Disruption From The Cloud: Opportunities And Challenges For SMB Channel Partners

NEW YORK(BUSINESS WIRE) The rapid growth of cloud computing is making it much easier for SMB channel partners to provide a broader range of offerings on a 24/7 basis at a lower cost and with fewer IT staff. These offerings include services such as SaaS and managed IT services. 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.

"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," says Anil Miglani, SVP of IT Infrastructure Research at AMI-Partners. In response to this interest, local channel partners have started to rapidly expand their cloud-based solutions for SMBs. "However, cloud computing cuts two ways for small SMB channel partners. It 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."

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 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. While the 90s saw consolidation in computing hardware and the last decade saw a significant consolidation in software, 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," said Miglani.

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.Related Studies

AMI's recently published "The Emerging SMB Managed IT Services Market Opportunity in North America: How Cloud Computing is Transforming the SMB IT Services Industry" provides a comprehensive overview of the rapidly evolving remote managed services market in North America from both demand-side and supply-side perspectives. The study will help business planners and marketers understand the key dynamics of this fast-growing, but still highly fragmented market in North America. It explores the emergence of new key players in the SMB IT services market, and discusses how their entry will lead to reduced opportunities for the traditional SMB channel partners.

AMI's "Routes to Market Global Model" presents detailed market sizing and forecast for different products and services sold through different types of channels (e.g. retails chains, VARs/SIs, Direct from Vendors, Service Providers and DMRs) for over thirty countries and regions worldwide. This research draws on AMI-Partners' comprehensive quarterly and annual surveys of small (1-99 employees) and medium (100-99 employees) businesses and channel partners as well as detailed discussions held with several service providers and other key players in this market. For more information about these studies, AMI-Partners, or our global SMB research, call 212-944-5100, e-mail [email protected] or visit www.ami-partners.com.