Solution providers are still addressing the market from a value perspective, but are having to sell more products and services to maintain and increase profitability, according to the newest report from business strategy firm and channel expert The 2112 Group.
Now in its second year, The 2112 Group’s 2014 Channel Profitability report discovers the channel is profitable, but at risk of stalling. While solution provider profitability increased marginally in 2013, the profitability of products sold through or by the channel hardware, software, managed services, cloud services and professional services all fell, some by as much as one-half over the previous year.
In 2013, the technology sector lost its crown as the most profitable industry segment to the financial services industry, which rebounded from the 2008 crash and recession. Despite a few technology vendors reporting record profits, most feel profit pressure as market prices decrease.
“2112 sees a channel in transition. Solution providers are moving to accept the new realities of cloud services that replace or complement traditional hardware and software products,” said Lawrence M. Walsh, CEO and chief analyst of The 2112 Group. “Part of the profitability challenge is natural commoditization cycles as well as increasing competition. Overall, the channel profitability trend reveals how solution providers continue to sell products over systems/solutions that have higher aggregate value.”
Walsh added,“Channel health is measured in many ways, but none is more important than partner and product profitability. Everyone in the channel value chain manufacturers, distributors and resellers benefit from an ecosystem that’s able to generate profits through the sale and support of products and services.”
In the 2014 Channel Profitability report, 2112 details:
- Redefining Channel Value
- General Channel Profitability
- Product Profitability in the Channel
> Cloud Computing
> Managed Services
> Professional Services
- Reconciling Profitability Conflicts
- Sales Cycles & Competition Trends
A complimentary summary of the 2014 Channel Profitability report is available at The 2112 Group Website.
About The 2112 Group
The 2112 Group (the2112group.com) is a business strategy firm focused on improving the performance of technology companies’ direct and indirect channels through our portfolio of market-leading products and services. We leverage proprietary intelligence with qualitative research, market analysis, tools, and enablement programs. Our industry experts approach each engagement by applying innovative solutions customized to meet the needs of our clients. By looking at the technology market from the viewpoint of vendors, partners and end users, The 2112 Group is uniquely positioned to develop go-to-market strategies that are beneficial to all parties from both a channel and enterprise perspective.