2018 predictions - IT Europa

2018 PREDICTIONS An IT Europa report

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Hampleton

1 9 SEPTEMBER 2 018 155 BISHOPSGATE, LONDON THE MANAGED SERVICES & HOSTING SUMMIT is firmly established as the leading managed services event for channel organisations. In its eighth year as a UK event, the Managed Services & Hosting Summit will examine the issues facing Managed Service Providers, hosting companies, channel partners and suppliers as they seek to add value and evolve new business models and relationships. The Managed Services & Hosting Summit – UK 2018 features conference session presentations by major industry speakers and a range of breakout sessions exploring in further detail some of the major issues impacting the development of managed services. The unique mix of high-level presentations plus the ability to meet, discuss and network with sponsors, peers and potential business partners across the industry, makes this a must attend event for any senior decision maker in the ICT channel.

WHO SHOULD ATTEND?

Delegates: Directors and senior managers of Managed Service Providers, Systems Integrators, Solution VARs, ISVs. Sponsors: Hardware & Software Vendors, Service Providers, Distributors, Hosting and Datacentre Providers, Cloud Service Providers.

2018 CONTENT

CREATING VALUE WITH MANAGED SERVICES The Managed Services and Hosting Summit UK 2018, will examine the changing role of the channel as it transitions from hardware and software supply to full IT and Cloud service provider. It will also explore the implications for sales processes and how solutions should be built, supported and expanded to create value for both MSPs and their customers.

For further information or to register, using FREE code MSHS-iteuropa please visit:

www.mshsummit.com Vendors, service providers or distributors interested in sponsorship or exhibiting opportunities please contact: Alan Norman [email protected] +44 (0)1895 454 604

Jason Holloway [email protected] +44 (0)7845 377 003

Stephen Osborne [email protected] +44 (0)1895 454 536

Peter Davies [email protected] +44 (0)2476 718 970

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INTRODUCTION The coming year will be risky, no matter what your place in the IT industry. The undercurrents of changing models in IT, more exacting customer needs, the pace of technology and introduction of new elements such as AI and advanced analytics, make this a time for strategic thinking.

There is no stand-still option; the buyers’ market is changing, the national and international economic situations are not overwhelmingly favourable, the IT environment itself is very fluid and subject to new pressures; skills and resources will continue to be in short supply. However, the rewards are there for those who get it right. This special report aims to reveal pointers and advance indicators as to the potential winners in 2018, and the paths they are taking.

Top interest areas In particular, this report looks at some key sectors and what channels should be doing to take advantage of what customers are asking for and what vendors are driving. • Distribution: Building a services business using distribution - Distributors are offering an ever-wider portfolio of products and services; we look at how smart partners are able to leverage their offerings into more business and added services. • Mergers and Acquisitions: The M&A activity in Europe has been rising steadily and there seems to be no shortage of available finance, while companies themselves have been keen to expand by acquisition in a time of limited resources, snapping up skilled smaller players. There are certain hot areas, however, and anyone setting out to be bought needs to know what the buyers are looking for and at what stage it may be best to sell. • Managed Services: Research shows that this is an area which may be the only chance for growth in the IT industry’s channel; resellers are still switching in large numbers, but the sales process and customer relationships are very different. • GDPR: May 2018 will see a fundamental shift in how security relates to companies of all types and sizes; the implications on the channel are that customers and potential clients will have a lot of new questions. It means new risk management issues for customers that channels will need to explain. • Cybersecurity: Cybersecurity is the hottest topic in both enterprises and SMBs; the tough job for the channel, especially MSPs, is staying current with threats and challenges, and finding the right language to talk to customers. • IoT: A technology with a lot of potential needs new levels of understanding of analytics and big data; will 2018 be the year this becomes mainstream, or is it still missing a key part – channel delivery?

3 IT EUROPA 2018 PREDICTIONS

EUROPEAN IT IN 2018 In Europe, there is political uncertainty even as the economies are seen as moving ahead, southern Europe in particular saw an improvement in 2017; The Russian economy has recovered from the jolts it received a few years back and its structure has become more settled. Poland, the giant of eastern Europe has made good progress and is proving a sound base from which suppliers can build out to the rest of the region. Europe cannot be isolated from the rest of the world in what The Economist says will be a “nerve-jangling year”, [‘The World In 2018’]. The publication cites various themes including North Korea’s nuclear challenge, the Brexit negotiations, China’s economic reforms and America’s mid-term elections as well as the presidential polls in Brazil and Mexico. Europe may seem to be relatively stable in spite of Brexit, politics in Germany, Russian uncertainties and Spain’s local difficulties. Looking at specifically IT activities, the Nordics are proving of great interest to data centre builders because of the natural effects of lower temperatures and expansion-minded governments who are backing an already strong infrastructure. Benelux, which has seen a wave of data centre investment in recent years looks set to continue as a natural tendency to group facilities works in its favour. France, now with a more certain economy than has been apparent for a while, is seeing rising levels of investment in IT. Among the vertical markets in Europe, the automotive and manufacturing business in Germany have been outsourcing their IT software eastwards and this is starting to yield results, particularly in vehicle data management. Just as is the case globally, manufacturers are working through their needs for more demanding applications with some expert help, through integration and outsourcing. The rise in the adoption of SaaS is a reflection of just how well these solutions are playing out in the real world.


Serge Findling, vice president of Research for IDC‘s IT Executive Programs (IEP): “For CIOs and senior information and technology (IT) executives, the challenge is to think and operate like a digital-native enterprise in the face of the emergence of platforms, innovation accelerators, machine learning, augmented skills, micro-personalization, new partnerships, and new relationships. At the same time, change continues to move from linear to exponential and from evolving to episodic and unpredictable — requiring businesses to build digitally fuelled adaptive processes, decision-making, and technology platforms to survive, let alone thrive.“

The pressures in 2018 will come from the speed of change, the ability to sell concepts and engage at a high level in the customer, and the resolution of the ongoing security crisis in enterprises of all types. A wall of technical solutions from a large number of vendors is increasing the noise level in this sector, it takes an expert to understand, reselect and merge appropriate solutions that can deliver against heightened expectations. The larger players have been finding their feet again after a number of years of disruption: HP, having sold off a lot of its business, is trying to remake itself in Europe as elsewhere globally and finding a focus for its acknowledged impressive technical abilities. Dell-EMC too is recovering its form and remaking its channel to take advantage of particular strengths in storage and in customer monitoring. Other big brands such as IBM and Microsoft have undergone major transitions which are not yet completed, once again examining the market for profitable niches.


The IT channel in Europe has seen a mix of consolidation and new entrants; the cloud effect has meant many more opportunities to form a business, unhindered by the traditional scale of investment in technology that has been needed in the pre-cloud era. This seems to have brought out numbers of new players moving across from customer organisations, or with a particular technology expertise or market niche. These are a welcome addition to a channel which is being deployed by a number of firms merging or being sold as owners remove themselves from the game after an active period of decades. A lot of the VARs are lifestyle companies waiting to retire, says Apay Obang-Oyway Director – Cloud & Software, UK and Ireland, Ingram Micro.

THE LARGER PLAYERS HAVE BEEN FINDING THEIR FEET AGAIN AFTER A NUMBER OF YEARS OF DISRUPTION: HP, HAVING SOLD OFF A LOT OF ITS BUSINESS, IS TRYING TO REMAKE ITSELF IN EUROPE

The overall forecasts for the year are promising: all the analysts, from Gartner and IDC to economic modellers are predicting more investment in IT, although they are less clear on direction and speed of adoption of some of the technologies. Technavio’s research analyst predicts the global IT spending by SMBs to grow steadily at a CAGR of close to 6% during the forecast period. The need for cost reduction and efficiency is the primary growth driver for this market. The SMB sector plays a significant role in the growth of a country’s GDP, employment, and exports. Despite its size, the sector remains plagued with many challenges. It is fragmented and unorganized, lacks support from top management, and has funding issues and supply chain inefficiencies. Also, this sector is facing global competition from developed nations. Therefore, it has become imperative for this sector to streamline processes and operations, adopt best practices, and use technology to improve the overall operational efficiency and enhance quality. Top executives of SMB units are always under pressure to shrink IT costs. Therefore, to minimize costs, SMBs are deploying low-cost IT solutions such as cloud computing that are flexible, scalable, and reliable. Its research report predicts virtualization of IT aimed at minimizing both CAPEX and OPEX of SMBs to emerge as the next big thing in the IT industry until 2020.

Traditional ICT spending (IT and telecom) is now a mature sector of the economy, as many technology markets continue to saturate and commoditise. The growth of cloud will also cannibalise traditional ICT revenues, concentrating more IT capital spending into the hands of large cloud service providers. Traditional IT spending will grow at an annual rate of 3-4% through the next five years, while telecom spending increases by approximately 1% per year, according to IDC. Above all, security spending is set to continue its upwards path. Frost & Sullivan‘s research, EMEA Managed Security Services Market, Forecast to 2021, finds that the market was valued at $4.27bn in 2016 and is expected to reach $8.26bn by 2021 at a compound annual growth rate (CAGR) of 14.1% during 2016 through to 2021.

