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Expert Hubs 2021: vendor-partner relationships

Canalys recently ran a series of “Expert Hubs” at its latest forum events. The idea was to gather experts within the channel partner community to discuss a variety of subjects pertaining to one of the key event themes: ESG, strategy, cybersecurity, managed services and digital workplace. The sessions featured a mix of partners, vendors and, in some cases, third-party experts. Event participants were invited to watch the live discussions online. In this series of reports, we summarize some of the key points that came from these sessions.

In Market

Written by : Alex Smith

Posted on 19/10/2021

Session details

Topic: Vendor-partner relationships

Partner participants: Atea, Computacenter, Exertis, Markit, Prianto

Vendor participants: Hewlett Packard Enterprise, IBM, Nutanix, Trend Micro, Vertiv

Key points

Given the topic of this session was vendor-partner relationships, it was apt that half the participants were from vendors while the other half were from the partner community. The challenge, however, was to find enough common ground across a diverse mix of companies that operate in different technology markets. Fortunately, there were several areas where shared experiences could be discussed, and it was insightful to hear both the vendor and partner perspective on these topics. Below, we have summarized some of the key themes and points of interest that came out of the session.

Partners are increasingly strategic in their vendor selections. This was one of the opening talking points, and while there was some variance in perspectives here, most partners indicated that they are increasingly strategic in their vendor selections. Amid a technology landscape that continues to see new vendor startups, partners must maintain a degree of stability and plan for the long haul, rather than be overly reactive to the latest vendor making headway in the market. There are a few important considerations here. First, all partners (even large ones such as Atea and Computacenter) must prioritize their resources and will often find that they can gain more market value by having strong expertise in a particular technology stack, and therefore will invest the time and resources in a select group of vendors. Second, there was a belief that, inevitably, natural consolidation within the technology landscape often results in smaller vendors (especially those with compelling and disruptive technologies) being acquired by larger ones. A wait-and-see approach, therefore, becomes a practical strategy for partners that identify alternative vendors making noise in the market.

This vantage point bodes well for many of the established incumbents, vendors such as Cisco, Hewlett Packard Enterprise, HP, Lenovo and Microsoft, which have long-standing relationships in the channel and drive significant revenue for the ecosystem. It is, perhaps, a reminder for those vendors looking to break into the channel that they must be prepared for the long game. As one partner put it, “trust has to be earned over time.”

Equally, however, partners must keep a close eye on a rapidly changing landscape. Being overly reliant on a small set of vendors can be dangerous, especially if the fortunes of some of those vendors goes south. Consider cybersecurity, which is an industry that continues to be disrupted from within. In just a few short years, Symantec has gone from being a cybersecurity leader (from both a market share and mindshare standpoint) to virtually non-existent. In hardware, Dell Technologies has gone from being a company that disregarded the channel to one of the largest vendors in the channel by volume. AWS, too, started its journey focused on direct sales and self-service models, but has significantly ramped up its channel efforts. Partners must read the tea leaves to know which vendors to bet on.

Vendors struggle to support partners’ international operations. This was one of the more contentious points of the conversation, but one that the partners were largely in unison on. There are two things at play here. First, more partners are expanding geographically. Every partner on the panel operated in multiple countries, whether across the EMEA region or worldwide. Second, and arguably more important, these partners all reported to have examples of global customers that wanted to centralize procurement from their HQ locations. The overwhelming feedback was that vendor country operations or regional siloes were a significant barrier to supporting these opportunities. Partners would encounter both a home market that is unable (or unwilling) to support revenue activities that fall outside of their allotted territory, while the vendor teams within the “subsidiary” markets would be equally concerned about getting recognized for sales activities happening in theirs. The consensus feedback from partners was that few vendors have figured out how to crack this conundrum, leaving partners in this situation having to navigate up the seniority stack to plead with global executives to resolve things.

Some vendors are tackling this challenge by formulating dedicated international programs, but these are challenging initiatives to drive successfully given the geographic P&L structure most vendors operate with. It is one thing to segment out a small number of global accounts that are managed by the vendor directly (and therefore sit outside of the normal sales segmentation model), but it is another challenge to support partners’ own global ambitions through a programmatic approach. Furthermore, vendors must consider the other side of this debate. Few partners have true international scale, and there will always be some markets where they cannot fulfill orders themselves, and therefore vendors may be asked to bear the burden of filling those gaps, either directly or with local partnerships, which leads to the other key point: vendors must consider long-standing local relationships with partners that may not have international strength but excel in their local markets. Forging ecosystems (the hot buzz in channel management right now) across the channel may be key to unlocking the success of international vendor programs.

Program incentive changes often happen before the market is ready. As one of the final topics discussed, unfortunately there wasn’t enough time to dive deep into this area. But it was clear from the reaction of the room that partners collectively felt this pain point. The complaint is that vendors, wanting to prioritize their latest and greatest offerings, apply great incentives on that side of their portfolios but in doing so, take away from the more established offerings. If there isn’t enough volume opportunity in the new products, the move only serves to reduce the overall earnings for the partner in the short term.

It is easy to sympathize with vendors on this front. Incentive programs, at their core, are designed to drive a specific set of behaviors and vendors clearly show their priorities with their incentive stacks. Vendors in the described scenario can argue that they are offering attractive margins but the experience from partners may be the opposite if they have not uncovered those opportunities. Affecting a partner’s earnings in the short term will inhibit its ability to succeed in the long term. Clearly, achieving perfect timing is not possible, so vendors need to use other tactics to ensure a smooth transition for partners:

  • Use short-term incentives, such as promotions, deal registration bonuses or MDF, to encourage partners that are ready to focus on the newer part of the portfolio before overhauling the core incentive program.
  • Give advanced notice that sweeping changes to the incentive stack are coming and provide tools to help partners calculate their earnings in the new structure.
  • Before making programmatic changes, calculate the real (not hypothetical) impact on partners’ incentives to understand the potential ramifications.

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