Are you Engaging Channel Partners?
Today’s IT and Telco channels are going through a major transition, both at the vendor and partner levels. While the industry has always been in a state of change, this period is significantly more intense with new business model requirements, different competitive pressures, changing routes to market, and a major shift in the customer buying journey.
This hasn’t been an easy shift.
There are estimates that 1/3 of all partners have shut down or got acquired since the great recession of 2008. In addition to that, CompTIA predicts 40% of the remaining partners retiring over the next 7 years, creating a very different base of partners. What will your program look like when 75% of the industry is comprised of millennials by the year 2024?
Beyond demographics, the most impactful thing changing partner relationships and loyalty is the changing customer buying journey. Ten years ago, according to Gartner, over 90% of technology decisions were made by CIOs and IT departments. Today, the number has flipped where lines of business (LOBs) make 72% of decisions. This is predicted to grow to 90% in the next few years.
The challenge for partners in this shift is that their relationships have historically not been with business leaders and they are being shut out of these discussions. For example, the VP of Sales or Marketing may be leading major technology initiatives, without the support of internal IT. This used to be called rogue or shadow IT, but is now the new normal.
As partners scramble to become relevant in these decisions, there is a hunger to build the skill and services capabilities to add value to the lines of business. According to recent research by CompTIA, upwards of 43% of channel firms are exploring or actively shifting to new vendors to help them make the transition.
Partners are not waiting around
They are spending more time building their own brand and value proposition to the market. In the early days, it was enough to call yourself an IBM, Compaq or Microsoft partner and have the business flow in. Today, partner executives are building (or buying) sales and marketing talent to be the trusted logo in front of the customer.
The customer demand for vertical experience is also increasing. In fact, vector skills such as subindustry, line of business, sector, geography and technology specialization is driving the opportunities in the next 3-5 years. Partners have always shown resiliency and will go to where the demand takes them. Different buyers will invariably cause different partnerships to form.
A new breed of partner is emerging
We are seeing new “shadow channels” enter the market focused on the line of business buying journey. Disparate groups such as SaaS ecosystem partners, industry based consultants and service providers (think accountants, marketing agencies and legal firms), independent software vendors (numbering in the tens of thousands), born in the cloud experts and even startups are having an outsized influence on line of business professionals as they implement technology to drive their business forward.
The cloud, combined with peer groups and social media, have given customers unprecedented access to pricing, features, and capabilities. This transparency has eroded margins and taken away “special sauce” that local partners protected in years gone by. Most of IT is now commoditized to the point of disadvantage for partners – and they are looking for vendors to help them.
Customers have many more purchase options and have become self sufficient in areas where partners would have specialized only a few years ago. Because it is browser or mobile driven, the technology itself has become easier to deploy, manage and support internally.
You may not lose a partner, just their focus
Given all of these changes, partners are still cautiously optimistic and generally loyal to their current line card of vendors. In fact, 84% of partners are mostly or very satisfied with their vendor relationships according to CompTIA.
This doesn’t mean they are staying put. As mentioned earlier, 43% are exploring new vendors and actively growing their line cards. Vendors are losing a bit of control over partner loyalty as they embark on polishing their own brands in the marketplace and build the sales and marketing capabilities to be truly standalone entities. This changes as the size of the partner grows, from SMB always looking to shake things up to large being very measured in their approach.
These are key considerations for vendors as they place program bets going forward. There are several reasons why partners are focusing elsewhere including ease of doing business, the myriad of new competition, getting treated like a number, poor communication, lack of profitability, complexity, lack of product/program innovation, conflict, consistency, pre/post support, training, cost of program, lack of co-selling and marketing, and lack of specialization.
The good news is that channel partners have traditionally been a loyal bunch. However, the massive changes in the industry and with their very survival threatened, everything is on the table. Unlike losing a customer opportunity, a partner will usually not advise you of the defection. You may see an unexplained decline in revenue, either slowly or immediate, and not catch it in time for anything other than a post-mortem.
Channel Mechanics has just published the Definitive Guide to Keeping Channel Partners Engaged. With 17 pages of detailed insight, including the top 16 reasons that partners are disengaging from vendor programs, this guide will help you protect your most important partners from losing focus.
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