“CUSTOMERS WANT SOLUTIONS THAT SOLVE PROBLEMS, RATHER THAN MERE ALERTS TO A POTENTIAL PROBLEM,“ SAID FROST & SULLIVAN DIGITAL TRANSFORMATION RESEARCH DIRECTOR ADRIAN DROZD. “THEREFORE, MSSPS THAT OFFER CONSULTING, PROFESSIONAL AND TECHNICAL SERVICES COULD WELL OUTPACE THE OVERALL MARKET.“

Managed Security Services Provision (MSSPs) The key to longevity and success in an agile MSSP environment is staying ahead of the competition by: • Capturing the next wave of higher-value MSS. The two growth MSS segments in the next five years are threat intelligence, and research and detection services; • Growing the midsized market segment with the right pricing strategy; • Following a customer-centric approach by delivering solutions that meet evolving demands; and • Adopting technology-led approaches to service delivery, such as unburdening tedious tasks through automation and a collaborative solution approach. “Although the media has extensively covered security breaches, many enterprises still believe that they will not be subject to targeted attacks and, hence, do not require protection against advanced threats,“ noted Drozd. “This approach to security has curtailed the adoption of MSS in the EMEA region – and is one that will doubtless change as the threat landscape evolves.“


VERTICAL MARKETS As a starting point we can take the position of the various vertical industries in 2017 and where the growth can be expected to continue:

Source: IDC‘s Western European Vertical Markets Pivot 1Q17

According to a study from IDC, IT spend in Western Europe will total $453.8bn in 2017, a 2.7% increase compared with 2016. IT spending will continue to grow at a 2.0% fiveyear CAGR through to 2021. Investments in 3rd Platform solutions and Innovation Accelerator technologies — such as augmented reality/ virtual reality (AR/VR), artificial intelligence (AI) and cognitive, robotics, 3D printing, and Internet of Things (IoT) — will drive demand as companies strive to innovate, increase customer experience, and streamline business processes. In 2017, consumer, banking, and discrete manufacturing will be the vertical markets with the biggest IT spending, accounting for over a third of overall Western European spend. IDC forecasts that retail, professional services, and telecommunications will be the fastest growing markets in 2017, and they will continue to lead in 2018. In the long term, professional services, retail, and process manufacturing will generate the fastest 2017–2021 CAGR.


“Traditional technologies such as mobility, social media, cloud, and Big Data helped companies to introduce change and move from a traditional approach to a more digitized one. With next-generation technologies, companies will go the extra mile, move one step ahead of the competition, and fully embrace digital transformation. This will be a win-win game, from which both businesses and their customers will benefit as companies introduce a more advanced approach into their businesses, optimizing processes and bringing extreme automation. On the other hand, the large amount of data that customers produce will allow companies to understand what they must focus on. This will result in more personalized products or services and increased customer satisfaction,“ said Andrea Minonne, research analyst, IDC European Industry Solutions, Customer Insight, and Analysis.

INNOVATION AREAS New growth opportunities have meanwhile emerged in the new technologies which IDC calls “Innovation Accelerators“ (IoT, cognitive AI, robotics, AR/VR, 3D printing, and nextgen security). New ICT spending from these categories will grow by 17% in 2017, and will continue to accelerate over the next five years as adoption levels surge around the world, including in emerging markets. IoT, robotics, and AR/VR in particular will come to represent a significant proportion of the overall ICT market by 2021. “The Innovation Accelerators are an important driver for the 3rd Platform, which is rapidly replacing the 2nd Platform of on-premise datacentres, devices, and software,“ says Stephen Minton, vice president in IDC‘s Customer Insights & Analysis group. “Not only does this introduce new high-growth categories like VR viewers, drones, 3D printers, and IoT solutions, but it also represents a growing shift in traditional categories like the growth of IoT servers or cognitive AI software.“


Several years ago, IDC identified a dramatic shift to the 3rd Platform of cloud, mobile, big data and analytics and social, which quickly came to dominate industry revenues. The Innovation Accelerators will drive the next wave of 3rd Platform growth, resulting in the 3rd Platform accounting for 75% of ICT spending by 2021. “The 2nd Platform is shrinking, but mature economies still have a large base of legacy infrastructure to maintain and migrate from,“ said Minton. “Emerging markets, on the other hand, are sometimes able to leapfrog 2nd Platform technologies and move straight to rapid adoption of new platforms. Asia/Pacific, for example, has emerged as a leading innovator in the growth of IoT and robotics, having already seen explosive growth in mobile over the past few years.“

2017 was a solid year, cloud will continue to play a far more prominent role in 2018, but channels may need to be bolder says Apay Obang-Oyway at Ingram Micro Cloud. “As an industry we are still shy about cloud. We need to talk about the art of the possible – the ability to explain it is lacking. Our research in 2017 included a question about the challenge to cloud – 58% of respondents said the big issue was relating cloud to their business.” 2018 infrastructure as a service and PaaS will play a dominant role in growth – it is spreading everywhere and it is the fastest growing category, according to several companies and researchers. “You are going to see lot more interesting application of AI services. A few channel partners are building value around these services and are the ones making money. If it is a commodity they will struggle,” says Apay Obang-Oyway. Partners need to go in and fully understand the customer – this means knowing what is the current standing, where they want to get to, having a plan and overall solution that gives both the right margin and stickiness. “We are seeing many partners succeeding in the cloud who are delivering this.” The skills gap is a continuing challenge and everyone is talking about this. And other future technologies - customers are asking about augmented reality, but who has the understanding of the business to deliver this? Partners will need to have this ability. “The cloud channel will be bigger in 2018; we will see security play an even bigger role, not as a negative but as a way to evaluate and manage risk.” “There will be more specialisms- we have starting to see more partners talking about the verticals they are wedded to; more newer types of new channels and different types of channel partners. I don’t know who they are, but they will be disruptive – for example it could be a bank that becomes a cloud channel provider via applications. There will certainly be newer types of partner. We are working to amplify our message; it is not business as usual – business unusual – we are a not a typical distributor – we actually have the toolkit for the digital economy for partners, and it is a very different posture.”


Apay Obang-Oyway, Director – Cloud & Software, UK and Ireland, Ingram Micro: “We are clear that we see the great opportunity that cloud represents for us and our partners. We have partners coming to us in various stages of maturity. Those who are just entering the transforming process from traditional. We have a lot of conversations with them on making the change – a lot of workshops on sales structure and strategy, marketing and operations. “So we are creating content to help the transformation – that is now evolving into a closer relationship – partners want us to go with them to an end customer and help create and close the opportunity. We are engaged far more – all the time as part of the partner organisation and wearing their hats meeting end -user customers and helping them essentially create and close opportunities.” “Everyone in the value delivery chain has a stake in this – from the vendor, distributor, partner and the end user – we all have a stake in the outcome. If the experience and the outcome and desired objective do not meet, then we have all failed. And everyone in the chain’s brand is impacted. It is a positive thing and an exciting thing.”

DISTRIBUTION - BUILDING A SERVICES BUSINESS USING DISTRIBUTION Sponsored by

CHANGES IN DISTRIBUTION Distributors are offering an ever-wider portfolio of products and services; we look at how smart partners are able to leverage their offerings into more business and added services. Moving away from logistics to wider, on-demand tools and services, we examine some key offerings from leading players and look at the high-growth, highmargin aspects, and what the channel needs to have in place to use and promote these services. Apay Obang-Oyway, “MSPs, CSPs are looking for help. We need to show how we are transforming – distributors such as Ingram Micro and others are investing heavily here, and I applaud that. As an industry we need to show that we can do this well, and there is enough room for all.” The theme of specialisation is running strongly in the global IT supply business; the level of expertise and process of getting really close to customers is meaning that channels of all types, from traditional resellers to cloud providers, are concentrating their efforts on what they do besteither from a technical or market perspective. This has created a need for others to provide the specialist services, knowledge or abilities in associated areas. Distributors, being strictly channel-only, and with an existing relationship with channels of all types, are the logical place to turn for such help. It has been the case for a number of years that distribution has supplied services, some bespoke, some from a prepared list of offerings. Most recently it is clear that this service provision has exploded, with the GTDC listing some 70+ examples ranging from technical configuration to licence management, from marketing services to finance.


Tim Curran

“The distribution industry has become instrumental in much more than just delivering technology products to the right places at the right time,“ says GTDC CEO Tim Curran. “Shipping product is no longer the mainstay. Today‘s distribution leaders bring much more to the equation through their unique, highly diversified services portfolios.” The market is driving this change in distribution and the distributors themselves are keen to take on the challenge and have been investing heavily in their services operations. Svens Dinsdorfs, CEO of ELKO, based in Riga, Latvia says: “You can’t compete with price anymore. Services are the way to differentiate yourself from other distributors and retain clients.” He sees cloud computing, sales automation, securityrelated services, machine learning and Big Data offerings as growth areas. Distribution channels are keen to grow into these service areas and have already invested heavily in the “New Distribution” model. “It’s important for distributors to be relevant, for both our vendors and customers. As markets and technologies evolve, we need to evolve at the same rate, if not faster,” adds Peter Adams, Director of Services, Europe, Tech Data.

