By Larry Walsh
Technology spending is growing at double-digit rates this year, but most of the channel doesn't feel it. That gap is the story, and it's shaped like a K.
The headline numbers look strong. Gartner projects that worldwide IT spending will be up more than 14% in 2026. Partners in our own surveys expect to grow between 10% and 14%. Against persistent inflation, a Federal Reserve that just raised rates for the first time since 2023, tariffs, trade wars, and a war in the Middle East, the tech industry appears to be the one sector that's immune.
It isn't. The averages are hiding a split.
Spending on data center systems is projected to grow more than 60% this year; on services, about 5%; on communications services, about 4%. Strip out AI infrastructure and tech looks a lot like the rest of the economy: alive, but not thriving. Some categories — legacy infrastructure, seat-based software, pure-play resale — are flat or shrinking outright.
This is a K-shaped economy: Inside the same industry, one cohort rises while another falls. AI companies, hyperscalers, data center operators, and infrastructure manufacturers are on the upper arm. Nearly everyone else is on the lower one. And because capital budgets are finite, the arms aren't independent. The money flowing into AI is, in large part, money that used to flow elsewhere.
The channel sits squarely in the middle, and most partners are positioned on the wrong arm.
Channelnomics research finds that as many as one-third of partners are losing money. Another one-third are growing at low single-digit rates while their margins compress. Only the remaining third — the largest partners, the ones with service depth and AI delivery capacity — are growing near the industry's headline rate. Across the board, partners report longer sales cycles and falling average selling prices. Buyers whose budgets have been cut or diverted are pushing harder for price concessions, and every concession comes out of partner profitability.
Some of this is the money AI is pulling out of the system, as IT budgets shift from routine projects and day-to-day operations — the work that sustains most of the channel — to AI infrastructure and development. But uncertainty is doing damage too. With new models and tools arriving almost monthly, customers are struggling to keep up, and a customer who doesn't know what to invest in tends to invest in nothing.
For vendor channel leaders, this means more pushback on compensation and incentives. Partners consistently tell Channelnomics that rebates and promotional rewards are too hard to earn, that the program status that unlocks deeper discounts is getting harder to reach, and that the investment required to meet vendor expectations is more than their businesses can carry.
Vendors are pressing partners to adopt new technologies faster and transform their businesses for markets still taking shape. Partners don't disagree with the direction. Their problem is funding the transformation without disrupting the business that pays for it. Vendors are, in effect, designing programs for the upper arm of the K and asking the lower arm to execute them.
That won't hold. A single partner program can't serve both arms. Vendors that want partners to move faster will have to underwrite more of the move. Here's what that requires.
The K-shaped economy isn't the channel's fault, and it isn't the vendors'. But whether the lower arm becomes a stranded partner base or a recovering one depends largely on how vendors design the next two years of program economics.
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Larry Walsh is the CEO, chief analyst, and founder of Channelnomics. He’s an expert on the development and execution of channel programs, disruptive sales models, and growth strategies for companies worldwide.