Report finds solution providers, including hardware, software and MPS providers, saw a growth in profit last year despite “waning” profitability in five major product and service categories.
Channelnomics reported on the findings of The 2112 Group’s 2014 Channel Profitability Report, which indicated that the average solution provider saw profits of between 11 and 15 percent of gross revenue in 2013 – slightly higher than in 2012.
However, the article notes that “while solution providers are netting more money, it’s getting harder” as profitability is slowing in five of the major product and service categories; including hardware, software, managed services, cloud computing and professional services, with managed services and professional services seeing profitability fall by “as much as one-half” last year.
Lawrence M. Walsh, CEO and Chief Analyst of The 2112 Group, commented: “2112 sees a channel in transition. Solution providers are moving to accept the new realities of cloud services that replace or complement traditional hardware and software products. Part of the profitability challenge is natural commoditisation cycles as well as increasing competition. Overall, the channel profitability trend reveals how solution providers continue to sell products over systems/solutions that have higher aggregate value.”
He continued: “Channel health is measured in many ways, but none is more important than partner and product profitability. Everyone in the channel value chain — manufacturers, distributors and resellers — benefit from an ecosystem that’s able to generate profits through the sale and support of products and services.”