State of the Channel Survey 2023: Channel Pros Remain Optimistic Despite Revenue Growth Slowdown and Managed Services Transition Struggles

Channel Pro has released its State of the Channel Survey 2023.    Quoting the analysis:

Revenue and profit growth slowed somewhat in 2022, but channel pros are still doing well overall. Last year, 38% of channel firms witnessed a rise in revenues, down slightly from the 40% who saw revenue growth in 2021, while 45% saw little change and only 18% witnessed a decline in revenues. Not surprisingly, profits tracked at nearly equal levels; 37% grew their bottom lines, down slightly from 42% the previous year.

It’s a trend that will likely continue. Altogether, 87% of respondents believe that revenues will remain stable or improve over the course of 2023. Just over half (52%) expect the number of employees to remain the same (again, up by about 8% from the previous year), while an impressive 43% are predicting a need to hire additional staff. Only 5% say that their employee count will likely drop.

And this section:

A 2022 report from Precedence Research found that the global managed services market is growing by about 12.6% annually, and it will reach US $757.1 billion by 2030.Yet, many channel pros are struggling to make this transition. Last year’s survey found that 24% of respondents earned less than 10% of their annual revenues through managed services. That number jumped to 43% in this year’s results. And only 11% earn 75% or more of their top line through monthly recurring revenue, down slightly from 16% last year. What’s more, just 34% see their revenues increasing through managed services in the year ahead, while a resounding 61% expect it to remain the same.

And

While only 9% currently earn 75% or more of their revenues through various cloud computing products and services, 39% fall into the range of 25% to 74% of their revenues deriving from managed cloud services. More telling is the fact that 40% see their share of cloud revenue growing in 2023.

Why do we care?

I’ve become less enamored of pure-play managed services offering over time.  It’s not because I don’t like recurring revenue – I do.  I’m less enthused by the services bundle included in traditional managed services.   The core set is increasingly commoditized and, more importantly, less critical to operations.     I’m not sure this data aligns with that shift, although it would be a precursor to that occurring.

That cloud shift is happening.  We’re well into it.     The two are related – there’s more consulting around cloud revenue.       I’m inclined to think we’re in the messy transition portion, so the data doesn’t line up as quickly as one might hope.