The 10 Biggest Channel Stories Of 2016
Out With the Old, and In With the New
2016 was a year of business model transformation for many of the channel's leading firms, with top vendors unloading legacy IT outsourcing practices to focus on their core business, broadline players acquiring their way into the cloud, telecom services, and hyper-converged infrastructure, and industry leaders building and strengthening dedicated practices around security and IoT.
Outside money continues to flow into the channel from private equity, multinational conglomerates, and proposed initial public offerings. AWS continues to form partnerships with large solution providers, while mainstay AWS partners continue to grow their practices through M&A. And eight solution providers and distributors experienced a changing on the guard at CEO over the course of the year.
Keep on reading to relive the most significant channel developments of the past year.
(For more of our 2016 retrospective, check out 'CRN's 2016 Tech Year In Review.')
10. Eight Channel Giants Change CEOs
Eight distributors and major solution providers got new CEOs in 2016 as boards of directors sought out new leaders to reinvigorate business or longtime CEOs stepped away to get a well-deserved retirement.
Avnet CEO Rick Hamada stepped down after more than five years as CEO and a 33-year career at the distributor, and was replaced by former Lenovo CEO Bill Amelio. Brett Dawson resigned as group CEO of Dimension Data, No. 11 on the 2016 CRN Solution Provider 500, and was replaced by COO Jason Goodall. Michael Roach retired as CEO of CGI, No. 18 on the CRN SP 500, and was replaced by President and COO George Schneider.
Phil Norton stepped down after 23 years as ePlus CEO, No. 34 on the CRN SP 500, and was succeeded by COO Mark Marron. Black Box Network Services, No. 37 on the CRN SP 500, hired former Flextronics president E.C. Sykes as CEO, replacing resigning CEO Michael McAndrew. Nitin Rakesh stepped down as CEO of Syntel, No. 38 on the CRN SP 500, and was replaced on an interim basis by COO Rakesh Khanna.
OnX Enterprise Solutions, No. 46 on the CRN SP 500, tapped former Unisys, Xerox and CSC executive Tom Signorello to be its CEO, replacing retiring CEO Michael Cox. And Cliff Bleustein resigned as CEO of CTG, No. 65 on the CRN SP 500, after only 15 months on the job and was replaced by Bud Crumlish, the longtime head of CTG's largest business unit.
9. Federal Solution Providers Bulk Up To Address More Complex Challenges
Some of the largest IT players in the U.S. government space have brought their capabilities together to better address emerging security threats and a growing acceptance of off-premise technologies.
Groundwork was laid for the creation of the world's largest pure-play U.S. government solution provider in January when Lockheed Martin announced plans to merge its $4.7 billion government IT business with $5 billion powerhouse Leidos. The combined company is expected to be better positioned to win network modernization deals and aviation modernization contracts.
And CACI International, No. 17 on the CRN SP 500, closed its $550 million acquisition of the government services group of L-3 Communications Holdings in February. L-3 had a significant footprint in the intelligence space, where funding has been increased to put a single IT infrastructure in place that will allow information to move security across various agencies.
8. The Channel Flexes Its IoT Muscles
Solution providers and distributors are racing to establish a leadership position around the Internet of Things (IoT) as its usage becomes more mainstream in the enterprise space.
Tech Data unveiled an IoT practice in July focused on aggregating products from different vendors in the manufacturing, logistics, retail and Smart Cities spaces. Arrow Electronics, which has already established itself as an IoT leader, joined forces with crowdfunding platform Indiegogo in August to offer up to $50,000 in prototyping manufacturing benefits to IoT-focused innovators.
And Trace3, No. 54 on the CRN SP 500, credited IoT in part for a 20 percent increase in sales to $500 million and a $300 percent increase in net income in 2015. The company said its focus on IoT bleeds into all of its other technology practices.
7. AWS Spreads Its Channel Tentacles Even Further
AWS has achieved the dominant position in the Infrastructure-as-a-Service (IaaS) arena, and the vendor teamed up with some of the industry's top solution providers to press its advantage.
SoftwareONE, No. 14 on the CRN SP 500, rolled out transaction, billing, advisory and migration capabilities for AWS in November tied to its automated cloud platform.
CSRA achieved premier AWS network partner status, meaning the company has access to highly trained solutions architects, certifications and resources to help its U.S. government customers migrate and operate workloads in the cloud.
And AWS pioneer Datapipe, No. 105 on the CRN SP 500, purchased Adapt, the United Kingdom's fastest-growing MSP, to beef up its overseas capabilities, skill sets and talents around cloud services.
6. The Channel Further Expands Its Telecom Footprint
With the rise of VoIP and cloud computing accelerating the convergence of IT resellers and agents, distribution and solution providers alike are looking to stake a claim in the telecom space.
Distributor ScanSource led the way with its purchase of master agent Intelisys for $83.6 million plus earn-outs to bolster recurring revenue telecom and cloud services among its traditional communications resellers.
NWN, No. 68 on the CRN SP 500, has invested millions of dollars over the past half-decade building out a scalable VoIP and unified communication platform. The company further raised its game by purchasing Collabramind in November to provide more robust cloud-based Cisco contact center services for enterprise firms.
