There have been many labels for the most recent waves of technology that are redefining business and society, and one of these labels is the “Fourth Industrial Revolution.” This suggests not only a drastic change in the way work is done, but a new foundational infrastructure that enables that work. Just as previous eras of industry were driven by the creation of railroads, telephone networks and power grids, the modern digital economy rests on a foundation built in three parts. First is cloud computing, a model that brings greater flexibility and control to IT activities. Second is edge computing, which extends the principles of cloud computing from a centralized location to the places where data is being captured. Finally, 5G networks provide fast and robust connections between each node. Each one of these areas on its own provides opportunity for a company to innovate; taken together, they signal a new way of thinking about IT applications. Today, most businesses likely have the greatest amount of experience with cloud computing, but that experience has still been centered around porting existing applications to a cloud provider. True transformation starts with rebuilding applications to take advantage of cloud computing’s unique properties, and this transformation will accelerate as those applications also factor in the location awareness of edge computing and the dynamic capabilities of 5G networking. Fully evolved applications will be the mechanisms for new economic activity, and IT skills will likewise evolve to support the new structure.

For most people, the changes taking place in IT infrastructure will happen behind the scenes, but there will be changes in the front-end experience as well. With mobile devices and cellular networks, there has already been a shift in the perception of where computing takes place. It is no longer confined to an office or home, but is increasingly viewed as something that can be done from any location. Even so, there is still a strong tie to a computing device. As the Internet of Things continues to grow, every imaginable object will have the potential to be a computing device, collecting data and providing new capabilities. With the wide spread of computing power, artificial intelligence will automate tasks to reduce complexity and scan the environment to understand context. The net result will be ambient computing, with activity that was once confined to a device now taking place seamlessly with minimal user interaction. For example, think of smart lighting. The first iteration of smart lighting is lighting that is connected to the Internet and can be controlled through an app. The second iteration involves manually building some sort of automation. With ambient computing, smart lighting will automate itself, recognizing when devices enter a room or operating on a schedule built through pattern recognition. This will drive behavior change, as end users can take advantage of new efficiencies but must also be aware of nasty side effects related to security or privacy. In building out new digital experiences, IT professionals and solution providers will need to think carefully about user behavior, considering new interfaces and mitigating potential downsides. The new behavior on the front end along with the substantial changes on the back end will jointly drive big change in IT support, which will continue to move from tactical maintenance to strategic enablement.

The past year has not been especially kind to blockchain and other distributed ledger technologies (DLT). Cryptocurrency values have fallen precipitously, and killer apps have not yet emerged. Other types of distributed technology, such as distributed databases or the Tor browser, leverage distributed networks to extend established architectural concepts. DLT takes things a step further, introducing an entirely new architectural approach made possible by distributed networks and cryptography. In theory, DLT provides an improved method for recording many types of digital transactions. In practice, the question remains whether those improvements will be significant enough to unseat established models. Most of the DLT focus remains on the financial sector, where a typical pattern for disruptive technology is playing out. In markets with solid financial structures, the technology is attempting to disrupt well-established mechanisms. In markets where the financial infrastructure is less stable, DLT provides a solution where none existed before. This pattern can be extended to other applications as well, and it is difficult to tell where DLT is most likely to shake things up. Certainly, there is the potential for DLT to become part of the modern digital infrastructure, where the primary value is not the ledger technology itself but the distributed apps that can be built on top. To reach this point, though, there will need to be further breakthroughs in certain aspects, such as transactional speed or the method for building consensus. IT pros and solution providers should certainly remain aware of DLT as they are keeping up with a wide range of emerging trends, although long-term there may only be targeted instances where deep skills are needed, as with other enabling technologies. DLT quickly stepped in to the spotlight as a revolutionary technology, and the coming year will continue to see a high level of activity even with the inevitable backlash that comes at this point in the hype cycle.

The concept of “stacks” is a common convention in describing how Lego-like building blocks come together to form a whole. Software stacks, such as LAMP or MEAN, or, skillsets, such as full stack developer or CompTIA Security Infrastructure Expert (CISE), often come to mind. Taking this idea one step further yields what can be characterized as stackable technologies. As the name implies, stackable technologies allow organizations to piece together components to meet an end goal. While this is not necessarily a new concept, advances in a number of areas, from API-enabled cloud platforms and containers, to modular hardware design and business process widgets, facilitate more sophisticated and more efficient stacking of technologies. This, of course, leads to greater levels of digitization and business transformation. For example, it may entail stacking technologies in a given sector, such as agtech, where drones-as-a-service may incorporate elements of hardware, computer vision, IoT, and analytics to automate crop maintenance. Or, stacking may help a business provide a more engaging and seamless customer experience through combinations of mobile pay, AR, and virtual agents. For CIOs, business leaders, or technology partners, this will mean an even greater need to connect the dots across a broad set of existing and emerging technologies.

