For many resellers, the term "channel services provider" may conjure up images of screwdriver-wielding men in vans which all too often bear the logo of a competitor.
But the market for outsourced partner services has matured rapidly over the past five years, with a core group of channel-only, or at least channel-centric, players emerging that offer far more than just basic maintenance and spares.
They are the uncelebrated wingmen of the channel, wearing the resellers' T-shirts and carrying out the support, professional or managed services work they can't - or don't want to - do.
But get it right and it's a lucrative business, with Comms-care banking £3m on revenues of £20m in its last financial year and Phoenix's Partner Services arm making £7m on revenues of £114m.
The sector's rich potential was underlined last month when Daisy revealed it intends to build a £100m partner services business as it brings together three recent acquisitions in this area in the form of Servassure, NetCrowd and Indecs.
It's not hard to appreciate why the outsourced partner services model is in vogue. The recession has prompted resellers and SIs to trim their workforce to fit seasonal troughs and then back off any additional services work to third parties. Coupled with this, the recent boom in cloud and the consumerisation of IT means most can no longer supply the full array of services customers are requesting, making the partnering model a natural choice.
Lowest point of utilisation
"Since the recession, resellers have had to right-size their business and no IT provider can employ more resource than they need at the lowest utilisation point throughout the year," said Darren Liles, managing director of channel services firm Empowered SMS, which has made three acquisitions in 2014.
"They are looking to partners to support and underpin their business with ad hoc resource on demand."
The vast majority of UK resellers, SIs or outsourcing firms will back off some element of their services to a third-party provider, with Comms-care alone boasting an active database of 800 firms.
Comms-care marketing director Richard Eglon said the onset of cloud computing and the consumerisation of IT means resellers can typically no longer carry out large projects on their own and will bring in third parties around professional and managed services. Comms-care made its first ever acquisition in the summer, Platform Consultancy Services, to bolster its efforts in this area.
"That's where a lot of the success in the channel services market is coming from," Eglon (pictured) said.
"If someone wants a cloud computing solution delivered, the reseller may be able to do some elements but will bring in a third party as well. We are seeing a lot more activity away from the traditional maintenance hardware services Comms-care is known for and more requests around managed and professional services such as Microsoft Lync integration of Office 365 deployment."
The scale now required to turn a profit from providing support means even the traditional third-party maintenance market is booming, claimed Peter Titmus, co-founder of Networks First.
"It's getting to a price point where no reseller wants to do it in-house," Titmus said. "The price that can be charged for support per item has been declining since 2000 and that has never slowed down. Resellers were choosing to provide it themselves as it was relatively easy margins without huge overheads. Now the price point has moved to where it is, you need critical mass to make it work financially."
The men-in-vans stereotype is outmoded, Titmus said, with Cisco specialist Networks First now fixing 80 per cent of faults remotely rather than locally.
Channel services providers have existed in some form for decades, with the likes of Olivetti and Granada offering third-party services as a sideline to their end-user activities in the 80s and 90s.
But Eglon claimed Comms-care, and others like it, had helped define the market in its current, more clearly delineated form.
However, the market is still rife with direct and indirect-selling hybrids, with many of the UK's top resellers, including BT Engage, Maindec and CAE known to dabble in third-party services. Even some of the top channel providers, including Daisy and Phoenix, operate end-user businesses, with Eglon claiming Comms-care is one of the few to operate a genuine channel-only model.
"A lot of the channel service providers who also sell direct will assure you they can manage that, but the reality is things fall through the cracks," Eglon (pictured) said. "The feedback we've had from our channel partners is they've often developed an account with an end user, used a service provider and when that account gets larger, they find themselves in competition with them."
Daisy countered this by saying it will give a "cast-iron" guarantee that it will never compete with partners.
"We are creating a much bigger channel business and we can't do that if we slip up at any point," said Jason Spring, managing director of Daisy Partner Services.
