De-risking channel transformation

De-risking channel transformation

To help channel businesses adopt new technologies, technology providers need to get beyond the sales rhetoric

Many channel partners are feeling the pressure from technology providers to more aggressively pursue sales of their cloud, Internet of Things (IoT) and other emerging technology solutions to capture these markets.

What’s slowing partners down is their level of perceived risk in this transformation, rather than a lack of understanding of the market opportunities.

As a general proposition, partner behaviour is based on an investment perspective — any sort of meaningful investment decision will involve a risk assessment.

In this case, risk is less about whether the particular opportunity will emerge, although there may be some view that technology providers always oversell the size, speed and accessibility of new opportunities.

Rather, it’s more about the investments required and nature of change needed to exploit the opportunity, while keeping their business going.

Adopting these initiatives usually require changes to the business models of channel partners.

This transition is not merely a change in product or service, but requires significant changes in:

  • Revenue flow (i.e from project- based to recurring)
  • Service type and delivery (i.e shift from data centre support to managed services)
  • Skills requirements, from marketing through to sales and services
  • Cash flow and capital requirements
  • Sales models and compensation

To reach their goal of a transformed channel fully exploiting new opportunities, technology providers not only need to provide channel partners with the right programs, but must also effectively communicate the size of the opportunity, as well as how programs remove the barriers for transformations.

Communication issue vs. program content

In reality, effectively communicating the size of the opportunities isn’t the problem.

Most midsize to large providers are well positioned in their partner program content in describing the opportunity and the incentives they bring to bear to help channel partners accelerate.

However, if their program content isn’t up to scratch, they’re going to struggle with their goal.

To give you an idea of where the content bar has moved to, look at Microsoft’s cloud program and the extent to which the content has moved way beyond product and into business model transformation, starting with educating senior management of partners about what’s involved in this type of transition.

What’s consistently lacking in the broad range of partner programs we’ve seen is that the language and orientation of the program content doesn’t recognise the partners’ risk perspective or directly show how the program element de-risks the situation for the partners.

Reducing channel risk

I recently came across a very large vendor that has a program for getting its partners to develop an IoT business, which involves the partners building out service capabilities.

This provider program uses its own professional services teams to do the first few implementations of a new technology, specifically to acquire the lessons of what and what not to do.

The team also has a mandated goal of transferring this knowledge to its partners, thereby reducing the learning curve (and consequent cost) to them. This is a good initiative of clear and unambiguous value that absolutely reduces the partners’ risks in building this business.

Despite this, the provider’s communication for this program is strangely defensive and talks only of how it doesn’t intend to compete with the partner from a service viewpoint.

Instead, the provider really needs to strongly position the program as an unequivocal investment that significantly reduces the risk for the channel partner in developing a practice around this technology.

To help channel businesses adopt new technologies, technology providers need to get beyond the sales rhetoric and communicate that they understand the business challenges of partners.

Specifically, how their program content mitigates the risk of transition to the partner.

By Neil McMurchy — Research vice president, Gartner

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