Distributors are recognising the changes in what customers are demanding, and the accompanying changes in channels. A more sophisticated channel working toward business outcomes, using services and other partners is the logical way. The traditional reseller, or VAR is in decline, unable to compete in delivering these solutions.

David Fearne

David Fearne, Arrow ECS’s Technical Director says “Five years ago, we sold products – we talked about product A, products B and C. Two years ago we talked solutions: ‘take product A, B and C and create solution X’. Now the situation is that we need to take products and solutions and deliver business outcome Y to solve the real problems that enterprises have. “ The roles of services as an adjunct to products and solutions is clear: particularly in security, there is a crisis in resources: in the advanced economies there are some 25 million jobs open in the sector; there are still not the people and resources to keep on top of these issues. The reality is that security is hard and not sexy, he says– a lot of organisations see it as an insurance policy – vendors anxious to get product to market will not build-in the security in the depth it needs. Customer companies say they are no longer in manufacturing so much as they are technology companies, and this has security and service implications as well. The enterprises are facing huge problems – mobility for example – with security implications – to ensure the mobile device can be used securely, that it can’t be unlocked remotely, but can be managed. “The reality is that every one of those is a solution in its own right.” Hence the need for wider services in the channel.


“We have started to rebrand some of our marketing as an ‘outcome distributor’ – but producing outcomes with 120 vendors and their multiple products– one vendor alone has 16,000 SKUs is a complicated task. Making this work is a collaborative effort – between the vendors, distributors and partners, particularly vendors integrating security and working with vendors and channels.” At the Managed Hosting summit in September, GTDC European GM Peter van den Berg took part in a discussion on the need for partnership to deliver complete solutions. “Yes, distribution is in the middle of this – an average solution now requires around twenty partners. And for distribution itself, it is in the genes to partner with resellers and vendors. Ten or fifteen years ago it was pick, pack and ship; now it is a lot of services – 60..70…80 different services which they provide to the channel,” he told the audience of several hundred service providers, The other thing is ‘who owns the customer?’ he says. “One thing is clear – distribution does not – they are there to partner and there to help, but will never invoice the end user customer. It is an easy relationship to work with a distributor. And you can use what you need.”

Peter van den Berg

Distribution has been investing heavily in education and training, product knowledge, sales training. And this matters he says everything from marketing through to presales post sales and support – all these matter now. “The distributor knows the vendors and works on the solution and knows how to glue it together. [We are] in the middle with knowledge and can help pull down the education and training for the channel.”

With the shift to cloud & hybrid IT in SMB, the ongoing consolidation of MSP and distribution channel partners, and new “As-A-Service“ (aaS) offerings every week, the traditional IT buying and selling motions are under pressure to evolve. Greg Starks, Chief Strategy Officer from channelcentral. net believes that, “The lines between traditional upfront selling and DaaS/SaaS will continue to Greg Starks blur. The channel [distribution] will offer hybrid financing that address selling upfront + aaS together. This will allow partners and customers to visualize packaged aaS offerings alongside financed custom solutions as a comprehensive OpEx payment timeline.” “channelcentral works with distributors across the globe delivering Configure Price Quote solutions. We’ve seen first-hand the business model changing and it is still evolving. We hear manufacturers talking about Device as a Service every week now. We recognize the role that distribution now plays in the “As a Service” IT procurement model and partners who engage closely with distribution will be more successful.“ Some vendors are also not keeping up with the pace of change: distributors also say that it is a challenge for many vendors to differentiate value from commodity in their programs – and to define the right compensation models for ensuring their mid-to-long-term strategic objectives. As distributors increase their investments in services, ROI doesn’t necessarily come easily. While some are reporting their highest margins in history, how they get compensated for services varies significantly. Some bundle services into the cost of goods sold while others take a more “a la carte” menu-driven approach.


In general, however, the shift to services is welcomed not just by the channels, but by the vendors themselves. As the rootsquared report for the GTDC in November 2017 found in a study of suppliers: “vendors are seeing multiple trends impacting their business. The majority of respondents see the shift to services and cloud as having the greatest positive impact. Partly as a consequence of this over 85% of vendors are looking for distributors to offer subscription-based billing as well as converged or integrated billing.” The reason for the change is clear – there is more profit in adding value - as a reward for skills and working more “smartly” Tim Moyle, CEO, channelcentral.net: “Smart partners adopting this approach will benefit from an increase in business and improved margins. As-A-Service offerings will increasingly be seen as a way of ‘locking customers in’ and earning their loyalty.

“WE RECOGNIZE THE ROLE THAT DISTRIBUTION NOW PLAYS IN THE “ AS A SERVICE” IT PROCUREMENT MODEL AND PARTNERS WHO ENGAGE CLOSELY WITH DISTRIBUTION WILL BE MORE SUCCESSFUL.“ Everything that is offered ‘As-A-Service’ needs to be validated, yet you still want to give your customers choice and not be too prescriptive.“ Packaging/bundling up an ever-wider number of products, whilst managing your customers’ journey and still offering them choice, will create a need for more sophisticated eCommerce sites that have integrated Configure, Price, Quote (CPQ) software. Without this, the management of these offerings is extremely resource intensive. Traditionally, distributors have had to assist customers with their hardware configurations or ask them to click out to hosted CPQ software.

“There is still a time and a place for this level of complexity but we will be seeing a shift in the market,” says channelcentral.net. Already, hosted CPQ Software has an ever-growing number of attach options to fulfil the ‘As-A-Service’ model but what if Smart Partners can leverage their offerings even more easily than that?

Some partners may not yet understand that partnership in this world is about understanding the value you are receiving and it needs to be respected. We find there are still some partners – to a lesser degree these days - that don’t yet understand that what they are getting has real value even though they don’t pay for it.”

channelcentral.net’s Chief Strategy Officer, Greg Starks, thinks that “MFRs and distributors will invest in point solutions to bring just enough CPQ Software into self-service IT buying. Beyond just configuration, tools that help to shape demand toward the high-confidence products that can be delivered immediately.” These are likely to be served as ‘plug-ins’ to eCommerce systems with full basket integration.

In 2018 infrastructure as a service and PaaS (Platform-as-a-Service) will play a dominant role in growth. “We ‘re seeing it everywhere and it is the fastest growing category. You are going to see lot more interesting application of AI services.” A few channel partners are building value around these services and are the ones making money. If it is a commodity they will struggle, he predicts.

“WE ARE DOING THINGS DIFFERENTLY AND IT IS ALL ABOUT DELIVERING GREAT SERVICES. THE PORTFOLIO WILL GROW – YOU WILL SEE US ANNOUNCING NEW VENDOR RELATIONSHIPS IN 2018.“

The channel’s need is a mixed one and depends on the scenario, but there is certainly a confidence issue, as well as understanding the wider portfolio. “Then when you go into the boardroom, we have technical specialist who can talk business and technology together. Partners may not have the experience of bring technology and industry understanding together at the “CxO” level, so we help with that,” says Ingram Micro’s Apay Obang-Oyway. “In other cases, there are specific scenarios that need deeper knowledge, especially once we get into infrastructure as a service issues, and security. Resources are in short supply across the industry. We knew this was going to be the case, which is why we invested heavily in the dedicated cloud organisation, where we have people who can help with digital marketing and this is now lent out to the partners.


By evolving offerings and putting them together in new ways, engaging with different type of conversation with a far better grasp of the end user challenge -distribution is able to help by having that conversation and doing it credibly with the channel. “We are doing things differently and it is all about delivering great services. The portfolio will grow – you will see us announcing new vendor relationships in 2018. We have just announced 8x8 and that will continue. And we will bring more professional services to help partners deliver cloud to their customers and a different range of services. “We will have more envisioning and assessment reviews, more services as part of the gtm in 2018. We are expanding our teams, adding more technical resource and you will see us develop deeper capabilities on the more advanced workloads. We are building an AI capability, business intelligence, not quite there yet with quantum computing,” he concludes.

The view from the inside - Tim Moyle, CEO, channelcentral.net The IT Industry has changed over the last ten years more than any comparable industry. Consider these points: 1. Micro-businesses increasingly have NO IT infrastructure beyond a network. 2. Many larger organisations have adopted cloud services in addition to traditional IT deployment (Hybrid IT). 3. There are over 100 million Office 365 users most of them commercial users. 4. Some partners (including resellers) have pulled out of low margin hardware sales. Most distributors and partners are embracing the change and winning. When people state that distributors are all about stock, credit and logistics they’re quite wrong. It’s like saying restaurants are about tables, chairs and plates. Yes of course they need them but they are hygiene factors. Distributors offer so much more in the current environment. Partners value their distributors and the way the market is moving they will value them more, says Tim Moyle. channelcentral has been a cloud software provider for a decade and since then has sold “Software as a Service”. One advantage of this model is that the business becomes very predictable and less prone to the boom and bust of project based business. It is easier to make investment decisions based on mapping subscription growth against a (lower) level of attrition. It’s also easier to sell smaller value contractual business than large CapExdependent deployments. As distribution advances its capability to aggregate their breadth of suppliers into packaged “as a Service” offerings, smart Partners can take new, more appealing sales propositions to their customers. In the Noughties End Users would reach out to their


resellers when they had CapEx available to spend on a specific project. If a reseller won a €2m deal one year they’d be expected to win one next year and the year after. How do you resource that? Fast forward to now and that’s now OpEx spread over several years. As a Service is not just about predictability of revenue and removing barriers to driving new IT projects there are other advantages including: 1. Partners become strategic to their End User as they sign long-term contracts to provide IT Cloud or Infrastructure projects based on a Managed Service. 2. Distributors now represent hardware, software, services, finance and cloud vendors making the choice of solutions near infinite. Partners can guide end users to truly optimized solutions. 3. Partners (usually) bill the customer monthly and that’s a good thing – consistent interaction with a customer gives Sales opportunities to engage, seek feedback on the effectiveness of the solution and identify new opportunities. 4. Software as a Service is incredibly easy to audit versus traditional licenses ensuring the End User is compliant but also the sales opportunity is maximized. Businesses without full “license” compliance equals a lost revenue opportunity as well as a risk to their business. 5. Working indexing into contracts means that margin is protected over the term (example would be linking the price to the Retail Price Index or similar). 6. There’s such a great opportunity for partners to differentiate here and that means less price comparison. 7. End-users need help. Yes, commodity resellers sell servers and over time similar companies will use technology to improve that experience, but partners are best placed to recommend solutions.