Blockchain, AI, VR, IoT, drones. Those are but a few of the newer technologies bursting onto the scene, promising to shake up how businesses and consumers navigate their way through innumerable aspects of life and work. For the channel, how much is hype vs. reality? A little of both right now, truth be told, but in 2019 more reality and less hype will come to fore for all players in the business of emerging tech. (See Appendix for definitions, sizing, and additional information covering the information technology channel). There are really two main things for channel firms today to consider: which emerging techs fit into their business best and what resources and training are needed to ramp up technical and sales staff to effectively integrate these new wares into the business. Clearly, these are typical challenges associated with adding any new solution or skill to a portfolio, but with emerging tech categories there are some new wrinkles to consider. Many of these solutions are more akin to enabling technologies than products in their own right. Consider something like artificial intelligence. AI is often a feature baked into other products, solutions, Web sites, etc. Not being standalone, AI is a component that channel practitioners will need to weave into what they ultimately sell. A challenge, yes; but also, an opportunity. An emerging tech like AI could very well be the value-add or differentiator that closes the deal with a customer when woven into a product or solution. Working closely with emerging technologies also could lead to more channel firms developing their own intellectual property, such as custom coding to build a new solution based on an emerging tech component, a trend that CompTIA has examined over the past few years. Given these opportunities, many channel practitioners will be exiting their emerging-tech experimental phase in 2019 to move into full adoption with an eye on revenue-generation.

Today’s customers are more tech-savvy, more diverse, and more finicky than ever. From desiring seamless customer service to demanding myriad digital options for commerce, many buyers are no longer just looking for the right product, but also seeking a satisfying experience in attaining it. Apple and Amazon have been providing this for years, but it’s also a growing imperative across the IT channel, where improving customer interactions is a pathway to getting ahead. Savvy channel firms are placing more priority on how they engage digitally with customers across various platforms, how they provide customer service creatively with the most cutting-edge tools, and how they innovate their own business internally. Top of mind for the upcoming year is the idea of getting even closer to the customer. Forty-six percent of respondents in the CompTIA IT Industry Outlook 2019 study say they plan to focus on personalization in 2019. This involves tailoring experiences, content and engagement strategies to individual customer preferences. The catch word is “hyper-personalization.” This model takes the time-honored concept of segmenting your customers into specific buckets (small, medium or large-sized, for example) to the extreme. It brings marketing and engagement down to the individual level. Already widely used in the retail and content marketing industries today, hyper-personalization in the year ahead can become a differentiator for many channel firms. Data analytics reside at the heart of this approach. By using data analytics, and increasingly artificial intelligence tools, companies can provide highly personalized messaging/marketing, product/service offerings, delivery and implementation options etc. directly to that customer. Research study after research study finds that the more tailored the message, the more likely the consumer will bite.

Partner-to-partner (P2P) collaboration has always been a bit of holy grail in the channel. A way to fill skills gaps, a way to present a more comprehensive front to customers, a way to be bigger than you are. And yet for all the hype and promise, many channel-firm-to-channel-firm partnerships simply have not worked. What began as a handshake agreement to do one joint deal later fizzled when the parties skipped the due diligence needed to keep the partnerships alive. Vibrant partnerships require more than a handshake. They need to be formalized by the two parties, with specific duties, roles and accountability outlined. And then they need to be nurtured through regular communications. Looking ahead to today, there is renewed optimism about partnerships, due in large part to the expanding ecosystem of new channel players from the SaaS world eager to pair up with traditional infrastructure practitioners. In an increasingly applications-centric world, infrastructure companies that comprise the older base of the channel are needing to fill skills gaps in software to appeal to customers. Likewise, newer SaaS firms often lack hardware, networking, and security acumen. Short of hiring new staff and taking on new disciplines, partnerships are a good idea. Nearly two thirds of infrastructure channel firms reported partnering in the last year with a SaaS company, ISV, or vertical industry applications specialist, according to CompTIA’s 7th State of the Channel research. Of that group, nearly 6 in 10 said they have had a positive experience doing so. The benefits, they contend, are expanded business opportunities and narrowed skills gaps, especially in certain technology disciplines like data analytics where a lack of skill has held the channel back from penetrating enterprise accounts. These partnerships are not exclusive to SaaS and other software providers. Today, non-core technology entities such as law firms, accounting firms, digital marketers, consultants, and even consumer goods companies (think P&G, IKEA, Kohler…) are offering or influencing tech services as well. While clearly these new entrants could be seen as competitors, they also could help traditional solution providers gain a foothold into vertical-industry specialization.

