EDGE 2017 - Why vendors should leave gold, silver and bronze to the Olympics

EDGE 2017 - Why vendors should leave gold, silver and bronze to the Olympics

Vendor programs are living in the past, with tiering now archaic and favouring longevity over skills and abilities

It was not until the United States hosted the 1904 games that the now traditional gold, silver and bronze medals were first awarded at the Olympics.

Before then a simple olive branch was awarded and for a brief period silver was the highest honour awarded followed by copper and bronze.

Since then it’s become the default measure of status from airline lounge access to shopping discounts and of course IT industry channel programs.

Vendor partner programs have been focussed on the concept of status or tiering for many years. They were first put in place at a time when products typically weren’t restricted for purchase through distribution.

The ‘anyone can play’ strategy adopted by most vendors helped fuel the growth of the industry through the 90s and beyond and was a key driver of channel growth.

The unfortunate by-product of all this growth was the ‘drive-by’, where a partner with little or no investment in skills and happy to take deals at low margin could submit disruptive bids to customers for a vendor’s products.

Partners that had invested in skills and certifications cried foul and in response vendors started to adopt a tiered model for partners.

Typically, the programs provided higher product discounts plus other benefits for partners that had achieved gold or silver status which prevented a drive by from any non-accredited partners.

Although partners often balked at the requirements there was kudos in being a gold certified partner for vendor X (and then platinum when it became the new gold).

We never did get to rhodium, even though it’s rarer than platinum. I suspect it was vetoed by the marketing folks as not being sexy enough but I digress.

The world has changed

Fast forward to today and we are living in a very different world. We just don’t see the type of deals where the product components can be separated from the overall project anymore.

Customers don’t want this any more than partners do and in a world of ‘as-a-service’ it’s often not possible to do this anyway.

The other argument that’s always used is that customers want to know that partners have the skills to do the job but this comes from a time of CNEs, MCSEs and CCIEs.

For anyone born after 1980 the first one is Certified Novell Engineer and if you don’t know who Novell is then I can’t help you.

Once again, times have moved on and the data supports this. Our recent joint EDGE Research with ARN and Reseller News asked if vendor certifications were still important to customers and less than 25 per cent stated they were still directly relevant.

The focus now is on skills and that’s a very different thing. Customers are comfortable asking partners for their solution credibility, previous project experience and customer references rather than relying on vendor status and certifications.

This is understandable, especially as more projects now involve multiple technologies. There is still a role for vendors to provide training of course but certifications are just not as relevant as they once were.

Nobody blink

As outlined during EDGE Research, only three per cent of vendors are planning a major overhaul of their partner program in the next 12 months.

Given the change that has happened in the industry since the invention of tiered partner programs over 25 years ago, why are vendors continuing with this approach?

The primary issue is that nobody wants to go first for fear of giving away ground to their competitors. Everyone is waiting for someone else to make the first move.

Mark Iles - Executive consultant, Tech Research Asia
Mark Iles - Executive consultant, Tech Research Asia

The dominant legacy of the tiered approach is that we have a channel that is addicted to margins and rebates. If you want further proof, EDGE Research asked partners across Australia and New Zealand what were the top three things they want their vendors to deliver in their channel programs:

  1. Product and service margins
  2. Deal registration / price protection
  3. Program consistency / reliability

In an overwhelming show of solidarity when we asked vendors the same question i.e. what are the top three things you believe your partners want they said the same three things. In the same order.

So, at least vendors and partners are aligned. The problem is they aren’t aligned with the market.

It’s a points issue

As the world moves towards a more agile approach to IT, the reality is that the same margins and rebates won’t be there for vendors to give away.

The cloud providers get this — they had little or no legacy and didn’t have the margins to give away in the first place.

Ask any partner whose primary business is cloud and they will tell you that cloud margins are terrible and they build their business focussing on the margins they generate from their own solutions and services. This is the new world.

At Tech Research Asia we spend a lot of time helping vendors with their channel strategies and I am yet to meet one that is completely happy with the partner coverage they have. And EDGE Research again bears this out with 75 per cent of vendors looking to recruit new partners in the next 12 months.

In FY17 there were surges of new IT, media and telecommunications businesses established in Australia and New Zealand so the new partners are out there.

The problem is the current tiered system serves its highest-ranking members and acts as a disincentive for partners to begin a new vendor relationship.

The days of a vendor starting a conversation with a potential partner by showing them all the program requirements are gone.

Partners aren’t looking to start a new relationship with a vendor by jumping through hoops involving training, certification and investment in marketing.

A new agile approach

We live in a world of start quickly and adapt fast. If vendors want to grow their channels they will need to adopt a different approach.

Let’s imagine what would happen if vendors provided a level playing field for partners.

They could still target their resources based on a partners’ actual or potential market impact e.g. strategic solution alignment or industry focus but these would be more fluid and adapt in real-time rather than being based on outdated annual accreditations and business plans.

This approach would require a reduction in margins and rebates overall to free up the resources needed to drive more opportunities and our research again supports this.

Partners and vendors both stated the biggest issue with partner programs today is the lack of new business opportunities they generate yet all our efforts focus on getting partners to compete for status and then compete again to be the first to register any and all deals they know about to secure yet more discounts.

Where’s the value — what assistance would you like to see vendors give you?

  • Sales introductions / leads
  • Help to drive awareness to broader customer base
  • Help to find and collaborate with other partners in ecosystem
  • Digital marketing assistance
  • Technical assistance

Let’s focus our energies here — margin and rebate resources would be better redirected towards activities that drive the market, create better awareness for partners and vendors and ultimately deliver more opportunities across the board.

Fortune favours the brave. In a world where we are constantly telling customers to adapt or die and to be agile and transformative maybe it’s time we took some of our own medicine.

Mark is an executive consultant with advisory and consulting organisation Tech Research Asia, where he focusses on working with established and emerging technology vendors across the Asia Pacific region.

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