MERGERS AND ACQUISITIONS Sponsored by

Hampleton

The M&A activity in Europe has been rising steadily and there seems to be no shortage of available finance, while companies themselves have been keen to expand by acquisition in a time of limited resources, snapping up skilled smaller players. There are certain hot areas, however, and anyone setting out to be bought needs to know what the buyers are looking for and at what stage it may be best to sell. Researcher Information Services Group (ISG) predicts that technology merger & acquisition activity will only increase. “The market has already witnessed a revolution in traditional partner-supplier relationships, with booming tech start-ups leading the charge in offering innovative solutions, and larger companies snapping them up to bolster their capabilities,” says Steven Hall, Partner at ISG and President EMEA. “This start-up boom will also continue to spur increased M&A activity in 2018,” he says.

PwC says there are two big factors at play: uncertainty and prices. But while this may dampen the appetite for the biggest deals, the mid-market is very strong. This may mean even more interest in Europe’s companies. There’s also still doubt surrounding the future of US taxes and trade policy, it says, which may impact big-ticket transactions. More than that, valuations for potential acquisition targets continue to climb, making buyers think twice about major moves.

This course could be expected, looking at the indicators: as David Riemenschneider, Director at M&A specialists Hampleton told the Managed Services Summit in London in September, the level of technology M&A activity correlates with the NASDAQ index (see chart). If technology stocks continue to soar in 2018 as they did in 2017, so too will the pace of technology mergers. With historically low interest rates, increased spending by private equities and adoption of the maxim “M&A is the new R&D”, this is looking very probable for the year ahead.

The same story crops up across different parts of the market. High-value deals remain down from a year ago, but the number of deals overall is up. Through the third quarter, 2017 deal volume is up 14% from last year, while the number of megadeals – those worth more than $5bn – is down 28%. The trend is the same for both corporate buyers and private equity, and it probably explains why certain huge deals have generated a lot of headlines: there aren’t as many other megadeals to grab attention away.

The question is therefore, which sectors and which companies are in demand. Those selling a technology business probably need to be aware that the actual transaction volume tends to be more stable year over year –it is the valuations that fluctuate the most, and it is the valuations that determine how profitable a deal will be for them.


With the US potentially turning cautious, businesses in Europe may find their suitors also situated in Europe; despite that wave of funds in the USA, the picture over the last few years has been that some 60% of the acquirers of European technology firms have also been European themselves.

For more detail on the areas of technology in demand, Hampleton breaks down the market into sectors: Enterprise software has been a very active area, with over 1700 acquisition in the last 18 months. This can be expected to continue as pressures on enterprises mean they must transform or get out of the business. Researcher TBR says: “Enterprises accept digital as the new normal for customer experience (CX) and will rapidly scale up, integrate and transform to become customer-centric businesses.” The enterprise sector has been the first to use cloud and software-as-a-service (SaaS), another sector identified by Hampleton for growth and with some big buyer and potential buyers in the form of Microsoft, Oracle, IBM and Cisco from inside the industry and equity players like Vista and Marlin Equity very active. Hampleton found nearly 1800 deals in this sector in the last 18 months. The global public cloud services market where SaaS delivers the tools to users is set to grow 18.5% in 2017 to $260.2bn, according to analyst house Gartner, up from $219.6bn in 2016.


The highest revenue growth will come from cloud system infrastructure services (infrastructure-as-a service), which is projected to grow 36.6% in 2017, to reach $34.7bn, it says, and expectations are rising for 2018. But it may depend where in the world you are: Crozdesk, the business software discovery platform, looked at cloud start-ups in its SaaS and Cloud Startup Report 2018 which found that 8 of the 10 largest SaaS and Cloud Startup ecosystems are in the United States, with London and Tel Aviv the only areas in the Top 10 outside of the US. It found that nearly 89% of the world‘s SaaS and cloud financing went to US companies, with those in California, receiving about 45% of global sector funding (9 times the European total). “The disparity of growth speeds across the world‘s cloud ecosystems is staggering. We were surprised to see the degree to which investor location, loyalty, and access to talent can drive success in the SaaS and cloud space.“ Say Nicholas Hopper, Crozdesk CEO.

Perhaps the rising tide will lift all: Sid Nag, a Gartner analyst, said: “SaaS is growing faster in 2017 than previously forecast, leading to a significant uplift in the entire public cloud revenue forecast.“ SaaS revenue is expected to grow 21% in 2017 to reach $58.6bn. Gartner said the acceleration in SaaS adoption can be explained by providers delivering nearly all application functional extensions and addons as-a-service. This appeals to users, said Gartner, because SaaS solutions are engineered to be more purpose-built and are delivering better business outcomes than traditional software. “Strategic adoption of platform-as-aservice (PaaS) offerings is also out-performing previous expectations, as enterprise-scale organisations are increasingly confident that PaaS will be their primary form of application development platform in the future,“ added Nag.

DIGITAL MARKETING


The growth in enterprise software, attributable in part to increased SaaS-model adoption, will also give a particular boost to interest in marketing specialists, where M&A activity can also be expected to rise. Digital marketing has seen over 750 acquisitions in the last 18 months, with several large companies such as WPP, Publicis and Accenture very active and making multiple buys. Significantly, EV/EBITDA (enterprise value/earnings) values have been rising in this sector for the last year or so, showing rising expectations. Beginning in 2018, chief marketing officers (CMOs) will begin to radically change how their enterprises engage with buyers and clients by scaling up and integrating their advertising technology (ad tech), marketing technology (martech) and sales tools to improve engagement and demonstrate the revenue lift they can attribute to campaigns, says TBR. This is turn will increase the need for vendors to acquire skills and diversify their technologies.

One area that will come under particular scrutiny in 2018 is financial services and the technology used to deliver them – commonly known as fintech. Not just GDPR, but the effect of Brexit’s implication for the movement for financial firms from London, compliance and security issues generally will mean pressure on the technology suppliers and interest from potential buyers. As Tom Harwood, Chief Product Officer and Co-Founder at call centre compliance specialist Aeriandi put it: “Regulatory Tech – or RegTech as it’s more commonly known – is a term created by the Financial Conduct Authority. It’s a sub-set of fintech. As the regulatory focus on data, reporting and oversight continues to increase, RegTech is evolving as an area specifically geared towards the compliance, security and regulation aspects of fintech. Essentially it’s about developing technology that can help financial firms to better comply with regulations. RegTech is already helping address compliance challenges in the voice space. Just imagine how much personal data is held within call recordings. These are ubiquitous; many companies across a range of sectors store call data.”


“With GDPR offering customers new rights to access, view and delete this data, how can companies ensure they can offer this capability? How will they even know what data they hold? A technology approach to the problem is the only way many organisations will be able to address these challenges effectively. As financial institutions continue to face ever-increasing regulations, accompanied by spiralling costs and complexity, they become even more receptive to innovative companies that can offer technologybased solutions. And that’s why, for me, RegTech will be a winner in 2018.” Hampleton points to some 500+ acquisitions in the fintech business in the last 18 months, but the names may be unfamiliar to those in the technology market – brands such as FICO, Broadridge and FACTSET are among its top buyers.

REGTECH IS EVOLVING AS AN AREA SPECIFICALLY GEARED TOWARDS THE COMPLIANCE, SECURITY AND REGULATION ASPECTS OF FINTECH.

