Plotting an indirect route out of a predictable decline
There was an interesting post on LinkedIn recently by Jay McBain, chief analyst for Channels, Partnerships & Ecosystems at Omdia, concerning a “controversial prediction” he made in 2018 (does anyone remember anything that far back?) that the overall percentage of sales through the channel would decrease each year.
According to McBain: “I even lost some industry friends over it!” I have to admit my first thought on reading that sentence was “maybe those friends ought to get out more” as his prediction didn’t really seem worth falling out over. And my second thought was, well, I didn’t really have one because the first thought seemed all anyone needed to say on the matter.
Anyway, returning to McBain’s post, he noted of his prediction that “it ended up being 100% correct – not only for the past decade, but likely the next decade as well”.
According to an Omdia chart mapping indirect sales by percentage, they declined from over 78% In 2016 to a projected figure of just over 66% in 2026. On the face of it, that doesn’t appear to be good news for the channel but it’s not necessarily as bad as it looks.
McBain claims the prediction was easy to make because areas of the industry that were growing the fastest, such as hyperscalers and SaaS companies, had a much higher percentage of direct business than previous categories.
Unfortunately, the AI era seems set to continue, if not accelerate, that process. As McBain points out, Nvidia has a very small number of large customers who have committed hundreds of billions to build data centres. We are not talking about insignificant sums going to direct sales here when you consider, as I noted back in October that without data centres, US GDP growth was 0.1% in the first half of 2025, according to Harvard economist Jason Furman and Nvidia CEO Jensen Huang told a company town hall meeting in November that “the only thing standing between America and recession is us”.
With continued growth in hyperscalers and SaaS companies, McBain believes the industry has “a recipe for long-term decline in resell”.
It’s usually around this point in any gloomy direct versus indirect story that services comes riding to the rescue as the great growth saviour for channel partners. The good news is that, once again, it makes an appearance. McBain highlights the strong growth of digital marketplaces as one of the factors helping the indirect part of the market.
“We are predicting $163 billion in marketplace sales by 2030 for ISVs and partner-led services that will show up on the books as indirect sales,” he writes. In addition, partner-led services are outgrowing many of the product categories they are attached to. “Tech services have been growing over the past decade at 8.1% CAGR and could bump into double-digits in 2026,” McBain notes, adding: “The channel is so much more than a cash register – especially as two-thirds of our industry has morphed into subscription/consumption models.”
So there’s the good news. Not that it’s particularly unexpected. After all, the industry has spent quite a few years talking about the shift from reselling to services and from a transaction model to recurring revenues and it looks like that’s where the channel is heading at last. Perhaps if there is a surprise, it’s that it’s taken quite some time to get here.
Of course, if anything were to go awry with the vast sums being spent with Nvidia by a very small number of very large customers to power their AI data centres, the decline could be very steep very quickly. Ironically, the share of indirect for overall sales might go up in such a scenario.
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