New Year, New Opportunities: State of the Channel 2024 Takeaways

Seeing your doctor regularly is considered a best practice. Tests will show the state of your current health and discussion about your behaviors and goals will help you create a plan of action to achieve better health. The annual CompTIA State of the Channel study is just that—a checkup that shows the health and relevance of the IT channel.

At the CompTIA Communities and Councils Forum (CCF) 2024 Carolyn April, vice president of industry research at CompTIA, shared what channel companies are telling us about the channel ecosystem, products and services, growth expectations, business dynamics and preparing for the future.

The Big Takeaways

Global technology spending is forecast to grow by 6.8% in 2024, including an 8.7% jump in spending on IT services—to $1.5 trillion, according to Gartner. That catapults the services category to the top of the spending list for the first time, eclipsing even software sales.

That focus on services, along with business training and moving in tangent with your customers top the list year. Key highlights include:

• 63% of channel firms say their business is in better shape than it was two years ago
• 49% say competition and pricing pressure are top inhibitors to revenue growth and profitability
• 46% cited training and certification as the main remedy for improving business skills
• 40% of channel firms say they participate in just zero to four partner programs
• 47% of channel firms say they will be selling generative AI solutions to their customers this year
• 38% describe their company as an expert in terms of general business acumen

The Health of the IT Channel

Examining the health of the IT channel is subjective because “healthy” means different things to different people. There are quite a few measures of health for channel companies. But one important measure is relevance. How relevant is the IT channel in terms of selling products and services?

“The number of firms that say the IT channel is relevant is about the same as it was in 2021,” April shared. “When we see the 2021 numbers and 2024 numbers looking similar, it means we’ve come out of the pandemic era and we’re officially in a post-pandemic phase right now.”

Factors driving the health—and relevancy—of the IT channel include complexity, adoption of generative artificial intelligence (AI) tools and demand for cybersecurity services. In this case, complexity is a good thing. As technology becomes more complex, customers are increasingly looking for experts and assistance.

“This creates demand,” April said. “We can help our customers figure out their AI strategy, how to deploy tools, train their workforce and remain the experts in cybersecurity.”

Are We Better Off Today?

More than half (63%) of channel companies say yes. Of course, operating in a fully post-pandemic era helps—but it doesn’t account for everything. Channel companies are also doing better because they’ve done their due diligence with best practices, transitioning their business models and doing the things that make them “growth happy.”

Perhaps one of the reasons companies are finding themselves in a better position in 2024 is the unprecedented move to selling tech services—versus tech products. When asked how they would describe their business, 38% of channel companies say they sell tech services with only 27% claiming tech products. Another 35% describe their focus as selling business solutions that include technology.

With Gartner projecting an 8.7% jump in spending in IT services for 2024, this is a huge deal for the channel.

“All of these dollars bleed downstream,” April said. “If you have pivoted to services, you’re doing the right thing. You’re following where the money is going.”

The newfound concentration on selling tech services is represented in the most popular business lines. When asked what they are selling, channel firms first cited IT solutions (65%), which includes many components—and then the services start showing up.

What Are We Selling?

• IT solutions: 65%
• General consulting services (IT or business): 52%
• Data services: 50%
• Software development services: 45%
• Cloud services: 40%
• Cybersecurity services: 38%

While April flagged just 38% selling cybersecurity services as low, she made a point to share that 51% of channel companies identify cybersecurity as the most in-demand service, followed by SaaS cloud-based subscriptions (47%) and remote network monitoring and management (41%).

Growth Happy Categories

Channel companies say that most categories with significant growth opportunities are service oriented, including cybersecurity services and automation (AI) services. Among the companies identifying as sellers of tech products, 47% predict a significant increase in managed services. April said this shows that product resellers are moving over to the MSP camp.

Among those companies describing themselves as service-based, 33% predict a significant increase in automation services. They are leveraging the fact that AI is complex in nature and customers looking to implement AI tools will need guidance and expertise.

Of the companies that identify themselves as purveyors of business solutions, 49% predict a big increase in cybersecurity revenue. April said this makes sense because this category of companies is having conversations with customers about business concerns, pain points and goals—and cybersecurity fits the bill.

Of course, there are factors that can get in the way. Top concerns of channel firms are competition and pricing (49%), global economic uncertainty (47%) and worker skills and talent shortages (42%).

“Everyone struggles with filling positions, changing their employees’ focus, elevating their game with data services, AI or cybersecurity,” April said.

Considering Business Acumen

For the first time in the history of the State of the Channel study, the nuts and bolts of running a business were considered. After all, being an entrepreneur is not for the faint of heart. We usually find ourselves thinking about our strengths, not our weaknesses, and learning on the job.

In fact, 60% of channel companies say their business skills need work in the areas like financial forecasting, budgeting financial analysis, cost control, cash flow, taxes, and legal and compliance issues.

Related Content: The CompTIA Community MSP Guidebook: Cultivating a Culture of Process Efficiency

The good news is that where there are weaknesses, channel firms are being proactive by engaging in training and certification by industry associations, peer-to-peer networking, training by vendor partners and hiring consultants to fill the gaps. But spending money to make money is still a concept that most channel firms aren’t comfortable with.

“The channel is historically very risk averse,” April said. “That often keeps channel companies the same size year after year after year. They are not willing to take the risk.”

In fact, just 23% of channel companies describe themselves as having a high risk tolerance, while 52% say they are more moderate and 22% describe themselves as cautious.

And within the business acumen conversation, comes relationships with vendor partners. In 2024, just 6% of channel companies say they are working with 20 or more vendor programs – as opposed to 8% in 2023.

“This is likely a quality versus quantity or less is more approach,” April said. “What was valuable to you in a partner program five years ago may be obsolete today.”

But fewer partners doesn’t mean you’re unhappy, it just means channel firms are being more selective. In fact, 84% of firms are satisfied with their vendor programs today versus 66% one year ago.

“The relationships aren’t fraying,” April said. “Just changing.”

Predicting the Future

The 2024 State of the Channel study shows how the IT channel is changing and how companies are changing with it to optimize their performance. Most companies that say they are in a better position today than they were two years ago, have moved with their customers to achieve that status.

Traits of Firms Performing Better Than 2 Years Ago

• 79% are employing a CFO or equivalent finance professional
• 55% plan to sell AI solutions this year
• 44% currently offer cybersecurity services as a business line
• 41% report being very satisfied with vendor relationships
• 30% are describing their risk tolerance for borrowing, investing and hiring as high

Download the 2024 State of the Channel study to explore more of the dynamics in play for today’s channel, including data on the ecosystem’s relevance and composition; challenges and opportunities; business assessments and metrics; vendor relationships and the competitive landscape.