For a purer technology play, turn to the IoT market, where Intel, ARM, Google and Verizon are among the more familiar names buying up businesses. This is more than a pure technology play, however, with implications for security and consumer markets. Analysts forecast that B2B marketing and spending on IoT technologies and solutions will reach US$267bn by 2020 as Internet-enabled devices stream more and more data. IoT technologies and solutions are anticipated to transform virtually every industry vertical across consumer, enterprise and industrial segments. According to research firm Research and Markets, successful companies will be those that “understand how and where IoT technologies and solutions will drive opportunities for operational improvements, new and enhanced products and services, as well as completely new business models.“ Hence the interest in acquiring those technology companies who have done the groundwork in IoT. Though still a relatively small area compared to enterprise software, and with a small number of transactions (200 in the 18-month period, according to Hampleton) the median EV/S (enterprise value/sales) ratio of approximately 3.5 shows a consistent expectation of future growth, as can be expected in emerging technologies. In the specific area of unified communications where cloud is having a big impact and shifting users from traditional PBX to a more technologyfocused solutions, there are predictions of particular change and M&A action: Charles Aylwin, Director of Channel, 8x8 says 2018 is the year of acquisitions. “As the demand for unified communication (UC) grows, the market will inevitably become more competitive. With everyone looking for a slice of the action we will see a lot more M&A activity. Big players will look to snap up small independent cloud providers in an effort to cash in on a growth market. For example, Cisco’s recent acquisition of BroadSoft is an indication of what’s to come. As we move into 2018, expect to see not just tech acquisitions but channel consolidation as well”. One of the factors driving the current high level of M&A is that private equity has enormous buying power. They are sitting on historic levels of cash and are more likely to spend cash on M&A as technology-listed companies tend to spend way more on share buybacks, debt repayments and capital acquisitions.


Market forecasts and industry interviews indicate that most executives believe that PE acquisitions will outnumber strategic acquisitions in the coming year, says Hampleton. They also tend to like businesses with strong recurring revenue, so expect to see continuing interest in managed services. The way that technology underpins most large businesses means continuing needs for solutions and hence consolidation for growth. As Deloitte comments: the speed of change and growth in prominence of technology is unprecedented. Within a short timescale, we’ve seen an evolution, from technology as an enabler of back-end processes, through to it underpinning most, if not all, of an organisation’s functions, and fully establishing itself as a key disrupter, differentiator, and revenue driver. Within the context of an M&A transaction – for buyers or sellers – this means technology now represents both a massive opportunity, and a risk of equal measure. With all the signs pointing to a strong M&A market in 2018, the advice from David Riemenschneider remains the same: • Know your sector; this is what gives you value to your customers and also tells you which areas of your business matter to potential acquirers • Pay attention to timing and don’t lose sight of the day-to-day running of your company -always meet your budget • Prepare as best you can - look for those leftfield buyers and tangential sectors • Ensure the process is structured – try to create an auction environment • Set expectations early…but not too early • Think about integration planning and negotiate a transaction that works for all stakeholders in your company • Hire good advisors (of course) and good lawyers

“

We got to where we are today by being

narrow minded”

International Technology M&A At Hampleton we do one thing: we get the best results for owners and leaders when selling their technology companies, whether they are looking to exit, accelerate growth or maximise value. Based in London, Frankfurt and San Francisco, our dealmakers and sector experts are technology entrepreneurs who have built, bought and sold over 100 fast-growing tech businesses.

Thinking about selling? Profit from our expertise and experience by contacting [email protected] or call us on +44 20 3728 6910 for a confidential conversation. Considering your options? Sign up to receive our regular reports on technology sector M&A at www.hampletonpartners.com/reports.

MANAGED SERVICES FOR GROWTH Sponsored by

MANAGED SERVICES Research shows that managed services may be the only chance for growth in the IT industry’s channel; resellers are still switching to this sales model in large numbers, but the sales process and customers relationships are very different; we look at what help is out there to ease the transformation. The sales process from traditional models is very different; we look at the tools available and how you use them to keep talking to your customers through reports and useful data. Plus, how to add additional services and packages, including analytics and security to existing contracts. Managed services in 2018 will need to deal with a number of issues – some, like security are external, others like the changes needed in sales processes and customer engagement and security, are external factors. One the main pressures will continue to be the availability of skilled resources, both in sales and in the area of security. Research from IT Europa and others shows that there is a continuing race to scale as the economics of managed services depend on having a large customer base, but at the same time, because of the expertise needed to deliver specific vertical market applications, many are having to build on their strengths and specialist further.

THE CHANGING NATURE OF MANAGED SERVICES Bigger MSPs are growing fastest, and the Netherlands has overtaken Germany in numbers of large MSPs. The UK has 36% of Europe’s largest managed services providers and is the largest individual market. Internet of Things (IoT) has started to appear as an MSP solution area.


The latest study of Europe’s managed services providers shows increased consolidation as well as more specialisation by application area. In the study of the top 1500 MSPs 2017, the listed companies – 112 in number - saw their sales rise by 7.5% yr/yr. The smaller independents by contrast managed a lower 5.5% growth. One reason for the changes has been the rush for scale among managed services companies, with a high rate of mergers among the small players, and acquisitions by larger firms. It’s fair to say that three of 2017’s biggest technology trends – digital transformation, cyber security and AI – are impacting the managed services industry significantly, says Simon Simon Bitton Bitton, Marketing director, Europe at fast-expanding Park Place Technologies, a specialist in storage and server monitoring and management. “We expect that cybersecurity will remain top of mind throughout 2018, especially with the introduction of GDPR in May. We believe the general shift in consumer attitudes towards security could help drive adoption of private and more security-focused managed service solutions this year. For us, being able to support hardware and ensuring that server hardware is available to run security based applications is key for the security of our customers. With the continuing trend towards digital transformation, we see that as companies innovate, there needs to be a conscious effort to efficiently allocate budget.“

Third Party Maintenance services can go a long way in freeing up mindshare and budget for IT programmes looking to shift resources into innovation for future growth, and Park Place Technologies is ideally placed to help organisations with their support and maintenance for their storage, server and networking equipment, he says. “At Park Place Technologies, we have transformation needs now, and high aspirations for the future, and recently ‘future proofed’ our own business through the adoption of AI capabilities. By partnering with BMC to leverage the TrueSight platform, our new ParkView service represents a fundamental shift in our offering from reacting to customers’ needs – traditionally, “tell us when something is broken and we will fix it” – to proactively anticipating and fixing issues even before customers know there’s an issue.” There seems to have been a rising tide of specialisation in the last year, with some MSPs withdrawing from areas where they lack or can’t find the expertise they need. The number of partnerships between providers, and with distributors in the two-tier model has been growing as a further indicator of the process of concentration. As a result, some 67.8% are now offering security management, which has seen a fall from last year’s 72% as this become perhaps a more specialist task. As part of the push to specialise and engage early adopters the MSP offerings and associated product solutions show the start of the rise of the IoT function in late 2017, with just under 10% saying this is something they do or can do. The most popular packages are still as last year - Network/ Infrastructure Management 76.2% with 69.93% offering SaaS.

THE NUMBER OF PARTNERSHIPS BETWEEN PROVIDERS, AND WITH DISTRIBUTORS IN THE TWO-TIER MODEL HAS BEEN GROWING AS A FURTHER INDICATOR OF THE PROCESS OF CONCENTRATION.


Some 60% offer storage/backup managementa slight decline from last year’s 61%; 56.87% offer server management; 54.6% application management; 47.73% website hosting; 11.53% managed print services (down from 13% last year) and 9.47% are offering IoT. With managed services still seen as the best prospect for growth in the IT industry in 2018, there are good reasons to be optimistic, but it will probably also be another year for growth in scale and specialisation in the sector. The pace of consolidation is unlikely to slow for both these reasons. European and UK managed services may be different from the US model. David Bellini, President and Managing Director, ConnectWise International says: “Overall, the role of David Bellini managed services provider (MSP) in the UK is similar to the US, but what we’re seeing specifically in the UK is more of a hybrid. SMB customers are still outsourcing everything to MSPs and that works for them because it meets their needs. On the other end, UK corporations are finding success in keeping some IT functions in-house, but also relying on larger MSPs to provide the secondary and tertiary IT functions for them, like creating a mobile app.” So what are the new management and service desk issues that service providers face in 2018? “The most common service desk issue will likely be a continuation of what we’re already seeing. Customers not only want, but have an expectation of more service for less cost.” In the SMB market, there is typically a bootstrap tech budget – they want as much as possible for

as little cost as possible so they can put more funds into other business areas. “ConnectWise works to provide a strong value to our partners by sharing our best practices over the past 35 years so they can work as efficiently as possible with their clients – to save them time and money. I think one of the biggest things an MSP can do to work with SMB management is to be as transparent as possible from Day One. There can be contention between an internal IT department and an MSP – the internal IT team wants to know their job won’t be outsourced and replaced. If an MSP can create a transparent and trusting relationship with their client, they will be seen as an advisor and support function – not as a job threat – the recommendations by the MSP are more likely to be valued and followed, even if there are budget constraints associated with the recommendations,“ says David Bellini at ConnectWise International. The UK is experiencing an economic boom right now so that’s really helping drive growth for MSPs, he says. “We can see the growth in the net new number of users added to our products. Also, companies are outsourcing more of the technology jobs and MSPs are benefitting from that. MSPs can improve growth by constantly striving to improve customer service. Just because we are providing a technology service in a digital world, that does not mean we can forget about the human element. Consistently strong customer service can make a huge impact on client retention as well as recommendations to prospective clients. We all remember the times we received exceptionally poor customer service and how that has changed our perception of the company in question – and not for the better.” And customer relations? “MSPs should make the time for face to face meetings with their clients – don’t rely too much on emails, texts and phone calls. Go into their offices, sit down face to face with them and talk to them. When you sit across a table from your client, you’re able to listen to them better – not just what they are saying, but how they are saying it." This higher level of customer value and service will create stronger relationships and give you an edge over the competition, he says.


