A quarter of US resellers could suffer 'unrecoverable financial distress', influential analyst predicts

A quarter of US resellers could hit the wall as a result of COVID-19, Forrester analyst Jay McBain has predicted.

Some 25 per cent of the 150,000 channel partners in the US will experience "unrecoverable financial distress" in the most likely of three ‘scenarios' Forrester is modelling for the US economy and tech sector, McBain wrote in a blog post.

McBain said the mildest of the three scenarios - Scenario A - would force upwards of 10 per cent of VARs, MSPs and other tech solution providers into bankruptcy, forced M&A or retirement.

Scenario A assumes that the impacts on economies and tech markets hits in Q2 and Q3 but are reversed in Q4, and has a probability of just 30 per cent.

Scenario B imagines that the pandemic and economic downturn will last through 2020, and has a 60 per cent probability, according to Forrester.

In this more drastic scenario, Forrester forecasts that US tech budget spending would be cut by nine per cent in 2020 and an additional five per cent in 2021.

And the channel will be disproportionately dented, McBain said, because it lacks a dominant position in fast-growing technologies such as SaaS.

Under Scenario B, the revenues delivered by the US channel will drop from $880bn to $770bn in 2020 and $724bn in 2021, he predicted.

"Given our modelling around the 150,000 channel partners in the US, with an average size of eight employees and around $2m in revenue, 25 per cent will experience unrecoverable financial distress in scenario B. These are similar numbers to what we saw in the Great Recession of 2008," he wrote.

Modelling for the even more dangerous scenario of Scenario C - which has a ten per cent probability - is "not possible at this time", McBain added.

Scenario C assumes the pandemic will recur, and that the resulting economic downturn will extend well into 2021.

On the plus side, McBain said the channel is "helping broader communities prepare and cope, reminding many businesses why local service and support is necessary".

"Beyond the initial surge in remote work, including communication and collaboration tools, partners can capitalise on moving customers to cloud infrastructure faster, recognise and secure new threat parameters, automate customer workflows and business logic, provide enhanced disaster recovery and redundancy protection, and engage deeper in business consulting to help customers survive and, later, thrive from this crisis," he said.

• Tweet  
• Facebook  
• LinkedIn  
• Send to  

• Topics
• Research