No surprise, the IT industry’s tight labor market and tech skills gap challenges continue unabated. In fact, it’s not just a problem for the technology industry, but one that is affecting most every industry in the economy. Consider that the U.S. unemployment rate for IT occupations stands at approximately 2.1 percent, nearly half the national unemployment rate (a pattern that holds for many countries and regions of the world). If you have job openings at your company, especially for disciplines around emerging technologies, data analytics, application development and the like, finding and retaining workers has likely been tough-going (see Tech Workforce section of this report). But while the tech-labor shortage remains a challenge, it also has sparked some creative thinking. Take tech giants Apple, Google and IBM, for example. These companies no longer require a four-year college degree for many of their positions, including those in some technical roles. Loosening up this age-old requirement opens the doors for thousands of potential hires. And it is recognition that many of the skills required for a career in tech can be acquired via alternatives to the four-year academic path. There’s self-learning, community college enrollment, and on-the-job training, among other valuable routes to a career in tech. Case in point: many employers have stepped up efforts to help existing employees pursue IT certifications and other professional development credentials as a way to offset the lack of external candidates for jobs in newer skills areas. Other companies have put their weight behind “knowledge-sharing” or mentoring programs that are less formal than classroom retraining. Lunch-and-learns conducted by older employees to newer ones are one example. The practice of having Gen Y and Gen Z-age workers create videos about new technologies, tools and approaches is also gaining in popularity within organizations. Likewise, using online outlets such as YouTube and customized podcasts is another means of providing workers avenues to retrain in a self-paced fashion. These approaches are especially critical to channel partners contending with aging workforces. Relatedly, experimentation with the traditional apprenticeship model is seeking to provide new avenues for young people and employers to develop the right mix of hard skills, soft skills, and on-the-job experience. Lastly, it shouldn’t take a tight labor market to prompt tech companies to review their approaches to expanding the pipeline to boost the numbers of those under-represented in the industry. While there are positive examples of efforts to increase gender and ethnic diversity, there is still much work to be done.

While the dire warnings of “the robots are coming for our jobs” tend to draw the headlines, the reality of the situation is far more nuanced. Automating technologies has undoubtedly displaced segments of workers through substitution. This represents one end of the human-technology continuum; with the other end being workers using tools where technology plays a passive role (think email or traditional spreadsheets). Between these two endpoints sits a hybrid model whereby humans leverage and act on technology; and intelligent technology proactively does the same to workers. The underlying assumption with this model is the recognition that humans and intelligent technologies will always have strengths and weaknesses, much like any team. In practice, these digital-human models may take many forms. In industrial settings, collaboration robots (co-bot) may work hand-in-hand with humans, both responding to instructions, but also acting independently based on stimuli and objective. Across just about every knowledge worker occupation (e.g. physicians, sales reps, teachers, accountants, project managers etc.), the potential exists to deploy intelligent technologies to take on mundane tasks, and increasingly higher-level functions, such as predictive modeling, scenario analysis, or even serving as a type of personal coach. The consultancy McKinsey & Company estimates 6 in 10 occupations – among over 800 evaluated, have at least 30% of their job tasks that could potentially be automated, which points to the far-reaching impact of digital-human work models. This will, of course, require ongoing trial and error to optimize work processes, as well as investments in training for both workers and machines.

From the global economy to everyday activities, technology is changing the world. However, for those working in technology, this is not a chance to simply claim victory and reap rewards. Changes at the scale made possible by technology will inevitably cause ripple effects. Those effects have been coming to light over the past year, from security and privacy incidents to AI bias to technology that is not quite ready for prime time. A negative perception of the technology industry could lead to many different scenarios, from increased government regulation to lower customer confidence. The answer is not to place barriers in the way of technical progress, but to responsibly take action that allows continued growth while accounting for potential missteps. The business of technology has typically focused on individual solutions: hardware for IT operations or applications that serve a specific business purpose. As there is a shift to a broader system mindset, there is the opportunity—and the obligation—to consider the full extent of the system being implemented. Hardware choices are not just about productivity and cost; they are also about environmental impact. Data management is not just about storage and analytics; it is also about privacy and transparency. While these big-picture issues have typically been the concern of a CIO, everyday technology professionals will now be expanding their expertise from hard-core technical skills to include cross-departmental collaboration and strategic business thinking. This broader skill set will allow tech pros to drive conversations around unintended consequences. In today’s landscape, technology may sometimes be cast in a negative light, but the tech industry itself will learn from the past and set the course for a prosperous and conscientious future.

