT hardware will be forced to take a backseat going through UK ports and will be met with delays at the UK border.
Meanwhile, reports have emerged that some US vendors, including most notably Apple, are moving production away from China and into neighbouring Asian countries, which could lead to further disruption for UK resellers.
Business-defining decisions on workplace culture
UK resellers and MSPs adapted to working remotely during the first national lockdown in the spring last year. Most partners are planning to bring remote working into their corporate cultures in a post COVID environment.
MSPs are growing and scaling fast. And many want to significantly grow their workforce in 2021. MSP leaders will now have to think about how far they're willing to lean towards remote working as a long-term part of their corporate identity.
Will an MSP with a sole office in London be willing to hire staff in Manchester, Edinburgh or even abroad in order to facilitate their workforce expansion? How will MSPs cope with having a highly distributed workforce where a large portion of the staff are working remotely?
If an MSP commits to hiring staff outside of its home town or city, then how will that decision affect their ability to operate once COVID restrictions come to an end?
Big infrastructure projects are back on
The UK channel got a huge boost in business in 2020 as their customers looked to buy PCs, monitors, headsets and desk chairs for their makeshift home offices.
While 2020 was all about customers finding short-term solutions for their immediate IT needs, reseller bosses believe 2021 will see a return of customers making big investments on their IT infrastructure.
Some said they're expecting hardware sales to increase this year as well as infrastructure-related services as customers restart investments in their infrastructure.
But a third lockdown in the UK will likely mean another wave of business for resellers in supplying devices for home working public sector staff.
Will the new national lockdown dampen an appetite to invest and put long-term projects on the backburner once again?
Channel consolidation to accelerate
Admittedly, mergers and acquisitions have been a staple in the UK channel for some time. But there are several signs that channel consolidation is going to accelerate sharply over the next three years.
In 2020 it was the global SIs which were the most active consolidators in the UK channel. Most notably, IBM and Cognizant acquiring NordCloud and New Signature respectively points to a trend of tech giants vying to add cloud capabilities to their businesses.
We will no doubt see more born-in-the-cloud specialists be swept up by larger partners over the next 12 months.
Meanwhile, vendors are beginning to re-evaluate their channel strategies. As technologies become more complex, vendors want to reduce the number of partners they work with in order to pull out costs within their own organisations.
As a result, legacy vendors that want to reinvent themselves as software companies will be looking to massively reduce their partner numbers in the next three years. A reseller boss said that one of their vendor partners is looking to reduce their partner base by as much as 75 per cent over the next few years.
Vendors are placing their bets on a smaller number of resellers, which will inevitably drive a wave of consolidation among its partners
And the growing interest from private equity in investing in high-performing channel firms will only contribute to this buy-and-build mentality.
Ingram Micro's $7.2bn sale to private equity firm Platinum Equity and the completion of Tech Data's $5.4bn sale to Apollo are testament to the value investors are placing in the channel at the moment.
Add that to the countless UK MSP's that are now being backed by PE firms and its clear to see the UK channel has becoming a desirable and lucrative place to be.
