But this shouldn’t be surprising give the complexion of the channel today. Business transformation is not one-size-fits-all. There’s no single go-to template to follow as you align your company to meet new realities. So while in theory it might benefit the vendor community to identify a “perfect” partner type for the future to either develop or recruit, it’s simply unrealistic. Channel partners of varying sizes, skill sets, business models, customer demographics and even personal goals will have distinct roles to play in this “new normal” world.
In an effort to better understand the complexities of channel business transformation, CompTIA’s Vendor Advisory Council recently commissioned a white paper entitled, “Understanding & Aligning with the Transformation of Partner Business Models,” that outlines some of the forces changing the industry today and provides some guideposts for best practices to aid vendors dealing with evolving partner roles.
The issues are many. Today, for instance, many vendors are looking at ways to identify practical partner segmentation and engagement strategies to pull off the balancing act of aligning new go-to-market strategies while maintaining short-term revenue productivity. Channel partners are in the same boat, eyeing new business models and markets such as cloud, while continuing to successfully leverage legacy revenue streams for survival.
This is just one reality that came through during a series of in-depth interviews conducted by CompTIA and Morris Management Partners of 15 solution providers executives located throughout the United States, in addition to a similar number of vendor channel executives. Participants in the research process participated in either a 60-minute in-depth interview or a 30-minute concept validation interview.
The solution provider participants represented companies that range from less than $2 million in annual revenue, to more than $150 million, and operate a mix of business models including traditional product resale, systems integration, managed services, and even cloud-based subscription sales. Vendor executives represented a mix of hardware, software, and tools developers that generate a substantial portion of their total revenue via indirect channel sales, and whose total market revenue ranged from approximately $25 million to more than $4 billion.
Additionally, many of the anecdotal observations from the interviews are supported by quantitative data from several CompTIA research studies conducted over the past year, including reports on cloud computing, channel partner program trends and managed services. These studies’ findings each highlight the underlying change going on in the channel brought on by new business models and the desire by both solution providers AND their customers to move technology from a cap-ex world to an op-ex arrangement that features more predictable recurring expenses and revenue. Case in point, 6 in 10 end users currently handling some or all of their technology needs within a managed services model today cited cost savings as the No. 1 major driver, according to CompTIA’s recent study, Trends in Managed Services.
One notable takeaway from both the qualitative interviewing and the quantitative studies concerns the vendor-partner relationship. Solution providers are looking for help from their vendor partners to transform their business into a mold that best suits them and serves their customers. This assistance can come in many forms: sales and technical training, financial incentives and/or credit, etc. Both vendors and the channel have their own agendas, obviously, but mutually driving one another’s growth and profitability ought to be a shared one.
Consider how business-oriented the following list of top transition challenges cited by channel companies adding cloud services in CompTIA’s 2nd Annual Trends in Cloud Computing study:
- Determining appropriate revenue model
- Time/cost investment for cloud-based training for sales/technical staff
- Deciding which vendors to work with
- Cash flow/financial considerations
- Initial costs
Business transformation is hard work involving a reorientation of many core functions such as sales and marketing, financial capitalization, pricing structures and even some ongoing business relationships. As such, most channel companies plan to do so in an evolutionary manner, step by step, according to the qualitative interviews with solution provider executives. None of the executives said they were exiting their current legacy business 100 percent; in fact, most plan to operate in a hybrid mode for the foreseeable future.