Another way MSPs can improve growth is by taking care of their own employees. Employees that are happy, empowered and passionate about their work and their clients, will work harder for them. And make sure you’re hiring employees that have the skill set required for the job, but also have strong customer service skills. There will be further pressure on service providers to specialise in 2018 in order to avoid becoming a commodity “This is something businesses have always had to deal with. There’s always a certain set of services that are unique, but eventually they become a commodity. The important thing is not to overreact or underreact to specialization pressures. Our advice to MSPs is to take the time to evaluate the market conditions. See what other businesses have done historically and what they’ve had success with. Basing your business plan on successful businesses is never a bad idea."

SECURITY IN MANAGED SERVICES Enterprises, many smaller firms and certainly most in the financial services area now consider the threat of cyber-attack to be the greatest challenge they face. With most of the growth in IT in the cloud and in managed services, the managed services provider has to find answers to their questions, and propose compliant, yet viable solutions. Researcher IDC says that by 2019, 70% of major multinational corporations with roots in the United States and Europe will face significant cybersecurity attacks aimed at disrupting the distribution of commodities. It also predicts that over the next two years, 80% of consumers in developed nations will defect from a business because their personally identifiable information is impacted in a security breach. With the publicity given to threats and direct experience of their impact by more and more firms and organisations, the drive to find solution has never been higher: worldwide spending on security products and services will reach $86.4bn in 2017, an increase of 7% over 2016, with spending expected to grow to $93bn in 2018, according to the latest forecast from Gartner, Inc.

”Rising awareness among CEOs and boards of directors about the business impact of security incidents and an evolving regulatory landscape have led to continued spending on security products and services,“ said Sid Deshpande, principal research analyst at Gartner. Security services will continue to be the fastest growing segment, especially IT outsourcing, consulting and implementation services, it says. David Bellini comments that security is going to continue to be a major element in managed services. “Similar to home security efforts, when better locks, doors and monitoring systems become available, people upgrade to those better options so they not only feel more secure, but in fact are more secure. I think it’s the same with business security efforts. Every company has the same security concerns – they want to keep their data safe. MSPs need to understand their clients’ security risks and weaknesses and then prioritize upgrades and improvements based on available budgets and staffing. The first step is making sure they stay up to date on the latest threats and the solution offerings for those threats.“

MSPS IN THE DRIVING SEAT COMBATING RANSOMWARE With the MSP likely to be in the front line after a cybersecurity incident, they face numerous challenges: staying current with the threat models, understanding the customers’ business models and possible attack vectors to it, monitoring current usage and safety models and planning for possible expansion and change in the business. On top of this comes new and emerging threats targeting specific applications, branch offices and mobile working, the use and management of Internet of Things devices and targeted attacks on specific individuals. MSPs report increasing concerns by customers and rising interest in security from senior management confronted by media headlines of successful attacks. So the service provider needs to find solutions and address concerns at all the various levels of an organisation- from technical to user to strategic planner.


And the approach to security discussions with a customer needs to be made carefully: another 2017 security survey suggests that while executive boards of enterprises and small to medium-size businesses say they are confident of their cyber threat preparedness, as more high-profile hacks and breaches are revealed, budgets to maintain their supposed security are being continually ramped up, showing that deeper concerns hold sway. Surveys such as that done for Datto on the top challenges in 2017 show that MSPs are themselves concerned with the issues of ransomware and cybersecurity, also expressing the need to keep their staff and training at an appropriate level in a fast-changing environment. Other areas for concern include the security of the end-point as well as the data centre, but this may depend on the size of the client business. This end-point security market is expected to reach $27.8bn by 2025, says a forecast by PMR. SaaS deployment of end-point security is also expected to gain traction registering a value CAGR of 15.2% over the forecast period. While small & medium enterprises from around the world will contribute with just over 30% of global revenues, large businesses will be observed as the principal end-user of end-point security solutions in the global market. The technology aspect is also leading MSPs into new areas enterprises are increasingly seeking products that incorporate “smarter“ predictive and prescriptive analytic technologies, which help warn users of potential security incidents and provide guidance on optimal responses, says Gartner. These more advanced analytical capabilities are driven by a variety of underlying technologies, such as heuristics, artificial intelligence/machine learning and other techniques. Successful vendors will work with customers and prospects to understand use cases where analytics will deliver significant value and augment limited security staff and resources.“

“Next year our growth will happen by engaging with MSP who know they need to differentiate on service, says Edmund Cartwright, Highlights’ Marketing and Business Development Director. “The growth will come in the SMB sector. We had previously engaged a lot with Tier 1 Service providers but the MSP space in UK Netherlands and Germany have a lot of smaller customers”. The expansion plans come on top of a change in the business. The go-to-market changed in October 2016 from trying to talk to the large enterprises and Tier 1s to the MSPs and smaller customers. The marketing has been changed and made more accessible to the MSP and SMB market. “We are also getting traction from social marketing and other sources. There are a lot of people looking at us, and raised interest. We are scalable as an organisation, but need more channels so we are about to launch a new partner portal, which is going live and will give all the marketing and sales packages for partners. They will have access to all the videos which give them training and to show customers.” “We are on the edge of some big things – from just twelve active partners now we should be thirty by the end of 2018.”

SOLUTIONS FOR MSPS An MSP should always be looking to evolve service offerings. Security services are among the fastest growing areas at the moment and if MSPs are not already offering this to clients they will need to act fast in 2018 as the competition is probably already doing so. Clients expect MSPs to be experts in security; this may not be something you currently have in your contracts but they will expect it nonetheless. Increasingly, this may be done in partnership with providers or specialists. The Datto State of the Ransomware Report 2017 shows that MSPs are encountering more cyberattacks on their clients and this is a trend that is set to increase into 2018 and beyond.


Pricing is another tough call, given the growth of public cloud, but Chris Tate, Business development director at Datto Europe says “As with all the services a MSP will offer, pricing is really important. The transition to cloud and SaaS based services has accelerated the shift from “Per Device” to “Per User” billing but a lot of MSPs use a combination of the two. There is really no right or wrong way to do this, it’s just important to understand the profitability of your offering. If you aren’t able to make money selling your services you need to re-think the pricing or face problems.“ Security services can fall into the “Per User” billing model and generate great additional revenue streams in areas such as Backup and Business Continuity, Managed Secure Networking and even products such as End-User Cyber Awareness training. “Your clients trust you, but with that trust comes responsibility. They will expect you to take all reasonable measures to ensure they aren’t hit with any kind of cyber-attack and trust you to get their data and systems back online if it ever does happen. This is where Datto can help, their MSP focussed range of products and services can give you the confidence that your clients are protected and that the trust they place in you isn’t misplaced.” Like the “tortoise and the hare” our customers are innovating at different paces, says Park Place’s Simon Bitton. “As customer needs evolve, Park Place needs to be ahead of our customers to ensure that service needs can be met when they are requested. When a key component of a data center infrastructure fails, it is crucial to locating the failure and getting it repaired quickly.“

“As more businesses look to expand into managed services, we’re seeing an increasingly competitive landscape. Where we seek to differentiate ourselves as an MSP is not necessarily in what we provide but how we provide it and why a customer would work with Park Place Technologies – resulting in a 96% customer satisfaction rating. “Our focus is always on ensuring we design and deliver a service aligned to a customer’s business, legal, compliance and IT requirements. This is achieved from the commencement of the engagement by using established processes to understand a customer’s business (model, strategy, industry specific and unique challenges, technological landscape & constraints, commercial position).


Take time to fully understand customers, is his advice. “Combined with our experience and expertise and our flexible and agile approach to Managed Services, this helps cement our goal of building a long-term trusted partnership with our customers throughout the lifecycle of their hardware needs.”

YOUR CLIENTS TRUST YOU, BUT WITH THAT TRUST COMES RESPONSIBILITY. THEY WILL EXPECT YOU TO TAKE ALL REASONABLE MEASURES TO ENSURE THEY AREN’T HIT WITH ANY KIND OF CYBER-ATTACK.

www.datto.com/uk

ONE CONSOLIDATED PLATFORM BUILT FOR MANAGED SERVICE PROVIDERS

SIRIS DNA

Datto provides business continuity solutions to secure the essential business data. Our integrated suite of services include our market leading data backup and disaster recovery (BDR) offerings, our advanced Cloud-to-Cloud (C2C) backup services for leading SaaS applications, and our innovative network continuity solutions. All delivered as managed services primarily through Managed Service Providers (MSPs) for the data protection needs of small and midsized businesses or distributed locations of large enterprises.

Datto’s 2018 MSP Predictions 2017 has been a big year for MSPs. Global ransomware attacks of unpredented magnitude tested the channel’s resilience. But don’t get comfortable, beacuse the MSP sector is evolving at an accelerated pace. With an 11% CAGR, the global MSP market is projected to hit the $245 billion mark by the end of 2022, according to a report by Market Research Future. What’s ahead for MSPs in 2018?

