2112 Group: North American IT Channel Forecast To Grow More Than 6 Percent In 2015

By Christine Kern, contributing writer

A report by business strategy firm The 2112 Group, the 2015 Midyear Channel Report, predicts the North America IT reseller channel will increase by at least 6 percent in 2015, as solutions providers are expanding at substantial rates even while the rest of the IT market is experiencing declines in sales, revenue, and profitability. And the study found, nearly 40 percent of solutions providers report that their businesses will increase revenue by more than 15 percent.

While analyst firm Gartner predicts that technology spending will decrease by 5.5 percent this year and Computer Economics says that U.S. IT spending will show signs of erosion, the 2112 Group report explains why there is a difference when it comes to the channel. “The global IT industry is forecast to contract in 2015 as spending slows, cloud services displace legacy infrastructure, and current fluctuations impact budgets. The IT channel — resellers and managed service providers — are increasing their revenue, though, through recurring-revenue services that build up over time. The result is growth even when the rest of the industry is facing a stall,” says Lawrence M. Walsh, CEO and chief analyst of The 2112 Group.

According to the report, managed service providers, VARs, and solutions providers are experiencing increases in sales largely as a result of the strength of their IT managed and professional services. The common recurring revenue model used by many managed services means that their revenue and profitability are accretive, bolstering growth far above the market average.

The report found:

• Average deal values are increasing over 2014 levels for nearly 50 percent of solutions providers
• Two-thirds of solutions providers say their first-half sales pace is ahead of the same period in 2014
• 70 percent of solutions providers expect 2015 profits to be at least 6 percent higher than 2014 levels
• Three-quarters of solutions providers report that full-year 2015 sales should be at least 6 percent higher than 2014, while 25 percent forecast sales growth to increase at least 15 percent.

The report also reflects challenges that may arise as a result of solution providers’ growth, including finding new customers and recruiting and retaining qualified technical talent to keep their growth momentum going.