There's a lot technology vendors can learn from the mind-boggling amount of cash being invested in the channel by private equity’s best and brightest. In February's cover story, Associate Editor Sarah Kuranda takes a compelling look at just how much cash is being bet on solution providers by private equity
players (more than $25 billion in 2016, an all-time high), why those big bets are being made, and how it is forever changing the channel—for the better.
Private equity players see what vendors are sometimes blind to: Namely, the channel is the best bet to take advantage of the astronomical growth in cloud services and security. They recognize the channel as trusted, independent advisers driving today’s digital transformation. They also understand the channel is driving customer demand and purchases for what amounts to a cloud industrial services revolution.
This comes even as solution providers are still far too often viewed by vendors as a necessary evil rather than an extension of their sales force and the shortest route to drive digital transformation sales gains. The channel, in fact, is often tagged with what can only be described as a Rodney Dangerfield “Get No Respect” daguerreotype.
If you want to see just how things have changed for the better, look no further than private equity powerhouse and leveraged buyout kingpin KKR making a $2 billion bet on Optiv, the security solutions superstar with broad and deep vendor relationships. That’s right, the legendary KKR with $131 billion in assets under management, sees the channel as a good security bet.
“Because the technologies are changing so quickly and because the customers need so much help, this was a really interesting place for us to make a direct investment into a channel business,” said Herald Chen, co-head of the KKR technology, media and telecommunciations team. “The value-add in this case is high.”
High indeed — especially given the channel’s ability to pick and choose the best technologies and vendors. Think of the channel as the ultimate customer advocate in a market where technology is the ultimate competitive weapon. And in a cloud market moving at blinding speed, private equity also sees the channel as a safe bet. It’s a bet on relationships, recurring revenue, vertical market expertise, business knowledge and lifelong customer relationships.
So what kind of impact is the unprecedented amount of cold hard cash making its way into the channel having on its character? It’s bringing a level of business sophistication and science that heretofore was just not part of the channel’s makeup.
Never in the history of the modern IT channel has there been more pure business brainpower focused on driving better business results. That is going to result in a stronger, faster-growing, more mature channel with more staying power.
It is also going to result in a new class of global strategic service providers with almost unimaginable technical firepower and talent. For vendors, the time to build the long-term relationships to take full advantage of that strategic service provider firepower is now. Betting on the channel is betting on growth.
Bottom line: There has never been a better time for vendors to invest in the channel.
BACKTALK: Are you betting on growth? Contact Steven Burke at firstname.lastname@example.org.