The digital transformation of “low tech” encompasses a number of interrelated sub-trends. The Moore’s Law effect of more powerful sensors and components at ever-lower prices has contributed to the fast-growing expansion of the internet of things (IoT) footprint. Through refinements to standards and protocols, along with advances in interoperability, technologies are increasingly out-of-the-box ready to deploy, allowing for ease of experimentation. Taken together, more technology is finding its way into what could be characterized as “low tech” business activities or occupations. To clarify, low tech doesn’t necessarily mean low skill or lacking in sophistication, but rather, up until recently, there hasn’t been a need or justification for a heavy-tech presence. Sectors that fit this description may include restaurants, farming, delivery of goods, building management, and environmental management, just to name a few. More specifically, consider how sensors, data, AI, and robotics process automation (RPA) have the potential to impact the entire chain from the growing of food, to the preparation of food, to the delivery of food. On the workforce front, according to a study from the Brookings Institute on the digitalization of the workforce, occupations classified as low- or medium skill have seen a dramatic jump in the transition to digital skills. Occupations such as roofers, carpenters, landscapers, drivers, personal aides, or various types of trades and technicians, are steadily incorporating more technologies and the corresponding digital skills. With the pervasive focus on data coupled with the growth of AI and everything-as-a-service models, the rate and scope of change will likely accelerate. This does, however, raise a number of questions in the debate over the meaning of value and solving a true problem versus applying technology for technology’s sake. Potential adoption inhibitors such as resistance to change, resource constraints, digital divides, and skills gaps will factor heavily into the equation as well.

The ingredients of innovation have never been more accessible. With little more than a broadband connection and a credit card, a startup can spin up powerful, scalable compute and storage capacity with minimal investment. Add in open source code, stackable technologies, talent marketplaces, and creative financing and the ingredients are all there for innovation to flourish. The data bear this out as tech hubs have sprouted up across the globe (think Toronto, Nairobi, Budapest, Singapore, Stockholm, Dubai, and Sao Paulo, to name just a few). While Silicon Valley and other U.S. cities remain dominant players, their share of the total “innovation pie” is shrinking due to accelerating growth in markets around the world. This means the next breakthrough in fintech, smart cities, AI, robotics, quantum computing, or ‘to-be-determined’ could occur in any number of global tech hubs. Countries looking to leapfrog ahead increasingly pursue efforts to enhance their appeal, which typically starts with building the most tech-savvy workforce possible. Other efforts may revolve around support for R&D, public-private partnerships that facilitate the efficient transfer and deployment of technology, or targeted innovation policies. Lastly, factors such as livability, affordability, and openness cannot be overlooked when the competition for talent extends beyond borders. As a counterpoint, digital divides and “winner-take-all” market concentrations continue to be problematic and must be addressed to ensure long-term economic vibrancy.

The critical difference between today’s IT and the IT of 10 or 20 years ago is the degree to which technology is being used to drive the strategic goals of a business. Certainly, there has always been some mix of tactics and strategy in the directive of any IT function, with that mix varying based on the size of the business, the vertical industry, or the attitudes of upper management. But the shift towards strategy is a general phenomenon that has affected all businesses and driven a new paradigm.

It is an oversimplification to say that IT was ever purely tactical, but that model helps illustrate the organizational perception of IT through much of its history. In this traditional viewpoint, corporate goals were considered the domain of the business units. Getting product to market and driving customer satisfaction was the purview of the sales team. Geographic expansion rested on the shoulders of the operations team. In turn, the business units relied on the IT function to provide support that allowed them to perform their jobs with greater efficiency. Constructing a technical foundation, delivering the right endpoint tools, and troubleshooting user issues were all important tasks within a company, but primarily to the extent that they drove productivity. IT was often viewed as a cost center, striving to deliver a specific level of service within the lowest budget possible.

In contrast, modern IT has expanded to more explicitly serve a dual purpose. Along with the tactical support work that continues to be a requirement, IT now has a role to play in directly driving strategic objectives. Customer acquisition happens on digital platforms. Brand awareness is built through social media. Market share is gained through omnichannel experiences. These initiatives are not achieved simply by building programs on top of technology, but by using technology as the primary mechanism for success.

