Survey: Cloud, Security, Managed Services Are Driving Double-Digit Solution Provider SLED Revenue Growth

More than half of channel partners surveyed by The Channel Co., CRN's parent, saw a double-digit increase in 2016 sales to state, local and education (SLED) clients thanks to cloud, security and managed services.

Nearly a quarter of the 170 respondents surveyed reported a 2016 SLED revenue uptick of at least 20 percent, according to a web-based quantitative study conducted in advance of The Channel Co.'s XChange SLED 2017 event, which takes place May 23 and 24 in Atlanta.

"The SLED market is exciting; it's very dynamic," said Liz Anthony, senior vice president of marketing for Herndon, Va.-based ViON. "You can see some pretty immediate results as they move into new technologies that are innovative."

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Some solution providers – 28 percent of survey respondents – identified cloud services and solutions as their fastest-growing SLED technology area, with Software-as-a-Service called out as the fastest-growing cloud technology for SLED businesses.

"The customers want 'as-a-service,' especially in the SLED space," Anthony said. "They're struggling with cost containment and resources."

Cloud adoption began at the state government level, Anthony said, as department and agencies began taking advantage of the dynamic Amazon Web Services model to reduce costs. But as the cloud moves into the higher education setting, Anthony said a hybrid model became more important given the restrictions around how student records and health records can be stored.

Managed services were the fastest-growing area of SLED for 19 percent of solution providers surveyed as Anthony said government entities want to shift their finite IT resources to more mission-critical work.

"A huge number of people are on the cusp of retirement, so that's the driver for looking at cloud and managed services," Anthony said.

And 14 percent of solution providers indicated security services and solutions were their fastest-growing SLED technology areas, with anti-virus/malware/spyware/threat management pinpointed as the fastest-growing security technology for SLED businesses.

The need for enhanced security protections stems from many state agencies dealing with sensitive data such as health records, tax information and motor vehicle records, Anthony said. State CISOs share a lot of information among themselves and with their federal counterparts to ensure that citizen data remains secure, she said.

"Nobody wants to be on the front page of the local paper," Anthony said.

Nearly a third of solution providers surveyed said K-12 education was their fastest-growing sector within SLED, while more than a quarter cited each state government and local government as their fastest-growing area. The remaining 17 percent of survey respondents pointed to higher education as their fastest-growing SLED sector.

Vendors are also supporting solution providers looking to up their SLED game, with nearly two-thirds of channel partners surveyed reporting that they've seen an increase in supplier funding to drive customer demand and marketing for SLED customers. The solution providers surveyed by The Channel Co. derived roughly 30 percent of annual revenue from SLED and 15 percent of yearly sales from federal accounts.

Solution providers said were the lead on more than 70 percent of state accounts, according to the survey, and were far more likely to apply for SLED contracts individually than through an aggregator. Solution providers cited competition, pricing, the bidding process and budgets as the biggest challenges they face in growing or expanding their SLED businesses.

Local government is the most common type of SLED customer served by solution providers, with nearly four out of five survey respondents indicating they do work for municipalities. Between two-thirds and three-quarters of respondents have state government, higher education, or K-12 education customers, according to the survey.