The channel is being “squeezed” by the vendor community, with changes made by Microsoft alone sapping “tens of millions of dollars” from EMEA partner profitability this year.
That was one of the talking points raised by Omdia Chief Analyst Alastair Edwards as he set out the challenges and opportunities facing partners at Canalys Forums EMEA.
Following on from Informa Fellow Steve Brazier’s opening keynote, Edwards said there has been a reduction in the number of channel partners, particularly those focused on hardware.
There are currently 180,000 operating in EMEA, with the global total standing at 560,000, he said.
These partners represent 75% of an EMEA tech market worth $1.4tn this year and growing at 6%, Edwards said.
“That share is decreasing,” he said.
“We’ve seen a reduction in the share of business going to the channel, but that’s predominantly been driven by very large deals going to hyperscalers and other very large organisations direct.”
‘It’s a positive picture, but there is a risk here’
Some 67% of EMEA partners expect to grow their business this year, with over 50% believing they’ll grow by double digits, Edwards said, citing Omdia research.
That reflects a refresh cycle that will “sustain business for at least the next year”, with commercial PC refresh, datacentre upgrades, AI infrastructure, software, network upgrades and hybrid cloud all set to fuel growth, the analyst added.
“It’s a positive picture that reinforces the importance of the channel, but there is a risk here,” Edwards said.
“One of the challenges is that as we focus on this short-term opportunity, we’re not thinking about the future,” Edward said.
Partner success in the future will no longer be determined by “your ability to just transact efficiently and effectively”, Edwards claimed.
“It’s now being defined by a new set of deep complex skills, an innate understanding of how those new technologies like AI – or the data that it relies on – can transform customers’ businesses, and the ability to apply that understanding to real business value,” he said.
“Tremendous growth”
Digging further into the path to future success for partners, Edwards endorsed the AI and data M&A plays of big partners including Advania and Softcat. WWT and Computacenter are enjoying “tremendous growth” from building proof of concept labs to help customers define AI RoI, he added.
As illustrated by US VAR Presidio’s recent success in selling over $1bn via AWS Marketplace, hyperscaler marketplaces represent another “big opportunity” for partners, Edwards said.
Fleshing out recently released global figures, Edwards said the volume of third-party vendor products sold via hyperscaler marketplaces in EMEA will swell from $12bn to $51bn between 2025 and 2030. Partners will generate half of that business, he added.
“The channel is being squeezed”
Edwards encouraged the assembled partners to reduce their reliance on reselling vendor technology, meanwhile.
“The channel is being squeezed by the vendor community,” he said.
“We have seen significant changes in vendor partner programmes, we’ve seen changes in go-to-market models, and we’ve seen changes in incentive programmes – and these are contributing to an impact on profitability.”
Microsoft’s well-publicised partner incentive changes alone have taken “several tens of millions of dollars” of profit out of the EMEA channel, while VMware has cut several thousand partners and concentrated incentives in new areas, Edwards said.
“What it shows is that all of us have to be less dependent on vendor-led margin and profit,” he said.
“Your business value must increasingly be determined by your customers, and not the vendors themselves.
“In an AI-led world this will be increasingly true.
“Those partners who are winning are thinking not about the next quarter or six months, but the next three to five years.”
“Competing in the morning and partnering in the afternoon”
Edwards said partner-to-partner collaboration will become a key pillar defining future partner success – a theme picked up by fellow Omdia Chief Analyst Jay McBain in his following keynote.
The number-one buying criteria among the 51% of tech buyers now born after 1982 is tech integrations, rather than support, price or brand reputation, McBain stressed.
There are now an average of seven partners surrounding each deal, he added.
“Playing well with alliances, with the hyperscalers, with the big SaaS platforms and cyber platforms, and playing well with competitors, is paramount…. competing in the morning and partnering in the afternoon,” McBain said.
“Partnering in the co-selling and co-marketing moments becomes everything.
“The companies that get this over the next 20 years are going to be the winners.”
Doug Woodburn is editor of IT Channel Oxygen
