2019 Channel Lessons for the Next Decade
Here are four lessons vendors and channel chiefs can reflect upon while thinking of their strategies for 2020 and beyond.
By Larry Walsh
I’m not fond of year-end roundups of lessons learned and big-story retrospectives. Blogs and articles to that effect are little more than the equivalent of network sitcom clip shows that producers throw together because they have no new material.
Instead, I’d like to reflect upon the lessons learned in the past year that will stay with us in the channel well into the next decade. It’s easy to sit back and say 2019 will go into the books as yet another year of transitions and evolutions. Many people might say that 2019 was the year of acceleration, where trends such as cloud computing matured, consolidation picked up its pace, and the channel inched to a minute to midnight on the doomsday clock.
In reality, 2019 is a year of lessons in the new world order. In the past year, we’ve learned about new market needs shared across all technology vendors and the escalating and evolving expectations of business buyers. These are a few of the lessons that we’ll take with us into 2020 and beyond.
The Never-Shrinking Channel
Let’s get this out of the way: The channel is neither shrinking nor in danger of going away. The 2112 Group is tracking partner growth and start-ups. The number of channel partners is increasing steadily year over year. We have more than 150,000 unique solution provider businesses in the United States alone. According to data from our friends at Context in Europe, the same story is true there – a robust expansion of the channel population. And more indirect opportunities are becoming available as vendors discover the viability of non-technology partners and influencers.
The average partner earns more than $7 million a year in gross revenue. Partners are transforming, with the average partner generating the majority of its revenue from managed, cloud, and professional services sold on a recurring-revenue basis.
You’ve heard the naysayers and apocalyptic prognosticators talk about the need to save the channel from itself. It’s all bunk. Continual reports of partner consolidation (another misperceived trend), combined with an inability to “find the right partners,” have led some vendors and channel executives to believe that the channel is shrinking. The lack of uniformity in channel composition and performance accounts for most of these perceptions. Not all partners are equal. Transformed partners often de-emphasize or move away from their legacy vendors.
The channel’s role now and in the future is getting technology to market. Those screaming that the sky is falling also believe the sun dies below the western horizon every evening.
Channel for Customer Experience
Probably the most overused – and misapplied – term in the channel this year is “customer experience.” Too many people are using it as a punch line for accentuating the need for more training and incentives. They’re haplessly marrying customer experience to digital transformation as if the two are inseparable.
The need for customer transformation is real, and it’s a big deal. Acquiring products and services is no longer a challenge. Business buyers can satisfy their technology needs rather easily, but getting full use out of technology requires professional skill and support. The 2112 Group wrote extensively about customer experience as the new goal for the channel and counseled vendors on the need to think of partners as enablers of that experience. Partners are the means of ensuring that customers not only get a product but also get a return on their investment and a positive experience.
Sales Are Hard, Particularly Direct
Many channel chiefs don’t like to admit that their companies harbor a desire to go direct. Vendors perceive that doing so will save them money and allow them to close bigger, more profitable deals. Again, the evidence is clearly against this. A number of channel chiefs successfully fought back the direct trend this year with data that shows channel deals are more profitable. Moreover, they’ve demonstrated that direct sales are often the starting point for nonstandard pricing.
Lower cost of sales isn’t the only reason the channel will remain viable. In the global economy, direct sales are simply impossible. Vendors learn – and often have to relearn – that channel partners exist to provide market coverage they can’t afford. Even as we look to a future with artificial intelligence-driven sales, vendors will still need distributors and channel partners to sell to, distribute to, and support customers in various parts of the world.
Money Isn’t Everything
If you agree with the above lessons, here’s the last one that goes with it: Channel and partner value isn’t always monetary. We – as an industry – must recognize that partners exist because they provide essential services, support, and value to vendors and customers that vendors can’t deliver exclusively or independently. Many vendors are already exploring or adopting new partner performance metrics that measure partner value based on their skills, customer satisfaction, market penetration, specializations, and deferred costs. I’ll write about this more in 2020. Still, a lesson learned in our recent Channel Chief Meetup – an event co-produced by 2112 and 360insights – is that you can discover a lot about how partners contribute by removing money from the performance equation.
These lessons hardly make a complete list from the past year. Indeed, 2019 will go into the books as one of the busiest years in the technology industry and channel. On behalf of The 2112 Group, I wish everyone happy holidays and a joyous new year.
Larry Walsh is the CEO of The 2112 Group, a business strategy and research firm servicing the IT channel community. He’s also the publisher of Channelnomics, the leading source of channel news and trend analysis. Follow Larry on Twitter at @lmwalsh2112 and subscribe to his podcast, Pod2112, on iTunes, Google Play, Spotify, and other leading podcast sources. You can always e-mail Larry directly at [email protected].