With the global economy shifting to self-service, a growing demand for instant purchase and delivery, and everything moving to the cloud, there are some big shifts happening in the world of sales. But where do these changes leave the channel? Forrester has observed channel sales as representing more than 75% of world trade, and in a lot of cases, the channel makes up a significant portion of an organization’s sales strategy. So, what strategies will the channel have to adopt to succeed in this changing economy?
In reviewing these trends and other market shifts, I’ve developed a few channel predictions that can help us better understand the new channel requirements. Here are the top things I see coming that will force us to adjust our channel strategy.
Short-term predictions—a look ahead to 2023 and 2024
1. Partner Discounts Lose Steam in Favor of Stronger Enablement Programs
Until recently, partner discounts have been the most important element of a partner program. In the next year or two, the priority of partners and vendors will shift to partner enablement.
In the SaaS world, the initial transaction is becoming less and less important to the partner. Clients are engaging partners further down the funnel during the sales cycle. Post sales, the adoption of the product is paramount to avoiding customer churn. This means technical training and enablement of partners will be more important than the discount itself. Partners will need to be enabled with the information that is most important to the customer, not just to land the deal, but also to be successful post sale with the implementation to drive adoption.
This will represent a big shift for partner programs. It will be reflected in the way we design our programs and where we allocate our channel budgets. We all have a limited amount of funds that we can put into our partner programs. Most of this budget is put into partner discounts. Going forward, a lot more of these funds will need to be allocated to partner training and enablement.
The type of sales enablement training will need to shift as well. Sales enablement can no longer simply be training on the elevator pitch. Partners will need to be trained to speak to what is most important to the customer in terms of customer success. We have to enable our partners to drive business outcomes. Your traditional product sales and technical training will no longer cut it.
Partners will need, want, and ask for a lot more help on the technical side as their business models shift to a services-oriented model. Their business will depend on their ability to provide high value services that drive customer success. That means rethinking our enablement programs and increasing our investments in enablement so we can deliver better training not just to our customers, but also to our partners.
2. New Success Metrics Shred Metallic Tiers
In our partner programs today, the top metric for measuring partner success and partner rewards is sales revenue. Partners move into different tiers, often called metallic tiers, based primarily on how much volume they are selling. As transactions become less important, however, customer success will become the top metric for measuring and rewarding partners, over and above sales revenue.
We’re already seeing companies that are moving away from the classic metallic tiers. Microsoft just announced they are shifting to a point-based system based on competencies, certifications, and partner success. While certifications and competencies are important, and will still be counted and tracked, the really important part of that equation is final customer success and a high customer satisfaction (CSAT) score.
It is a big challenge for companies to accurately measure how well partners are driving that business outcome. Was the partner able to drive business success with a high customer satisfaction (CSAT) or Net Promoter Score (NPS)? The need to accurately capture these metrics will have a significant impact on channel technologies. In the coming years, we need to see existing customer success platforms, like Gainsight and Catalyst, move into partner success. I also expect to see the entrance of new technologies and new partner success firms in the channel tech space that will be able to help us track this and measure these higher-priority metrics.
3. CAMs Displaced in the Partner Ecosystem
Over the next year or so, Channel Account Managers will be replaced by Partner Ecosystem Managers.
Accenture sites partner ecosystems as being the cornerstone of business growth. Accenture and other large consulting firms now offer ecosystem consulting services to help companies adopt this business model. This creates a new business reality. Channel managers will have to expand their thinking and their ability to work with different partner types.
Today, the most popular position in the channel is the Channel Account Manager (CAM). The classic CAM role involves managing Value-Added Resellers (VARs) and Value-Added Distributors (VAD) and driving transactions to achieve sales targets. Companies, however, are already in the process of expanding their partner ecosystems to include regional and global system integrators, managed service providers, cloud hyperscalers, and a variety of referral and influence partners. This is a much broader role than what CAMs typically had before. CAMs will have to upgrade their skills or be replaced by partner ecosystem managers. Ultimately, we’ll have to redefine the meaning of the word channel from that of the transactional partners to a much broader and more diverse partner ecosystem.
10 Years Out - The Future of the Channel
Imagine ten years from now, when all products and services are purchased on a marketplace without any vendor sales rep intervention. That means the end of the classic reseller. Partners will have to drive business outcomes to survive. That's going to be the business model, and as a result, we are going to see a number of significant transformations:
1. The Death of the Classic VAD
With the demise of the classic reseller, the classic distributor that is serving the VARs today will have to become more of a partner services and enablement hub. Vendors will be challenged to deliver the services training that is needed by partners to drive customer success, which often depends on the integration of multiple solutions.
Distributors have an opportunity to build centers of excellence around their vendors’ SaaS offerings. Since they're good at bringing in multiple vendors and offering those up to partners, these will become hubs where they can support and train partners on multiple products and services. They help ramp up partners’ delivery capabilities through co-delivery and bench support.
To accomplish this, they're going to have to shift their business model more to a services mindset than their current transactional model. We could even see distributors’ value-add and margins increase as they move to this services model.
2. The Rise of the Influencer Channel
Another big change will be driven by the shift to marketplace purchasing: as more buyers switch to self-service, the channel influencer will become paramount.
With users purchasing directly from the marketplace, who is educating and influencing them along that buyer journey? In the consumer world, we rely on friends and the advice of online reviews. Technology buyers rely on co-workers, online communities, and trusted partners.
There will be a heightened need to think about who is planting the seeds of our solutions in the minds of the customers. This is where the influencer channel becomes so important. Our service partners are influencers, but there are other influencers in the chain that we may not even be talking to today. Companies will need to strategize how to get in front of influencers.
Channel success, partner success, and company success are going to become a team sport. The role of influencing the influencer will fall to everyone in the company, whether in marketing, sales, channel, or technology.
This effort to influence is going to drive a further shift in channel technologies. Where today we focus on partner-originated opportunities to determine success, the new influencer channel model will make this difficult to track. More and better technologies are going to have to come out in the channel stack to accommodate the need to track influence.
Conclusion: A transformative decade for channel is approaching
Leading channel organizations through all this transition won’t be for the faint of heart. There are still a lot of unknowns that make it difficult to foresee exactly where this shift will take us, but we can expect to see new roles, new business models, and new technologies rise to lead us through the challenge in the coming years. Of course, the only constant is change, and one thing we know for sure is that it's going to be exciting. The great news is that the channel is a tight knit community of channel pros who love sharing and solving problems together. Get out there into the channel community, listen to the channel podcasts, attend live and online events, and keep your company up to date on the channel of the future.
Rob Spee, SVP of Global Channels and Alliances
Rob Spee is the SVP of Global Channels and Alliances at BeyondTrust, where he leads a growing team to build a modern partner ecosystem. He is also the founder and CEO of Channel Journeys, and hosts the Channel Journeys podcast where he interviews other channel pros to explore best practices in partnering.
Rob is a guest speaker on other IT and channel podcasts, and guest blogs on numerous channel publications. He excels at creating visionary channel strategies that accelerate revenue growth and open new routes to market. He knows what it takes to build global partner ecosystems and performance-driven channel organizations. In fact he’s done that as a vendor, a reseller, and a distributor.
He enjoys sharing his passion for the channel, bringing new insights and innovation, and energizing his clients to excel.