Check out the report to find out! www.datto.com/msp2018

GDPR May 2018 will see a fundamental shift in how security relates to companies of all types and sizes; the implications on the channel are that customers and potential clients will have a lot of new questions. It means new risk management issues for customers that channels will need to explain. This feature aims to supply some answers to a complex issue, and gives guidance on how the channel can answer customer questions and provide GDPR as part of the business transformation and wider security management. MSPs in particular will need to become experts on compliance: the EU General Data Protection Regulation will come into effect on 25th May, 2018 and could see organisations facing heavy fines should they receive a single complaint for mishandling private data. Punitive regulations will create board-level fears, driving security software budget decisions based on the potential financial impact of fines and noncompliance. Consequently, organisations will look to providers with products that provide the needed visibility and control of their data. Providers should identify the key regulatory requirements and constraints in target geographies by working with legal counsel to deliver product and service choices that will alleviate board-level fears, advises Gartner.


At the Managed Services Summits in Europe and London in 2017 legal firm Fieldfisher‘s partner Renzo Marchini warned that the rules were changing and the impact on MSPs would be profound. Service providers are to be regarded as ‘data controllers‘ under GDPR, with the prospect of huge fines. “By applying an early focus to achieve GDPR compliance, and with a history of understanding customers’ legal and compliance requirements, we are hoping to capitalise on an increased Renzo Marchini at opportunity for managed MSH Summit Europe service contracts. Whilst traditional hosted/managed services will continue to form part of our overall MSP portfolio, we have broadened our offering to include Infrastructure Management as a Service,” says Simon Bitton at Park Place Technologies. The purpose of this service is to support a company’s IT department when they have skills or resource gaps on a short-, mediumand long-term basis. These requirements are typically driven by changes to personnel or changes to a business through downsizing or dramatic growth, whether this be organic or via acquisition. As these changes can have quite dramatic effects with very little time to react, the ability to react in an agile manner is key to providing and supporting the needs of customers, he says.

Derek Weeks, VP and DevOps advocate at Sonatype, an open source software governance automation company says he expects to see the security landscape change dramatically in 2018. In 2017, major global brands including Uber and Equifax have been subject to high profile breaches, with both coming under severe scrutiny for failing to notify the public sooner. However, the lack of legislation to date has allowed them to take a leisurely approach. This will all change when GDPR comes into force in May 2018, which will require organisations to notify the public within 72 hours or face penalties of up to €10M ($12M) — or 2% of prior year revenue — whichever is higher.

Finally, people may actually read online Terms & Conditions, says Bjørn Taale Sandberg, Head of Telenor Research. “Customers of any digital service - all of us - are becoming the owners of Bjørn Taale Sandberg the data that we produce when using these services. The regulation strengthens how that data is protected for all of us in the EU, aiming to give control back to us private users. It also changes how companies ask for your permission to use your data.”

“In 2018, we expect to see the first $10 million penalty imposed for violating GDPR,” says Derek Weeks. “The new regulation set to take effect in May 2018 will drive a fundamental shift in how businesses approach security. With GDPR’s Article 25 stipulating that security must be designed into software from the beginning, it can no longer be contemplated retrospectively once applications are already in the market. As a result, CIOs will invest more in tools, processes, and training that integrate security practices into the design and build phases of their software development to avoid damaging breaches and minimise the risk of fines.”

Terms & Conditions must be reinvented so that consumers know what data they give away and for what purpose. “This reinvention is key and we are going to see a lot of variations around Terms and Conditions in the beginning. We expect that the best solutions will be copied, so watch out. New Terms & Conditions are coming to your favourite app - and you‘ll want to read them!“ says Sandberg.

Next year, new security investments will shift from the perimeter to the application development he says. CIOs, having digested years of evidence that bolstering perimeter defences can only get them so far, will enhance application layer defences under their direct control. In 2017, Sonatype discovered that 1 in 18 software components used to build modern applications contain known security vulnerabilities that are often built into products and services offered to consumers. Recognising that security risks are electively being designed into products by their own employees, CIOs will embrace development fundamentals like building quality in from the beginning.

Unfortunately, GDPR will give a great opportunity to criminals, hackers, disgruntled staff and anyone who might want to do an organisation harm, says Ian Kilpatrick, EVP Cyber Security for distributor Nuvias Group. “They simply have to ask you to identify what data you hold on them, ask for it to be erased, and ask for proof that it has been done. If you can’t comply, they can threaten to go public – exposing you to the risk of huge fines – unless you pay them money. Watch out for that one!”


“We anticipate ripple effects in the months and years ahead. “Global companies like Google and Facebook might make their improved Terms and Conditions apply globally,“ adds Sandberg.

CYBERSECURITY Cybersecurity is the hottest topic in both enterprises and SMBs; the tough job for the channel, especially MSPs, is staying current with threats and challenges, and finding the right language to talk to customers. It is expected that cybersecurity will remain top of mind throughout 2018, especially with the introduction of GDPR in May. “We believe the general shift in consumer attitudes towards security could help drive adoption of private and more security-focused managed service solutions this year. For us, being able to support hardware and ensuring that server hardware is available to run security based applications is key for the security of our customers,” says Simon Bitton at Park Place Technologies. What makes malware illegal? Not the creation of it or even the sale; it‘s the intent to sell for criminal use. But, intent may be hard to prove (and disprove), and well-meaning security researchers may gradually find themselves the focus of investigations, says Leon Adato, Head Geek at SolarWinds. “Consider WannaCry ransomware cyberhero Marcus Hutchins, aka MalwareTech. He defused the attack and tried to remain anonymous behind his moniker. However, the high-profile nature of the hack generated too much interest in his identity. In August, Hutchins was arrested in a separate incident, accused of developing malware meant to infiltrate the banking industry. He maintains his innocence, and many in the security community believe he‘s been falsely charged.” This is just the latest in several years‘ worth of cases covered under the 1986 Computer Fraud and Abuse Act (CFAA), which forbids accessing a computer without authorisation, or in excess of authorisation. In theory, it outlaws hackers, but realistically, does not distinguish between cybervillains and good hackers. In another instance, employees could be blamed for posttermination access, even if by mistake. The list of possible offenses is untold.


Thus, the potential for security researchers to get caught up in the statute‘s ambiguity because the nature of their work may be an impending issue in 2018. There‘s a dearth of security professionals already (in fact, a recent cybersecurity survey revealed that fewer than one in four security professionals have the qualifications needed to keep an organisation secure), but the steady proliferation of end points and more sophisticated cybercriminals means security professionals are needed more than ever. We expect more awareness of this issue in 2018, coupled with an increased need for robust security tools.” Also looking forward to 2018, Security specialist ESET anticipate threats will continue to evolve and diversify, but a common underlying thread will persist – an effective cybersecurity posture pivots on knowledge of the value of information, coupled with insight into and an understanding of the threatscape. After a highly eventful 2017, when an increasing number of cybersecurity incidents grabbed headlines in the mainstream media, we’re now looking ahead to the coming year, which will no doubt generate further vibrant discussions about the threat landscape, says ESET. One refrain is likely to be heard time and time again. Cyberthreats and attacks are here to stay. Indeed, they will continue to expand in scope and volume next year. With data being the most valuable asset (so much so that many have called data ‘the new oil‘), ransomware is poised to remain in great demand among cybercriminals.

“We note the largely indiscriminate nature of ransomware campaigns and highlight the perils of paying up in exchange for (by no means guaranteed) restoration of access to data held ransom. Organisations seen as willing to pay up in lieu of hardening their defenses may run the risk of finding themselves a target of choice, yet with no certainty of getting their data back says the ESET report Cybersecurity trends 2018: The cost of our connected world.” In a world of smartphones and other mobile devices, attackers are more focused on denying the use of devices themselves than on data stored therein. The generally perilous state of affairs in the Internet-of-Things (IoT) arena presents a host of challenges of its own, as the dramatic increase in the number of smart devices shows no signs of stopping. By contrast, the addressing of security concerns is often an afterthought. “On a different note, we cannot help echoing our past – and prescient – sentiment that attacks aimed at critical infrastructure are set to continue to generate headlines. Worryingly, industrial equipment targeted by malware known as Industroyer – the biggest threat to industrial control systems (ICS) since Stuxnet – is in wide use, while much equipment in ICS was not designed with internet connectivity in mind.” Making things worse, prompt upgrades, though important in striving for a secure environment, are not always a panacea: the drive towards a cheap generic architecture for industrial devices may introduce additional weaknesses into the supply chain, ultimately endangering our physical safety, it warns. In the next 12 months, there will be main security concerns that will make inroads in the threat landscape. From ransomware bringing digital extortion campaigns to fruition to losses from business email compromise (BEC) scams exceeding $9bn, 2018 will be a year that will require businesses to significantly step up their security measures, says Trend Micro.


