Channel Champion Blog

We only feel tremors now, but more is on the way

82242201_illustration-[Seizmograph]I recently had a great conversation with Diane Krakora, founder and CEO of PartnerPath to get her insights on the state of the channel.

The reason for this call was to find out more about PartnerPath’s recently released 10th annual State of Partnering survey — 10 Trends for a 2020 Vision. Diane and I spent most of our time on five key new trends — the trends that Diane believes have many in the channel a little panicked.

Frankly, vendors are feeling behind on implementing new channel models, quipped Diane. They are struggling to figure out how to find and engage the right partners that will help them deliver cloud solutions. And many are unclear how to adapt their marketing to attract customers on the new buyer’s journey of independent online research. Even big companies with dedicated digital marketing groups are feeling the pressure to get their marketing right.

So let’s go through these five trends one at a time. As Diane said, some of these might be a shock to vendors. But it’s better to learn about them now while they are still new — and well before 2020.

Trend #1: Resale Will Be Irrelevant

Ok, while many may think this is over dramatic, keep in mind that PartnerPath’s report makes this prediction based on what will happen in 2020, not today. And that we are talking about mindset as much as physicality.

I saw one data point in the study that that said 20% of vendors expect 50% of their revenue next year to come from a cloud-based consumption model and 44% percent said that the cloud makes up 25% of their business today. I think we all agree that partners are approaching the tipping point that buyers reached a while ago. And this is what has vendors panicked. The truth is that most of their partners are not equipped to sell/market to the educated buyer in the new buyer’s journey. And that is either an opportunity or a threat, depending on your SWOT analysis.

Trend #2: Customers Want Specialized Solutions

Who knew that partners could make a good living selling software exclusively to pizza makers, and not just any pizza makers, but takeout pizza exclusively. Obviously vertical expertise has risen in the charts for the 4Cs (contribution, capability, commitment, and coverage). Buyers are looking for a full solution that combines hardware and software services that address their specific business needs.

This specialization changes how partners market and how the vendors help support partners. Some partners may stumble into success says Diane — they may come up with a great idea for a regional bank, but how do they take advantage of what they have created? This is where vendors can then help the partner package the solution and make it repeatable so the partner can sell that solution to other banks in the region. I think the word “repeatable” is key. Today’s buyers want solutions that speak to them — that make immediate sense. These kinds of narrowly focused, specialized solutions deliver that kind of immediate recognition. When a customer reads a case study about how a bank or pizza maker just like them benefited from a solution, they tend to trust that the solution will work for them as well.

Trend #3: Partners Are Owning the Customer Relationship

While this one is pretty close to being “the third rail” of the channel, in the new buyer’s journey this makes a ton of sense, in particular with cloud services. I believe everyone gets why there’s all this angst — vendors historically do most of the heavy lifting. They are the ones that develop the materials, training, and services; the ones that support policies that help partners create the specialized solutions customers want.

But today’s successful partners are selling relationships as much as products and services. The buyer and seller are linked like never before. Diane comments that even the VAR acronym has changed from “value added reseller” to “value added relationship.” According to Diane, “the customer is looking for a specialized solution and they are looking to the partner to put one together.” It is the partner that assembles the right mix of needed hardware, software, services and support. Sometimes they even hide all the vendors’ names and call it their own solution. Who owns the customer relationship is shifting towards the one who puts together the solution. Increasingly, that is the partner.

This is particularly true in the SMB space. Partners are selling cloud solutions and get the renewal revenue. They’re the ones helping customers adopt the technologies or the solution, get policies in place, do change management and, as a result, come to own the relationship.

Trend #4: We’ll See More Partnering Among Partners

Here’s a data point for you: Nearly 40 percent of solution providers in the study indicated that they regularly partner with three to five other solution providers, and 30% say they have more than five. That’s a 10 percent increase over last year. This trend aligns with the increased demand for specialized solutions: solution providers are working with other solution providers for technology expertise.

And this trend raises some new questions. If I’m a vendor and I’m seeing my partners collaborate with more partners, should I encourage that? Should I be asking myself if I’m doing enough to help my partners put together solutions based on my technology or with my vendor partners? Or even, is this new “partner partnering” a good trend that I should roll with? I would say yes if you want to be on those partner’s short lists of strategic vendors.

Trend#5: Partners Getting On the ROI Bandwagon

Along with the power shift in customer ownership, the PartnerPath report shows one more seismic change. Partners are taking a page from the vendor handbook and looking hard at ROI themselves. About 80 percent of solution providers indicated that they are starting to look closely at what it takes per vendor to get on-boarded, to market, and to sell, and what the time is “from quote to cash.” Partners want to understand their profitability with each vendor line in a very specific financial way.

Partners are suddenly interested in ROI because, as Diane says, they have much better tools and systems to use to assess on-boarding of their own employees and are getting comfortable using them. Vendors have been encouraging them to get better at capturing and analyzing sales data, and they’ve used that knowledge to assess the vendors themselves.

They’re measuring profitability, and seeing these numbers is causing some of them to start dropping vendors that are returning low ROI. “Sometimes,” Diane said, “the vendors don’t even know how profitable a partner’s business is. They think, ‘Oh yeah, all of our solution providers are profitable,’ but they’re not.”

My Take-Away? Know Thy Partner

The results of the PartnerPath report will be a wake-up call for some and an affirmation for many that are already deep into the new buyer’s journey world. The move away from resale, demand for specialized solutions, the rise of value-added relationships, increased partnering among solution providers, and getting put under the partner ROI microscope all represent part of a sea change for vendors. The way to stay afloat is to go with the tide and get to know your partners better—to provide them with the training and the support they need to deliver high-value, specialized solutions that are centered on your product lines, not your competitors.

On the question of ROI, as vendors you should be measuring the specific profitability of your partners, both large and small. Know how long it takes each partner segment to get enabled, to close sales, to produce significant ROI for themselves. If you as a vendor have that data, you have something to bring to the table when the partners are scrutinizing the ROI they get from you.

And remember, what I’ve talked about today covers only five of PartnerPath’s Top 10 Trends for 2020. To learn more about the five Diane and I discussed, and to see what else is coming down the road, please listen to our Channel Wisdom Podcast.

 

ABOUT THE AUTHOR

Steven Kellam, President at CCI

Steven KellamAs a growth specialist, Steven is responsible for driving CCI’s evolution to expand its offerings and grow across its product suite, utilizing marketing to position the organization for continued, long-term success. He is also responsible for developing the strategic alliances necessary for CCI to achieve its revenue and profit goals, including technical alliances, service partnerships and sales relationships. Steven has experience in both the VAR space, having run a successful managed services IT business, and a background in manufacturing where he built a channel of over 2,000 partners.