EDGE 2017 - Are partners and vendors on the same wavelength?
- 04 September, 2017 06:30
James Henderson - Editor, ARN and Reseller News
The channel across Australia and New Zealand (A/NZ) needs recalibrating, with EDGE Research uncovering the true pain points and priorities of partners and vendors.
While the channel appears to be operating on the same wavelength, through assessing the wants and needs of the market in parallel, it's clear that misalignment remains.
According to EDGE Research findings, both partners and vendors are actively seek to form new alliances in the year ahead, disrupting a previously settled industry in terms of long-standing partnerships.
From a partner perspective, 43 per cent of resellers on both sides of the Tasman are looking to take on some new vendors, in a bid to fill missing gaps across technology portfolios.
During the next 12 months, 27 per cent plan on making no change to current partnerships, yet 30 per cent are actively looking to replace some existing vendors with alternatives.
And why is that? Aside from technology reasons, partners are beginning to adopt a vendor-type mindset when it comes to striking alliances, refusing to loyally - and perhaps on occasions, foolishly - back a vendor unconditionally despite negative results.
In essence, the channel is placing vendors on notice, requiring technology providers to step up or step aside as new solutions and business models offer immediate alternatives to the status quo.
Because vendors continue to compete directly, continue to change program requirements and continue to engineer margin rates.
While EDGE Research points to a general consensus within the channel, partners want vendors to stop calling at quarter-end about deals, competing with resellers and quoting direct, alongside offering irrelevant incentives and meaningless rounds of reporting.
For those vendors still dictating margin and offering pointless rewards to close deals, partners have become tired with age-old methods in a modern channel.
Instead, partners want vendors to create markets, allowing partners to provide added layers of value on top for customers.
As one surveyed New Zealand-based partner put it, “create the market for your products and include us in your sales and marketing activities.”
Furthermore, deal flow improvements must be made with one surveyed partner adding, “help provide qualified leads and fully support partner led sales; align internal sales comp, proper account planning and joint customer events.”
Perhaps the final piece of partner advice to vendors is the most obvious however, and that’s around the notion of better partnering.
According to one surveyed partner, “understand my business (channel) better, make deal reg smooth and consistent, provide channel specific support, training and true cloud consumption models.”
But it’s not all one-way traffic, with 12 per cent of vendors also looking to replace existing partners across A/NZ within the next 12 months.
Delving deeper into EDGE Research findings, a whopping 75 per cent of vendors are looking to take on new partners to expand coverage, highlighting the increased importance of the channel in both the immediate and long-term.
Through this expansion, some vendors are rapidly expanding channel plans from a direct sales approach, while others require more partners for coverage regionally and in specific verticals.
Collectively, EDGE Research highlights that 87 per cent of the vendor community will instigate channel change within the next year, meaning partners must also be wary about becoming irrelevant.
Because vendors want partners to stop shopping around distributors and being driven by discount, as they try to support too many brands and essentially, sit and wait for leads.
When quizzed on the top pain points for vendors, technology manufacturers are turned off by partners being guarded with opportunities, having a solution agnostic attitude and selling on price.
Furthermore, those that seek additional discount do not favour well, joining partners that cling to outdated business systems and bring vendors in late to opportunities.
On the flip side, vendors want pro-active partners, partners capable of hunting for customers without assistance, creating new leads and business as a result.
According to one surveyed vendor, successful partners display “more proactive demand-generation activity, generate their own leads and invest more in pre-sales resource”.
Meanwhile, vendors want partners capable of adding value on top of technology solutions, moving away from the traditional resell approach - “add value to our services (not just sell them), focus on your differentiation and value add in a sale.”
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.
“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.”
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.
“For example, if the deal was closed in April, the vendor would recognise $45K, but if it was closed in June, then the vendor would only recognise $15K, meaning the rebate could be anywhere from $300 to $900 (still well short of the $6K reward for a perpetual deal).”
This means vendor programs must adapt to the changing nature of revenue accrual in an annuity model.
“One option is to reward partners for as long as the contract is in place, but that means paying small amounts of MDF for the next three years,” he said.
“The alternative is to reward partners up front, but that may mean paying a $6K rebate on $15K revenue (which on a spreadsheet looks disproportionate).