• IoT devices will be hijacked to create proxies and facilitate other forms of cybercrime. • Fake news will persist on social media and in the upcoming elections to discredit brands and authorities. • Machine learning and blockchain’s security will be challenged by criminals looking to abuse the technologies. • General Data Protection Regulation (GDPR) preparedness will be put to the test once the regulation is enforced. • Production processes will be at risk of sabotage and disruption due to enterprise application vulnerabilities. Ian Kilpatrick, EVP Cyber Security for distributor Nuvias Group, says that he expects security to blossom in the boardroom: ”Sadly, security breaches will continue to be a regular occurrence in 2018 and organisations Ian Kilpatrick will struggle to deal with them. New security challenges will abound and these will grab attention in the boardroom. Senior management is increasingly focusing on security issues and recognising them as a core business risk, rather than the responsibility of the IT department alone. The coming year will see further commitment from the boardroom to ensure that organisations are protected.“ Too much money is being made from ransomware for it to disappear - it won’t. According to Cyber Security Ventures, global ransomware damage costs for 2017 will exceed $5 billion, with the average amount paid in ransom among office workers around US$1400. Companies can help prevent ransomware by tracking everything coming in and out of the network and running AV solutions with antiransomware protection.

IOT A technology with a lot of potential needs new levels of understanding of analytics and big data; will 2018 be the year this becomes mainstream, or is it still missing a key part – channel delivery? Research TBR predicts that customers and vendors alike will abandon their irrational expectations for big Internet of Things transformation projects to refocus on smaller, incremental IoT tools. TBR expects customers and vendors to implement a two-part view, focusing on connected operations for their industry-specific operational needs and connected business tools for their horizontal business functions. So vendors may focus on delivering prepackaged IoT applications and services that help taskoriented customers eliminate IoT sprawl and help employees get their work done. Ian Kilpatrick, EVP Cyber Security for distributor Nuvias Group, warns that IoT could be a security time-bomb. “IoT is a rapidly growing phenomenon which will accelerate in 2018, as both consumers and businesses opt for the convenience and benefits that IoT brings. However, manufacturers are not yet routinely building security into IoT devices and 2018 will see further problems generated through the use of insecure IoT.”


“IoT is a major threat and possibly the biggest threat to businesses in the coming years. Unfortunately, it is not easy, and in some cases impossible, to bolt on security as an afterthought with IoT, and many organisations will find it challenging to deal with the consequences of such breaches. As IoT cascades through organisations’ infrastructures, it is likely to become the ultimate Trojan horse.” With the rapid adoption of AI technologies, benefits are now being realised at enterprise level. According to a recent report, “Artificial Intelligence: The Next Digital Frontier,” out of 3000 C-level executives, only 20% of respondents had adopted AI at scale in a core part of their business. This is an area where Park Place sees tremendous growth opportunity, specifically when it comes to service and support, says Simon Bitton at Park Place.

IOT IS ALL ABOUT DATA AND DATA NEEDS ANALYSIS Artificial Intelligence and especially Deep Learning, the ‘magic‘ that is bringing us driverless cars and facial recognition, has been sitting solidly atop the hype curve over the last few years. “We believe 2018 will be the year when deep learning moves beyond the hype, and will find new markets outside of the Internet giants,“ explains Telenor Research’s Sandberg. “The technology will take on a wide range of industries, including health, energy, transport and telco. Those that succeed will do it through hard work, well understood use cases, ample training data and skills and knowledge to train models. Business failures will come from misunderstood use, mismanaged expectations on deep learning‘s capabilities, immature data handling, and not the least - from those that think deep learning is a magical tool that can be bought off the shelf and not grown from within.” Digital transformation will also power a surge in momentum for the IoT, with the number of connected devices predicted to reach 23.14 billion by 2018. “Next year, we expect to see the IoT continue to touch all aspects of the digital economy, unlocking enormous benefits in a wide range of sectors, from agriculture to automotive. With more and more IoT technologies underpinning critical applications, such as disaster monitoring and military situational awareness, service delivery assurance will come into sharp focus,” says NETSCOUT.


One such critical application that will launch in April 2018 is the EU’s pioneering eCall initiative, which requires all new cars to be equipped with technology that dials the emergency services in the event of a serious accident and shares data regarding the crash location, if no passenger is able to speak. Estimated to save hundreds of lives a year and ensure injured people can be helped quicker, the technology highlights the benefits IoT services can bring and the importance to assure a flawless delivery of this mission critical service. As the amount of IoT devices and use cases surges, businesses will be under increasing pressure to maintain connectivity and communication across a myriad of devices and infrastructures. In 2018, assured delivery of IoT services will therefore become key determiners for success, NETSCOUT predicts.

IOT IS A RAPIDLY GROWING PHENOMENON WHICH WILL ACCELERATE IN 2018, AS BOTH CONSUMERS AND BUSINESSES OPT FOR THE CONVENIENCE AND BENEFITS THAT IOT BRINGS.

IT EUROPA CONCLUDES With more than one-third of IT professionals citing ‘moving faster’ as their top goal for 2018, and an overwhelming 99% of IT and business decision makers noticing an increasing pace of change in today’s connected world, according to Michael Segal, Area VP, Strategy, NETSCOUT , it’s clear that speed has become intrinsically linked to business success. For companies looking to compete in the digital economy, this pace of transformation is being driven by their customers and requires speedy software releases, agility through cloud services, and automation. Enterprises will accept digital as the new normal for customer experience and will rapidly scale up, integrate and transform to become customer-centric businesses With the amount of data in the world predicted to increase at least fifty-fold between 2010 and 2020, we’ll also start to see growing emphasis being placed on how that data is stored and used. Smart data is already used to power a range of service, operations and business analytics across different industries including automotive, manufacturing and healthcare, and we expect its usage to increase dramatically in 2018. With the proliferation of IoT sensors, mobile devices and digital services creating an abundance of data, having the ability to turn this information into meaningful and actionable insights, will help businesses to thrive in 2018 and beyond.


As we look ahead to next year, we therefore expect businesses to place increased focus on accelerating the development and deployment of applications, while maintaining quality and cutting costs: two juxtaposing tasks. To achieve this, more and more companies will look to move applications to the cloud and deliver services through virtualised data centres. TBR says that cloud buyers, management approaches and vendor landscapes will all be subject to change during 2018 As we look back on 2017, “the pace of change is one I’ve never seen” is a sentiment shared among IT customers, practitioners, vendors and analysts. Much of the change is driven by cloud solutions or cloud-based delivery of emerging technologies, and more change is all but a certainty moving into 2018.

In cloud, although the forms of change will vary, change will be seen across customer behaviours, tooling requirements and the vendor landscape. The common driver of change is the shift in the utilization of cloud from enabling technology and cost improvements to delivering more strategic business value. Put simply, customers are no longer only asking “What can cloud save in my budget?” but rather, “What can cloud do for my business?” This shift to more business-focused cloud usage and evaluation has wide-ranging impacts on the market. Regardless of the joint need for cloud from IT and lines of business (LOBs), this type of cloud objective will increase the number of stakeholders involved in cloud decision making moving forward. It will also roll over into the existing environment, which is frequently fragmented from a cloud adoption perspective. Most organisations have numerous cloud solutions spread geographically, functionally and divisionally.

Research and report by www.iteuropa.com


Consolidating and managing the legacy-pluscloud environment as well as moving forward with new business-driven adoption requires organizations to obtain a management tool set that crosses both cloud and on-premises technologies. Lastly, TBR anticipates a combination of vendor consolidation and a flurry of activity as providers target geographic, functional and vertical-specific needs that are being driven by customers’ demand for closer alignment to business outcomes than horizontal technologies. Although much remains uncertain moving into 2018, you can bet the cloud market will not look the same in a year. The final decider on any IT investment is if it leads to better business value; however, it is clear that many customers just do not know if their existing investments and even future plans, will deliver this. Expect more tools to assess ROI; in 2018 organisations must move to better management of resources and outcomes; the implications for human senior managers are profound, but we may know more by 2019.

2 9 MAY 2 018 NOVOTEL AMSTERDAM CITY, AMSTERDAM THE MANAGED SERVICES & HOSTING SUMMIT is firmly established as the leading managed services event for channel organisations. In its eighth year as a UK event, the Managed Services & Hosting Summit Europe is being staged for the second time in Amsterdam and will examine the issues facing Managed Service Providers, hosting companies, channel partners and suppliers as they seek to add value and evolve new business models and relationships. The Managed Services & Hosting Summit – Europe 2018 features conference session presentations by major industry speakers and a range of breakout sessions exploring in further detail some of the major issues impacting the development of managed services. The unique mix of high-level presentations plus the ability to meet, discuss and network with sponsors, peers and potential business partners across the industry, makes this a must attend event for any senior decision maker in the ICT channel.

WHO SHOULD ATTEND?

Delegates: Directors and senior managers of Managed Service Providers, Systems Integrators, Solution VARs, ISVs. Sponsors: Hardware & Software Vendors, Service Providers, Distributors, Hosting and Datacentre Providers, Cloud Service Providers.

2018 CONTENT

CREATING VALUE WITH MANAGED SERVICES The Managed Services and Hosting Summit Europe 2018, will examine the changing role of the channel as it transitions from hardware and software supply to full IT and Cloud service provider. It will also explore the implications for sales processes and how solutions should be built, supported and expanded to create value for both MSPs and their customers.

For further information or to register, using FREE code MSH-eur please visit:

www.mshsummit.com/amsterdam Vendors, service providers or distributors interested in sponsorship or exhibiting opportunities please contact: Alan Norman [email protected] +44 (0)1895 454 604

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