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Shadow Channel to Challenge Traditional MSP & VAR’s

The IT sector in India expanded at a CAGR of 10.71% to US$ 167 billion in FY18 from US$ 74 billion in FY10. It is estimated that the size of the industry will grow to US$ 350 billion by 2025.

Indian IT companies had a decent year in terms of financial performance, driven by factors like such as digitisation, and non-linear growth models. Indian IT firms continue to move up the value chain by providing more end-to-end solutions and engaging more closely with clients. The drive towards digital technologies, internal cost optimisation to improve profitability continued in FY18. And with this trend, the growth of Shadow or unconventional partner types is expected to continue in 2019, challenging the more traditional IT channel companies to collaborate or compete.

Shadow companies include ISVs ( Independent Software Vendors), SaaS and other cloud ecosystem consultants, and professional services firms are playing a bigger role in the channel today. Shadow Channel present both a competitive threat and a partnering opportunity for traditional IT Channel companies.

If you are a forward-thinking traditional partner, you would view this as an opportunity,” Both sets of partners bring different skills sets to the table, Most of the traditional partners have expertise in IT infrastructure solutions, perform a lot of security and compliance work, and handle the basics of devices and networks. On the Other Hand The Shadow Channel Partners  “steeped in applications and the cloud” and tend to specialize in a vertical industry here is considerable cost involved in cultivating vertical industry expertise or developing a software offering. So, alliances with nontraditional channel firms — ISV partnerships, for example — could defray the cost of entering a new market.

The ISV has been, and will continue to be, the fastest growing type of company within the shadow channel. ISV Build Application to turn ideas into reality The number of ISVs has grown from 10,000 firms 10 years ago to more than 100,000 today. According to industry experts, there will be over 1 million ISV firms by 2028. The Indian software sector’s value proposition is unmatched in the world. India is the leading sourcing destination across the world, accounting for approximately 55% market share of the US$ 185-190 billion global services sourcing business in 2017-18. India acquired a share of around 38% in the overall Business Process Management (BPM) sourcing market.

Increasing competition, pressure on billing rates of traditional services and increasing commoditization of lower-end services are among the key reasons forcing the Indian software industry to make a fast move up in the software value chain. The new digital technologies like social media, mobility, analytics, and cloud computing (SMAC) has permanently changed the way Indian IT firms do business.

As per IBEF, the Indian IT industry is expected to maintain a growth of 7% – 9% in FY19. It also expects that the Indian IT industry is likely to achieve a revenue target of US$ 350 billion by 2025.Billing rates are expected to remain under pressure due to commoditization of traditional services. Therefore, companies are expected to preserve their margins through effective cost containment measures like shifting more wore work offshore, improving employee utilisation and increasing the use of automation software.

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