INSIGHT: The 90s called… They want their channel program back
- 06 March, 2015 05:53
Channel programs have been developed by technology vendors to manage and enable their indirect channel partners and create a certain level of consistency and brand loyalty for decades.
For technology vendors, they can require significant financial investments in people, processes, systems, marketing and sales support to gain scale (repeatable and efficient) especially on a global basis.
Unfortunately, Tiffani Bova, VP and distinguished analyst, Gartner, believes the same performance metrics have been in place to show the return on investment (ROI) in recruiting and managing thousands of partners (yes even though most have shifted to value instead of volume metrics) which is holding channel leaders hostage and unable to make new investments.
In some cases Bova explains, the indirect channel is such an integral part of providers’ overall go-to-market strategies (delivering 50% or more of total revenue) that the programs are too ingrained in the business to abandon them all together and start from scratch.
“Unfortunately, most program development today is focused on enhancing and iterating what has been in place for a long time, ensuring partners continue or even increase their business with a particular vendor, rather than thinking about the long term needs of the company and its ecosystem,” Bova adds.
“The changes are a bit too short term focused and internally focused.
“Helping partners make a very thin margin deal more attractive by artificially improving profits through incentives has created a false sense of security that the existing business model will continue to deliver current levels of profitability for years to come.”
Furthermore, Bova believes that while offering targeted incentives or development funds to help partners make business model transitions may appear to help in the short term, it doesn’t allow for a partner to find their own path forward irrespective of what vendors may want them to do.
“As the interest, applicability and use of cloud services expands fundamental challenges to the existing/traditional channel programs continue to arise,” she forecasts.
“The long term view from channel leaders requires more innovation and willingness to take some risks when it comes to channel program development – especially by the traditional on premise providers who now have introduced cloud services to the market.
“One might say that channel program architecture and the role they play in the business and for the partner are at a crossroads.”
Consequently, Bova believes programs are no longer able to have the resale of technology (hardware, software and services including cloud) be the centre and financial driver of the partnering relationship.
“They need to move to a holistic, integrated and customer-driven program framework,” she explains. “However, that type of change is not something that will happen overnight, nor will it be something every provider aspires to tackle.
“Nevertheless, the re-imagination of how to work with the channel will be necessary if a provider wants to respond accordingly to the new speed of business and IT departments.”
As a result, Bova says programs should focus on the financial relationship between the vendor and the partner and further driven by how the partner is using the technology within their overall offer, and what advanced services and intellectual property (IP) they bring to the table and not the volume of ‘product’ they resell.
For Bova, the bottom line is… “both vendors and the indirect channel need to look back fondly and remember their favourite channel programs from the ‘90s which brought a sense of stability and predictability to the business — because those days are long gone.”
“There is nothing we can do to slow down the pace of change we are facing as an industry,” she adds.
“However, what we can do is work hard to become more agile and adapt to those changes more quickly, without disrupting the existing business too much.”
So much so that when examining the market, Bova remains confident that these next few years won’t be for the faint of heart.
“They will be for those who have the courage to lead their companies into a healthier future driven by market and customer demands and not the latest vendor programs and incentives,” she warns.