And rising giant Incedo, No. 447 on the CRN SP 500, bought SysLogic in June so that it could provide software, virtualization and cloud orchestration services to tier-1 telecom service providers.
5. Leading Solution Providers Double Down on Cloud Acquisitions
Solution provider behemoths upped their commitment to supporting cutting-edge cloud service vendors, acquiring boutique firms oriented around Salesforce, Workday, Oracle and Microsoft.
IBM Global Services, No. 1 on the CRN SP 500, got in with Salesforce by purchasing one of the vendors longest-standing partners in Bluewolf, No. 240 on the CRN SP 500, for a reported $200 million in March. And business process services giant Wipro spent $500 million in October to purchase cloud services powerhouse Appirio and improve its market share around Salesforce and Workday.
Meanwhile, Accenture, No. 2 on the CRN SP 500, grew its Workday practice by 50 percent by purchasing 400-person partner DayNine in September. Cognizant, No. 7 on the CRN SP 500, obtained one of the industry's largest bases of Oracle cloud application customers by acquiring KBACE in January.
And Dimension Data, No. 11 on the CRN SP 500, strengthened its Microsoft public cloud offerings for end users with hybrid workloads by purchasing Ceryx in April.
4. The Channel Bets Big On Next-Generation Data Center Architecture
Broadline distributors and solution providers made aggressive moves in 2016 to expand their footprint around converged and hyper-converged infrastructure.
Tech Data in September announced plans to purchase Avnet's Technology Solutions business for $2.6 billion. The deal, expected to close in the first half of 2017, will increase the share of Tech Data's overall revenue coming from the data center from just 29 percent to 45 percent, and will give the Clearwater, Fla.-based distributor more capabilities around security, analytics and the cloud.
And one of the channel's largest pure-play data center solution providers, Datalink, announced in November that it would be sold to Insight Enterprises, No. 15 on the CRN SP 500, for $258 million. Buying Datalink, No. 45 on the CRN SP 500, will boost Insight's services revenue by more than 50 percent and establish ties with next-generation vendors Pure Storage, Nimble Storage and Nutanix.
3. Activist Investor Elliott Management Targets Cognizant
Fresh off the Thanksgiving holiday, activist investor Elliott Management on Nov. 28 hit Cognizant Technology Solutions with a 16-page letter demanding a shake up its board of directors and the buyback of $2.5 billion in shares as part of what it called a value enhancement plan aimed at driving shares up by 50 percent to 69 percent over the next year. Elliott Management, which owns a 4 percent stake in the solution provider, said Teaneck, N.J.-based Cognizant is underperforming its peers across a number of financial benchmarks, including share price and valuation. The letter, which criticized Cognizant for sticking to a 20-year-old margin strategy, sent ripples through the channel community, serving as a strong reminder of the need to evolve.
2. The Infusion of Outside Money Into Channel Continues Unabated
Private equity giants and multinational conglomerates have poured money into the channel during 2016, and solution providers have opted to test the public market for the first time in years.
Chinese logistics firm Tianjin Tianhai announced plans in February to acquire Irvine, Calif.-based Ingram Micro, the world's largest IT distributor, for $6 billion. Ingram will be folded into $29 billion Chinese conglomerate HNA Group.
Not one, but two solution providers filed for an initial public offering in November for the first time since CDW went public in July 2013. Solution provider powerhouse Presidio, No. 22 on the CRN SP 500, could raise $400 million from its IPO, according to Renaissance Capital, while security solution provider Optiv Security, No. 25 on the CRN SP 500, hopes to raise around $100 million from its IPO.
Private equity also dug its tentacles deeper into the channel, with Blackstone Group buying Bangalore, India-based solution provider Mphasis from Hewlett Packard Enterprise in April for $825 million.
But that's not all. Cloud business applications provider Intermedia, No. 189 on the CRN SP 500, was purchased by Madison Dearborn Partners in September, and Microsoft Azure superstar 10th Magnitude received a significant investment from Pamlico Capital in October.
1. Legacy Vendors Get Out Of The IT Outsourcing Business
Three of the industry's largest vendors announced plans in 2016 to spin off or sell their IT outsourcing practices, essentially undoing acquisitions that occurred less than a decade ago.
Hewlett Packard Enterprise announced in May that it would merge its Enterprise Services segment, No. 3 on the CRN SP 500, with CSC, creating a $26 billion behemoth with 5,000 clients across 70 countries. This essentially rolled back Hewlett-Packard's August 2008 acquisition of EDS.
Xerox announced in January that it would be splitting its legacy document technology and document outsourcing practices from its business process services unit, No. 9 on the CRN SP 500, which will be renamed Conduent. This will largely undo Xerox's $5.6 billion purchase of Affiliated Computer Services (ACS) in February 2010.
And Dell reached a deal in March to sell its Perot Systems IT services business, No. 10 on the CRN SP 500, to Japan-based outsourcing firm NTT Data for nearly $3.1 billion. Dell had announced plans to acquire Perot Systems for $3.9 billion in September 2009.