The UK's top 35 comms resellers raked in collective revenues of £2.01bn last year.
That's according to CRN's inaugural Comms Reseller Report, which ranks the 35 largest specialist comms VARs on CRN's radar by revenue and examines the trends affecting their businesses.
Collectively, they banked operating profits of £39.3m on revenues that rose 11.6 per cent to £2.01bn in their most recent financial years on record, and saw headcount rise by over 1,000 year on year to nearly 10,500 staff.
The full report, which profiles each of the 35 leading outfits (see bottom for a snippet) is available here to subscribers of CRN's market intelligence service, CRN Essential.
Here we round up six key takeaways from the report.
1. The comms channel is on a journey of reinvention
Comms VARs have spent recent years transforming themselves from mobile or PBX resellers into end-to-end comms, cloud and IT services providers. This journey is best summed up by market giant Daisy, which - through a string of acquisitions including Phoenix IT and Alternative Networks - has moved rapidly beyond its roots as an SMB telecoms provider to become a £700m comms, cloud and IT services powerhouse. But the pattern is being repeated across the market, including at Elite Group, Olive, Charterhouse, G3 Comms, Solar and Excalibur.
2. Those who can't make the change are selling up
Not all resellers in the comms space have been willing - or able - to make the increased levels of investment needed to remain relevant in the market.
This has led many owners to give up the ghost, and sell up to a more ambitious competitor. More legacy players will come to this conclusion in the coming years as the convergence trend accelerates, which will continue to drive feverish M&A activity in the sector.
"Everyone has had to take a hard look at what they do as a business, and some have said ‘actually, I don't want to go through the pain of evolving into a multi-service solution provider," Rob Sims, director of Elite Group (pictured), says in the report.
3. Top 35's revenue growth is an illusion
The top 35 comms resellers grew their collective revenue 11.6 per cent to £2.01bn in their last financial years on record. Although that sounds pretty impressive, most - if not all - of that growth can be attributed to consolidation, with an M&A frenzy artificially boosting the top lines of about half of the companies in this report.
4. Comms resellers are losing their margin advantage
Margins associated with traditional comms products are higher than in IT, due to the lower cost of service involved, but this advantage is eroding as the convergence trend hits home. At 3.9 per cent, operating profit margins are now in line with the wider Top 250 UK IT resellers. Although comms resellers are having to broaden their offerings, this is sometimes having a negative impact on their bottom lines.
5. Avaya's woes have taken their toll
Many of the 35 providers in this report count Avaya as their largest technology partner. Although Avaya insists its Chapter 11 bankruptcy was about restructuring its balance sheet, rather than an issue of solvency, its partners felt considerable pain as a result of its financial woes.
Some reported a slowdown in new Avaya business last year, with others complaining that it affected their margins. The vendor has a lot of work to do to win back channel hearts and minds in 2018.
"I think there was a lot of concern around further investing in Avaya systems, and certainly we never saw many new sales during the period they were in administration," John Whitty (pictured), CEO of Solar, says in the report.
6. Pockets of growth are emerging
The comms market may be flat, but the rise of new technologies and delivery models is providing pockets of growth for resellers. Unified-communications-as-a-service is one obvious hotspot, with SD-WAN also gathering pace.
In the contact centre space, virtual assistants are currently setting the market alight.
"We are seeing significant uptake and interest from our clients looking at how they can embed virtual assistants into the customer journey," Russell Sheldon (pictured), chief commercial officer at Sabio, says in the report. "Not only in terms of efficiency gains - which is often how it's looked at - but, equally, in terms of speed of response and being able to help consumers in a more effective way."
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