EDGE 2017 - Are partners and vendors on the same wavelength?

EDGE 2017 - Are partners and vendors on the same wavelength?

Both partners and vendors actively seeking to form new alliances in the year ahead

James Henderson - Editor, ARN and Reseller News

James Henderson - Editor, ARN and Reseller News

But in truth, vendors want partners capable of engaging better, through “acting as a team” and “engaging earlier when there are problems”, while also partnering with others who offer skills that are complementary.”

Has the role of the vendor changed within the channel?

New business models and market players are combining to create confusion as to the future role of the vendor, with a clear definition still lacking - Channel Dynamics co-founder and director Moheb Moses offered clarity during EDGE 2017.

A question that is straightforward to ask, yet complex to answer — has the role of the vendor changed within the channel?

From a technological standpoint, the answer is no. But from the perspective of the channel, the answer is yes.

“The role of the vendor, namely that of creating new and innovative products, has not changed,” Moses acknowledged.

“What has changed (or more accurately, what will change) is their role in the supply chain, their relevance for the customer, their relationships with partners and their approach to partner programs.”

According to Moses, the supply chain has become less linear, moving away from the traditional route to market of vendor to distributor to reseller to end-user. Today, the path has become more like a spider web that surrounds the customer.

“Partners sell to partners,” Moses observed. “Service providers sell to distributors who resell the solution to partners and/or vendors. New services companies — that behave more like distributors — have appeared and sell to the customer, but deliver their services under the partner's brand.

“So the definitions for ‘distributor’ and ‘reseller’ are becoming less clear, and that means the future vendor needs to invest more time in understanding their partner's businesses, and be more flexible in how they work with partners with newer and different business models.”

To add another layer of complexity to the question, not all vendors are created equal. With success chiefly defined by market share and revenue figures, the size, scale and stature of a technology manufacturer also contributes to the customer’s interpretation of the brand.

When examining cloud vendors for example, Moses said an important distinction exists that differentiates how the vendor goes to market through the channel.

Namely, whether the customer perceives that vendor's brand as a puppy dog or a battery hen.

“We have an attachment to a puppy dog that we don’t have to a hen,” Moses explained. “In fact, we don’t even care about the hen... what we really care about is the egg.

Moheb Moses (Channel Dynamics)
Moheb Moses (Channel Dynamics)

“Similarly, in technology, puppy dog services are those where the customer cares about the brand, whereas, battery hen services are those where the customer cares about the service, but not the brand behind it.

“For example, if a managed service provider (MSP) is providing email-as-a-service, the customer may care about which email application is being used, but not necessarily about the storage or networking products supporting it.”

Consequently, this changes how a vendor engages with the channel.

“If the customer perceives a vendor's technology as a battery hen service, then the MSP is in fact the customer, not the end-user,” he said. “In the past, partners tended to lead with the vendor's brand.

“For example, a partner would have proudly boasted on the front page of their website that they were (say) an IBM or HP partner. Today you can struggle to find out which vendors the partner even sells.”

Despite such changing dynamics, Moses was quick to stress that the importance of the vendor still remains within the channel equation, but it’s just under a different guise in 2017 compared to before.

“It’s just that the partners want the customer to see the partner as the primary contact rather than the vendor, because this gives them greater account control, and more flexibility in how they deliver a solution,” he said.

”Of course, if the vendor is a puppy dog, then the partner will continue to promote the vendor. But if the vendor is a battery hen, the customer may never even know they are part of the mix.”

Partner programs

Collectively, different vendor definitions — coupled with emerging technologies, different customer buying patterns and a new breed of customer — are also challenging the traditional purpose, and process, of partner programs.

“Most vendor programs today reward partners on revenue achievement,” Moses explained. “For example, if a partner achieves their revenue target, they receive a rebate. So if the target for the quarter is (say) $300K in perpetual licenses, and the rebate is two per cent, then that equates to $6,000.”

But when applying this approach to an MSP, Moses said the process becomes more complex.

“The equivalent annuity revenue for an MSP for a similar sized deal would be around $15K/month,” he said.

“Of course, this is a monthly revenue stream that continues each month for the next three years, but it is difficult for a vendor to track and reward that.

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