The 90s called: They want their channel programme back!
Gartner analyst Tiffani Bova is calling on technology vendors to rethink their channel programmes, saying the current programmes are holding channel leaders ‘hostage’ at a time when channel partners are facing new challenges from the cloud services model.
In a blog post, Bova, a Gartner VP and distinguished analyst, calls on vendors to refocus their channel programmes on the financial relationship between the vendor and partner, driven by how the partner is using the technology within their overall offer, and what advanced services and IP they bring to the table, rather volume of ‘product’ resold.
Bova says most programme development today is focused on enhancing or iterating programmes that have been in place for a long time and which focus on outdated metrics.
She argues that the outdated performance metrics in place to show the ROI in recruiting and managing thousands of partners – even though most have shifted to value instead of volume metrics – are holding channel leaders hostage and unable to make investments.
But, she says, with the indirect channel an integral part of providers’ overall go-to-market strategies – delivering 50% or more of total revenue – the old programmes are too ingrained to abandon all together and start from scratch.
“Helping partners make a very thin margin deal more attractive by artificially improving profits through incentives has created a false sense of security that the existing business model will continue to deliver current levels of profitability for years to come,” Bova says.
“Furthermore, while offering targeted incentives or development funds to help partners make business model transitions may appear to help in the short term, but it doesn’t allow for a partner to find their own path forward irrespective of what vendors may want them to do.”
Bova says cloud services are increasing the fundamental challenges to the existing/traditional channel programmes.
“The long term view from channel leaders requires more innovation and willingness to take some risks when it comes to channel programme development – especially by the traditional on-premise providers who now have introduced cloud services to the market.
“One might say that channel programme architecture and the role they play in the business and for the partner are at a crossroads.”
She says programmes need to move to a holistic, integrated and customer-driven programme framework, and can no longer have the resale of technologies – be it hardware, software or services including cloud – and the centre and as financial driver of the partnering relationship.
“However, that type of change is not something that will happen overnight, nor will it be something every provider aspires to tackle,” Bova says.
“Nevertheless, the re-imagination of how to work with the channel will be necessary if a provider wants to respond accordingly to the new speed of business and IT departments.
“Programmes should focus on the financial relationship between the vendor and the partner and further driven by how the partner is using the technology within their overall offer, and what advanced services and IP they bring to the table and not the volume of ‘product’ they resell.”
Bova warns the next few years ‘won’t be for the faint of heart’ noting vendors and channel should look back fondly and remember their favourite channel programmes from the 90s ‘because those days are long gone’.
“[The next few years] will be for those who have the courage to lead their companies into a healthier future driven by market and customer demands and not the latest vendor programmes and incentives.”