The evolving channel partner: an overview (part 1)
Friday, February 24 2017
With technology evolving at an unprecedented pace and customers going through different rates of digital transformation, the role of the indirect channel is more important than ever. But digital adoption is introducing greater complexity, which requires a spectrum of new skills and offerings that partners need to deliver. To stay relevant, partners must evolve quickly if they are to keep up with customer changes and industry trends.
The varying, and often unpredictable, demands of customers and the rapid advance of technology are the two biggest drivers of change in channel partners – forcing them to modify their business models, sales models, marketing, skill sets and partnerships. While there are many types of channel partners – both existing (volume resellers, systems integrators, service providers) and emerging ones (specialists, born-in-the-cloud partners, consultancy-led partners) – which all face unique challenges, this report provides an overview of the general changes affecting the channel. Further analysis of some of the topics in this report will be covered in subsequent reports.
Changing to a customer-led model
Customers across different segments will have their own unique challenges – enterprise customers face intense budget cuts in their IT departments as control moves to the lines of business (LOB) managers, including finance, marketing and operations. Each LOB manager has different needs, which can further differ by vertical. Customers face ongoing skills shortages, budget pressure and the constant need to cut time to market. But across these unique challenges are often common themes: customers want to simplify their complex IT environments, accelerate their business strategies through digital technology and enjoy predictable IT consumption. In addition, as cyber-security threats continue to rise rapidly, customers must navigate a maze of compliance requirements, while at the same time increasing revenue and profitability.
Partners cannot meet the multitude of changing customer demands by simply reselling IT products. Increasingly, partners need to move from a vendor-led model to a customer-led one. This means moving away from simply fulfilling demand created by the vendor to developing a set of offerings, services and solutions in response to customer needs, or acting as an advisor. This often includes designing and building customer IT models, possessing deep technical expertise, providing business-oriented/vertical consulting, defining solutions based on business needs, and being able to manage, monitor and protect a multi-cloud environment.
Furthermore, the channel must also demonstrate relevance to DevOps and developer teams as they deploy app-based solutions, and drive digital adoption. Partners should also be able to speak to compliance and security officers to ensure that any solution meets security and compliance requirements, and digital owners or the person/department in charge of crafting the digital strategy within the customer environment.
Partners need to keep up with the rapid pace of technology change
In the digital era, investments in cloud, the Internet of Things, big data and analytics, mobility and security, will accelerate, as will investments in emerging technologies, such as artificial intelligence. Digital transformation will happen in every industry – healthcare, education, manufacturing, the public sector – which will drive new regulations and compliance requirements. The great news for channel partners is that this will lead to an explosion of data that needs to be managed, stored and analyzed, higher-speed networks, greater processing power, and investments in new applications, management software and security. Legacy IT infrastructure will be unable to support many of the demands placed on it by digital technologies, so much of it will need to be replaced. Some will move to the cloud, but much will remain in customer data centers.
Though partners realize that this increase in demand will generate more revenue streams and business opportunities, the difficulty lies in creating an effective business strategy to capitalize on this. Many partners will be held back by their legacy hardware-led business models, an entrenched company culture or the inability of senior management to change. Some will be left behind.
Addressing the need for new skills
The need to specialize and change core business models means that partners need to bring in new skill sets.
- Vertical skills: As customer needs become more complex, partners need to bring in vertical specialists. These could be consultants – personnel who have very little to no IT background but know the industries they come from, for example, former bankers, teachers or healthcare professionals. These consultants know the buying decisions and cycles, how IT is purchased, who the influencers are, and the different business processes, needs and problems that need to be addressed.
- Application development: App development is another important skill set that channel partners need to establish as IT solutions and business outcome discussions continue to be application-led. It also becomes more important to effectively engage the DevOps/developer teams of their customers and speak the same language.
- Technical depth: Deeper technical skill sets beyond installing a server or deploying an ERP solution are becoming more important for partners. The rapid pace of technology change means partners need cloud architects, security specialists, DevOps engineers, data scientists and artificial intelligence scientists, among many others skill sets to stay relevant.
- New partnerships: But not every partner will be able to acquire in-house vertical consultants, deep technology skill sets or app-development capabilities. Partnerships between specialists will proliferate in 2017 (which will then accelerate mergers and acquisitions in the channel). Resellers are also looking to partner with – or even acquire – ISVs that serve a particular vertical and possess the app-development skills they lack, or at vendor marketplaces to see if there are organizations that can provide them with complementary skills or solutions and then go to market together. Increasingly, partners are looking to the distributors and vendors they work with to provide with the technical training and enablement around these newer technologies.
The sales model must change
Partner sales models are also changing. Resellers are paying more attention to the entire customer lifecycle – from the land stage (acquiring a customer) to the adoption stage (increasing adoption of software across the customer environment) to expansion (upselling additional features, services) and through to renewal (typically if a solution/software is widely adopted and customers see the value, they are more likely to renew). This has led to building customer success or customer lifecycle practices, driven by customer success managers or an equivalent role.
Moreover, partners are now shifting to a value-based discussion with their customers, leading with professional services and focusing on the business outcomes and not the speeds and feeds of the technology. While price continues to be a crucial factor in the sales process, partners are trying to avoid falling into that trap. Ultimately, partners want to be more than a reseller of IT, and want to be known as a strategic advisor to their customers.
Marketing seen as a differentiator
Marketing is typically not one of the strengths of channel partners. Historically, partners have been reliant on the vendor brand and certification, eg, as a Gold partner for Microsoft or a Platinum partner for Hewlett Packard Enterprise, as well as vendor marketing development funds and marketing collateral to generate awareness and demand from their customers. Increasingly, partners want to rely less on the vendor brands they sell, and build their own brand to stand out from competition.
Effective marketing means being able to engage with customers at different touch points, and much earlier in the sales cycle. Customers today have different ways of gathering information online, through social media, across multiple platforms, and other digital means, and partners need to be able to engage with them in each of these. Partners are increasingly making investments in digital marketing - 85% of channel partners polled in a Canalys global survey in 2016 said that at least 10% of their marketing activities are now digital. Moreover, 77% of the partners of those doing digital marketing find that these activities are effective. But 63% of the partners polled have no clearly defined marketing strategy – which indicates that this is where they might need the most help from the vendors they work with.
Furthermore, partners are assessing their approach to the vendors they work with – either consolidating their core vendor partnerships or expanding their partnerships to include more strategic vendors. The main infrastructure vendors may be pressured as more partners are drawn to work with Amazon Web Services, Google, Microsoft or next-generation technology vendors such as Nutanix. They will want to work with the vendors that will enable them to digitally transform and, in effect, help them enable their customers to navigate the digital transformation journey. But partners will always be driven by the need to grow revenue and stay profitable – and these will remain the most important factors for them when choosing vendors to partner with.
The evolved channel partner
Considering the multitude of factors driving change among channel partners – what does an “evolved channel partner” look like? While there is no single perfect model or partner type as the industry continues to change rapidly, an “evolved” channel partner will ultimately be a trusted advisor to customers, with the deep technical skills needed to solve complex IT issues. They will be able to engage customers from C-level executives to LOB managers. They will deliver business outcomes independent of the vendor brands they sell and be able to build their own IP to differentiate. They will be a credible digital provider, having deployed digital technologies internally while being able to market themselves effectively to engage customers across different touch points.
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