In any case, whether the provider in question is channel-only or a hybrid isn't the be-all and end-all for resellers selecting a third-party services partner, Spring said. Who is ultimately delivering that service is also important, he claimed.
"We ensure that at least 95 per cent of our services are delivered by our full-time employees and we do compete with people who sub-contract some of those services," Spring said.
Steve Ellis, managing director of another hybrid operator, 5i, a unified comms specialist that is part of managed service provider 365ITMS, said the ability of the third-party provider in question to deliver niche skills that no one else offers is what really counts. 5i has trained 5,000 employees of Cisco and Cisco business partners across Europe on Cisco's own unified communications products, Ellis pointed out.
"The space that guys such as Comms-care are in is ultra-competitive, with skinny margins," Ellis (pictured) said. That's why everybody wants to move into the space we're in, which is providing niche higher-value services."
Adrian Spink, chief executive of Company85, an infrastructure-focused partner services firm that turns over about £10m following its acquisition of XOR last year, said his firm's policy to also sell direct causes no conflict with partners.
"We are about 75 per cent channel and 25 per cent direct with customers, but that is more in an advisory role and often generates some pull-through for our channel partners [in terms of the datacentre and storage equipment the customer buys]," he said.
But Nathan Marke, group chief technology officer at Daisy (pictured), agreed with Eglon that the outsourced service model in general will thrive as more complex cloud and Internet of Things projects requiring collaboration between multiple suppliers rise in prominence.
"No one player can deliver these projects from end to end and we believe that by having a skilled capability that is trusted by partners, they will look to us as they build out these new models."
Resellers are increasingly looking to channel service providers to not only top up the core services they provide, but also drive entirely new services into their customer base, Empowered's Liles claimed. They are also increasingly looking for partners to take a bigger share of the risk and provide outcome-based services, he added.
"The more exciting stuff we've done is where we've helped partners deliver something they didn't previously do for their customer and help them own more of the client," he explained. "Our vision is to integrate our capabilities into partners and become a virtual extension of their own capabilities. This market is in its infancy and we are all having to make our own way - I believe those of us who do this will be the ones that succeed."
Top UK channel services providers
Phoenix Partner: Revenues last year of £114m. Provides desktop and infrastructure services to SIs and outsourcing firms. Skills with vendors including Microsoft and HP.
Comms-care: Turnover set to climb from £19.6m to close to £30m in current year following acquisition of Platform Consultancy Services, which marked the support specialist's diversification into professional services market. Has around 200 staff.
Daisy Partner Services: Claims to turn over £20m. Acquisitions of NetCrowd and Indecs in 2013 added skills around networking and datacentre to supplement the core UC skills it gained through its 2009 purchase of Servassure. Employs 250 full-time engineers.
Maintel: A key player in the telecoms partner services space following this year's acquisition of Avaya reseller Proximity Communications, which owned third-party services firm APSL. Total revenues (including direct) of £31.1m in its most recent financial year.
Intact Integrated Services: Revenues last year of about £11.8m and 200 staff. Provides commercial and technical consultancy services to channel partners. Was acquired by Datatec stablemate Westcon in April.
Networks First: Expecting revenues to hit £11.5m this year. Support specialist draws 65 per cent of sales from Cisco. Recently moved back to channel-centric model following period of direct sales.
Company85: Turns over about £10m, with 75 per cent coming through partners. Spun out of Symantec in 2010 but Symantec-based services now contribute just 15 per cent of sales. Acquired assets of XOR Professional Services in 2013.
Empowered SMS: Revenues of £8.8m last year, with 70 staff and 150 SI, reseller and outsourcing customers. Has acquired three firms - Convergis, OrderWork and Neptune Consultancy - in 2014. Core skills around Microsoft, Citrix, VMware and wireless.
5i: Claims to turn over about £5m. With 200 partners, specialises in designing, implementing and supporting unified communications projects.
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