Gen AI is a Generational Opportunity for the Channel
Gen AI is a multi-billion-dollar opportunity for the channel ecosystem that is still early in its lifecycle. Gen AI will amount to a $15.4 billion opportunity for the channel ecosystem this year alone and is expected to grow to $158.6 billion by 2028. There are two main opportunities for channel partners with Gen AI:
1) the opportunity to unlock new revenue streams, and 2) the ability to enhance internal productivity and client services.
Unlocking new services revenue in Gen AI
The four categories of new services in Gen AI are: AI services, AI software, advanced data services, and selling (i.e., reselling, co-selling or upselling) Gen AI products and offering services around them.
While these services represent billions of new revenue for the industry, not all channel partners will benefit evenly. Opportunities for partners will differ by the type of AI offering, the channel partner’s business model, and strategic alignment between complementary service offerings, skill proficiencies and target markets.
AI services ($$$)
A significant new revenue opportunity for channel partners is offering AI services, or services that help companies adopt Gen AI successfully. This includes AI advisory and change management services, consulting, design and build, architecture design, implementation and integration. These are typically highly customized large-scale engagements that bring in substantial revenue amounts, often exceeding millions of US dollars.
Channel partners best positioned to launch and deliver AI services today are GSIs, RSIs, buyer-and industry-specific professional services firms, as well as niche AI consulting firms. GSIs and large consulting organizations, like Capgemini, Deloitte, Accenture and PWC, are increasingly announcing entirely new practices, centers of excellence and partnerships with leading AI tech vendors.
AI software development ($$$)
Another substantial opportunity for the channel is the
development of Gen AI software and applications for specific use cases, industries, verticals, markets or businesses. Gen AI software solutions are growing exponentially, with both startups and established players contributing to the rapid expansion and diversification of innovative products. These solutions range from enterprise grade AI software to AI-enhanced software, to vertical-specific AI tools, applications, plug-ins, chatbots and custom solutions.
Partners best positioned to capitalize on this opportunity include Independent Software Vendors (ISVs), SaaS vendors, and development companies, agencies and independent developers engaged in software and application development.
Advanced data services ($$)
Advanced data and analytics services that utilize or enable Gen AI will also grow. Such data services include data collection, data integration, data management and optimization, data lake and data warehousing services, custom modelling, and advanced data science services. Channel partners most primed for this opportunity span boutique data and analytics firms, AI/ML and analytics agencies, consultancies, service providers, MSPs, GSIs, and RSIs.
AI products: resell, co-sell and upsell ($)
Reselling, co-selling and upselling AI products and offering integration, implementation, custom build, optimization or managed services around them are another opportunity for channel partners. While this opportunity is growing and important for some channel partners, it is not yet a hugely profitable new revenue stream in the short term.
The partners most prepared to capitalize on this opportunity today are the VARs, resellers, distributors, boutique service providers, MSPs, MSSPs, SIs and any professional service firm who is partnered with vendors offering Gen AI hardware and software. These partners should continue to build the right skills in Gen AI and take an opportunistic approach by offering their current vendors’ AI solutions with services as they become available.
Enhancing operational efficiency and client services with Gen AI
All channel partners have the opportunity to integrate Gen AI into their day-to-day work tools, processes, and business functions to drive efficiencies, automate workflows and offer more competitive services. AI tooling and AI-driven insights can help partners solve client challenges better and faster, maximize ROI and focus on innovation. Channel partners that successfully integrate AI into their business will gain a competitive edge in a hyper-competitive industry.
Partners are increasingly announcing partnerships with leading AI tech vendors to empower internal teams. For example, Microsoft and KPMG announced a strategic alliance to empower employees with Microsoft’s Gen AI tools to provide more effective and strategic client services. Similarly, Wipro and Google Cloud announced a partnership to help integrate gen AI across all of Wipro’s services and
capabilities.
Recommendations
Channel partners should prepare now to capitalize on Gen AI opportunities, while ensuring they don’t over-invest for specific business use cases or target markets. To position themselves for success, organizations should consider the following steps:
1. Determine AI strategy
Channel partners should begin by defining a clear AI strategy that aligns with the organization’s goals, strengths and target markets. Partners should conduct a thorough analysis of the AI opportunity and perform a Total Addressable Market (TAM), Serviceable Addressable Market (SAM) and Serviceable Obtainable Market (SOM) analysis to identify the scope of their opportunity.
Partners should then focus on identifying their value proposition and competitive differentiation, carefully identifying their strengths, weaknesses, opportunities and threats, as well as opportunity costs given limited resources and capital.
After completing the necessary analysis, partners should finalize their strategy for integrating Gen AI internally, and monetizing, packaging and delivering Gen AI services to clients.
2. Build expertise and partnerships
Next, channel partners should focus on building a skilled team of AI specialists and forge strategic partnerships with the right Gen AI technology vendors. Partners should take a layered approach to partnering and select the vendors that best align with their AI strategy and target market’s technology stack across the hyperscalers, software, hardware, data platforms and various business applications.
Being a first mover in a vendors’ AI partner program is an enormous opportunity to grow with the biggest AI players in the world. First movers also benefit from exclusive support and the ability to position themselves as thought leaders for years to come.
3. Invest and develop
Finally, channel partners should continue to refine and enhance their offerings. Channel partners should commit to acquiring ongoing training and working closely with their partners to bring innovative solutions to market.
Short-term, channel partners should think critically about their core business model and Gen AI strategy before launching new services. Long-term, the channel ecosystem should continue to monitor the market, adapt their strategies, and capitalize on emerging opportunities. Gen AI is rapidly advancing and the partners who are able to adapt, innovate and evolve with the industry will win.
Lisa Lawson is a Senior Analyst at Canalys, helping to lead channels research and custom channels projects in North America. Prior to joining Canalys, Lisa started and ran a channel and partnerships consultancy for fast growing SaaS businesses. Lisa has over 15 years of experience in the partner and channel space and holds a bachelor’s degree from Trinity University and an MBA from Southern Methodist University.