Expansion into a more strategic role creates two new types of interaction for the IT team. The first is the direct connection to business objectives. This brings IT into upper-level organizational discussions, where requirements are broader and more abstract. Rather than receiving a request that has been funneled through business units and may map to an individual application, IT must consider the overall needs of the business and construct systems that address many concerns simultaneously. As an example, a traditional request may have been “the sales team needs a tool that provides more robust information on customers,” and a more current request may be “the business needs consolidated insights into our customer base so we can plan future products.”

The second new interaction is a partnering relationship with business units. In the past, the relationship was primarily one of support. Now the IT team is working alongside the business units as they build systems together or as the IT team guides technology procured by the line of business. With this activity happening at a level below the overall strategic direction, the challenge here is in building consensus around tradeoffs. This requires some communication of technical details to the business unit, and it also requires the IT team to build knowledge around line of business priorities.

Recent CompTIA research confirms the shift towards more balance between tactical IT and strategic IT. When asked about the role of technology within business, the top response is fairly traditional: “Technology enables our business processes” (43% of companies surveyed strongly agree with that statement). However, the next three responses are all broader in nature: “We are using technology to drive our business outcomes” (39% strongly agree), “The technology function plays a critical role in strategic planning” (36% strongly agree), and “We are redefining our business thanks to technology” (34% strongly agree).

Within large organizations, the images above primarily represent internal resources. But most companies in the SMB space rely on a mix of internal resources and third-party support for their IT function. The concept is the same, though—a shift towards strategic thinking drives changes not only to the structure and role of an internal IT team, but also to the nature of relationships with outside partners. These partners may be asked to support corporate goals and provide input to the planning process, which may drive companies to broaden their horizons as they consider their partner ecosystem.

It must be noted that the diagram depicting a modern view of enterprise technology is not drawn to scale. While the role of IT has expanded to include a larger strategic component, IT teams have not usually grown at the same rate. This presents a unique challenge for CIOs and other individuals responsible for technology. Without significant resource growth, they not only need to add specialized technical skills, but also need to build a new operational model.

Technology is a crowded market today, leaving those in the business of tech scouting for every opportunity to differentiate themselves from the fray. This is especially true as the ranks of the channel expand to more non-traditional players that possess new sets of skills, different vendor partners and/or routes to market. One approach, though not new, is gaining steam: the pursuit of a vertical industry specialization. Focusing on a specific industry allows channel firms to move beyond horizontal solutions to become more granular in what they do; in effect, attaining know-it-all status in a niche market such as healthcare, retail, manufacturing and beyond.

Plus, customers love it. Finally, their tech providers are speaking their specific business language. That language, at its core, flows from applications’ expertise, which is key to a vertical specialty. Most basic infrastructure engagements – devices, networking, security and other hardware – are repeatable; it’s the same sales and implementation process whether you are dealing with a small doctor’s office, a car dealership or a manufacturing plant. But with verticals, it is about understanding the software, all of those specific-use applications that pertain to the industry in question. That will earn you true vertical street cred.

Applications-specific vertical expertise fits well in today’s cloud-based software world. Many cloud-based ISVs are developing discrete applications tied to specific industries. These are often small firms lacking a largescale sales operation and eager to grow. As a result, many are beginning to experiment with indirect channel partners to grow their footprint and penetrate various customers segments.

All respondents in CompTIA’s 7th State of the Channel study reported at least some vertical industry work within their business, with three quarters describing that work as important. Of that 75%, 4 in 10 deemed their vertical business as very important, which is a critical distinction. It is most likely this group that has made a concerted effort to make one or more vertical industries a strategic focus and a significant source of revenue. It’s important to note that many respondents that report doing vertical work may only be selling horizontal infrastructure solutions to a cluster of customers in the same industry. This is not the same as becoming an expert in the applications and business processes that an individual vertical such as retail requires. That level of expertise is what truly comprises vertical industry focus and is what many ISVs, vendors and customers are seeking in their channel partners.

It needs noting that vertical specialization is not the simplest path to pursue successfully. Breaking into a specific industry, mastering the vernacular along with niche applications and processes takes time and investment. It’s no wonder that 64% of channel firms said technical specialization is a higher priority for them than vertical specialization (36%). Technical acumen is the comfort zone for the channel after all. But vertical success is a path to profitability, one that depends heavily on acquiring specific business consulting skills as well as applications’ acumen.