“Partner programs that today are based solely on revenue achievement will not have the influence they used to in an annuity model.”
In looking ahead, Moses said the successful vendors of the future will have a more sophisticated means for tracking and measuring performance, alongside a “far more complex” channel model to manage, with the successful traits today still relevant.
“They will have a clear understanding of the role of their channel and clear expectations of what their partners need to deliver,” Moses outlined.
Delving deeper, the future vendor will also provide transparency around direct customer dealings, underpinned by clear rules of engagement and consequences for breaching such rules.
“They will also understand that if they are going to use a channel (which not every vendor may) that the channel is not ‘a thing that the channel team looks after’ but that it is a go-to-market strategy that affects everyone in the company from the CEO down,” Moses added.
“Vendors don’t necessarily have to have the best program or the best product to be successful — consistency is more important.
“If partners know how a vendor will behave, they can build a business around that. Whereas if a vendor is inconsistent, it’s hard to trust them.”
Top 10 ways vendors can influence partners
There are hundreds of sources of influence in the channel and they tend to have a very loyal and engaged subset of followers - Forrester principal analyst of global channel Jay McBain unveiled the hot spots at EDGE 2017.
1 - Industry media
In the technology and telecom space, there are 16 sizeable media companies around the world who have been quick to recognise the communities trend, and have formed powerful offerings under their trusted brands.
Looking at their advertising guides, you will quickly notice that unique readers are high among all of them.
Simply put, partners don't have the time to read a stack of magazines or a bunch of newsletters — they tend to choose only one brand to follow. How does this align with your media strategy?
2 - Associations
There are numerous associations, both generic as well as hyper-focused. Surprisingly, the largest association in the world (by far) doesn't even reach five per cent of the intended audience. Looking at your product portfolio, are you aligned with the macro and micro based communities where your partners are engaging?
3 - Analysts
Depending on the size and maturity of partner channel you are recruiting, analyst firms can have a major impact on whether you are considered for your product category. Research by firms such as Forrester, Gartner and IDC tend to carry a lot of weight as the size of partner grows.
Also, there are hundreds of mid and smaller sized analysts that carry weight as channel consultants that also have power in making vendor decisions. Are you spending enough time building those relationships?
4 - Distributors
Depending on your product category, making the commitment to broad-line or niche distribution will be important. From an influence perspective, distributors have out- sized reach and marketing budgets to drive partner influence.
Many small and mid-sized partners use distribution almost exclusively for learning and community.
5 - Vendor communities
Several companies have built impressive communities that serve their ecosystem. For example, in the managed services world, companies such as ConnectWise and Autotask have built large and loyal followings of partners that they offer other opportunities to market through.
There are many more examples ranging from SaaS ecosystems such as Salesforce Dreamforce to traditional vendors such as HP, Dell, Cisco and Lenovo.
6 - Peer groups
Many partners that I have worked with swear by peer groups. The ability to engage with like-minded folks and solve problems in a very human- centric way is a huge benefit for them. In most cases, these peer groups try to avoid outside influence but do have sponsorships for events available. In some cases, vendors can participate.
7 - Thought-leaders and bloggers
This is a broad group, but by engaging through thought leadership, blogging and consultancy, they become the most visible people in the channel. They are very visible and they have influence on many partners.
8 - Trade-shows
Most channel professionals will only attend one or two events per year but understanding your target partner and having a healthy trade-show calendar is a must.
9 - Social
Being on social means more than having company Facebook, LinkedIn or Twitter accounts. There are some vendors currently winning this medium, with very socially-minded channel managers engaging at a personal level on these platforms. There are thousands of partners engaged, with real business being conducted by ‘people they like’.
10 - Shadow channels
Partners such as consultants, integrators, ISVs, professional services firms, born-in-the-cloud and start-ups are all disrupting what traditional channels look like. The shadow channel is currently the wild- west but they need to connect, learn, and engage like everyone else.
Tech Research Asia, in conjunction with ARN and Reseller News, created three unique and correlated surveys to analyse trends and alignment between customers, partners and vendors in Australia and New Zealand. Over 240 respondents including IT decision makers from a broad range of industries and business sizes, traditional and ‘new’ partners and a broad mix of vendors took part in the online survey conducted from June through July 2017.