IT products may be unfashionable, but they're the still the bedrock of the channel - Canalys

Cloud services may be extremely hyped, but there is still money in traditional products, claims analyst

Partners that don't move to the cloud within five years will die; disrupt or be disrupted; services are the future - these are just some of the messages coming from vendors and industry experts, both those who are all in on cloud, or just have a smattering of cloud services on offer. Gartner claims that public cloud spending alone grew 17 per cent last year to $208.6bn (£167.4bn) and IDC reckons that by 2020, spending on off-premise IT will overtake on-prem IT spending for the first time. The hype around cloud services is tremendous, with those wedded to their traditional hardware businesses often dismissed as dinosaurs who have failed to adapt and move with the times.

But this year alone, the IT hardware space has received something of a shot in the arm. At HPE's Technical Solutions Summit in Cannes earlier this week, its EMEA vice president for channel, service provider and SMB Carlo Giorgi said that traditional product resale is a priority for the vendor, even though its services offerings continue to thrive too. And before that, Terry Betts, managing director of CCS Media, said he never gave up on selling products, which are core to his business. In global reseller giant Insight's annual results, it said that just three per cent of its $1.3bn full-year EMEA sales came from services, with 58 per cent coming from software, and 39 per cent from hardware.

It was against this backdrop that analyst Canalys released a short research note branding traditional product sales "the bedrock of the global IT channel" and an "important growth driver" for 2017.

Speaking to CRN in more detail, Canalys' chief analyst Alastair Edwards said that the industry ought to remember its traditional roots in products, because for many, it is paying the bills.

"There is a tendency to forget that we're an industry led by hype, and everyone is focusing on cloud and the shift to services, and so on," he said. "On one hand, there is clearly a transition in the market that has massive implications for that legacy business the channel has relied on for growth. And particular areas such as storage and PCs went through a tough time last year, and particularly in 2015.

"But when you look at the results of the major channel partners in EMEA in Q4 - and not just Europe, but globally - it's important to see that the product business still represents the lion's share of most partners' [sales]. It's a big part of the business."

The buzzword of the industry at the moment is digital transformation, with vendors encouraging their partners to help their customers move to the promised land of IT services.

But Edwards pointed out that although this area of the market is growing quickly, it does not negate the need for IT products.

"[Digital transformation] requires faster, higher-capacity networks, faster servers, more processing power, greater data storage capacity and a lot of software. All these trends pull through for the product business in the channel too," he added.