Costs across the IT channel are rising in 2026 on every line of the price list, hardware, software and security alike, and the fix is the same as it has always been: sell more, and sell more profitably. The difference this time is that the money to do it is already sitting in vendor MDF and co-op pots, largely unclaimed.
Why are IT channel costs rising in 2026?
Pick any point in recent history and the elephant in the room is the same one: costs are going up. What is different this year is that it is coming from every direction at once.
On the hardware side, memory and storage supply has been pulled towards AI data centres and the shortage is now feeding straight into list prices. Confirmed increases this year cover Cisco, HPE, HP Inc., Dell, Lenovo and Eaton, widely reported at 10 to 15% on affected kit and more on memory-heavy servers.
Software has moved just as hard. Microsoft raised commercial Microsoft 365 list prices on 1 July 2026 across most Business, Enterprise and Frontline plans, with increases ranging from 5% on E5 to 43% on some Frontline configurations, and that landed on customers who had already lost Enterprise Agreement volume discounts in November 2025. From 1 October a further 5% cost-of-capital uplift applies to annual-term CSP software subscriptions billed monthly, covering Windows Server, SQL Server, CALs and System Center. Broadcom’s move of VMware customers from perpetual licences to subscriptions has produced effective increases of 200 to 600% for some accounts.
Cyber has not been spared. Sophos applied a flat 10% increase to XGS firewall hardware and the subscriptions attached to it from 1 July 2026, and the CrowdStrike, Palo Alto and Fortinet renewals I hear about from partners are all landing higher than the ones they replaced.
I have spoken to several of the large distributors in recent weeks and the message is consistent across all three categories. Component costs, licensing changes, freight, the geopolitical picture and the usual business pressures are stacking up together, and the short to medium term prognosis is that it gets worse before it gets better.
What does that mean for MSPs and their customers?
An end user who budgeted £300k for cyber and licensing based on last year’s spend will not get last year’s estate for that money this year. The Microsoft renewal alone eats a chunk of it before a single new project is funded. So the MSP has a problem, the distributor has a problem, and the vendor has a problem. Nobody can talk the cost back down. The only way through is to create more opportunities, generate more end-user leads and close more deals at a margin that survives the price list.
Why is MDF the lever most of the channel ignores?
Because it is treated as a bolt-on rather than a strategy, and the numbers on how badly it is used are eye-watering. MDF makes up nearly half of the average vendor’s channel marketing budget, yet around 60% of it goes unused every quarter, and 43% of partners use less than half of what they are allotted. That figure originates with a partner-software vendor, so treat it as directional rather than precise, but the reasons funds lapse are well understood: pre-approval cycles that drag, eligibility rules that read like tax code, and partners who give up on the process.
The pattern I see is the same one whether the vendor sells servers, licences or security subscriptions. The vendor hands over money to do X, the MSP does not fully understand X, does not have the people to deliver it, or cannot pre-fund it while waiting on reimbursement, so the money sits there.
Part of the reason it sits there is that nobody has put a number on what it could produce. That is fixable. We published a LinkedIn outreach benchmark for the IT channel in August, built on more than a hundred live campaigns for technology vendors, distributors and MSPs across the first half of 2026. It shows what a campaign of a given size should return in connections, conversations and confirmed leads, which titles and industries respond, and where in a message sequence the leads actually come from. It gives a partner a figure to put in front of a vendor, and a vendor a figure to hold a partner to.
One finding from it is worth flagging here because it explains why so much co-op activity disappoints: the leads come late in the sequence, from the follow-ups rather than the opening message. Most MDF-funded activity is a single event, a single mailer or a single month of ads, and stops before the money starts working. There is supporting evidence from the vendor side too: partners who receive ready-to-launch campaign kits use MDF at roughly twice the rate of those who have to build campaigns from scratch.
That is the hidden advantage. If you are a vendor or a distributor, this is the moment to properly enable partners to spend the funds on activity that runs long enough to convert, rather than lecturing them about utilisation. The direction of travel supports it: Forrester’s 2026 Partner Ecosystem Marketing survey, published this week, finds partner incentive strategies becoming broader and increasingly tied to business outcomes.
Frequently asked questions
How much MDF goes unused in the IT channel?
The most-quoted industry figure is that around 60% of allocated MDF goes unclaimed each quarter, with roughly four in ten partners using less than half of their allocation. That figure comes from a partner-software vendor, so it is directional, but surveys in the space consistently land between 40 and 60% utilisation.
Which IT vendors have raised prices in 2026?
Hardware increases have been confirmed by Cisco, HPE, HP Inc., Dell, Lenovo and Eaton. Microsoft raised Microsoft 365 list prices on 1 July 2026 and adds a 5% uplift to monthly-billed CSP software subscriptions from 1 October. Sophos raised XGS firewall and subscription prices by 10% in July, and Broadcom’s VMware subscription model continues to push virtualisation costs up.
What is the fastest way to improve MDF utilisation?
Give partners something they can run rather than a budget line. Pre-built campaigns with copy, targeting and reporting already in place are used at about twice the rate of funds that require the partner to design the activity, and a campaign that runs through its full follow-up sequence captures the replies most likely to become leads.
David McCullough
David McCullough is co-founder of Visibility Wins
