- March 25, 2020
- Posted by: lmwalsh
- Category: Strategy
Our exclusive survey finds channel executives are responding to the immediate and long-term ramifications of the pandemic’s disruptions.
By Larry Walsh
The full toll of COVID-19 on lives, economies, and the channel remains speculative at this point and – as strange as it may seem to say – the pandemic is still in its early stages. Channel chiefs and professionals, however, are already feeling the impact of social distancing and lost productivity. They’re reacting quickly to ever-changing circumstances, trying to hold the line against cutting programs drastically as the global economy deteriorates, according to an exclusive survey by The 2112 Group.
In the COVID-19 Impact on the Channel survey, The 2112 Group queried more than 100 channel chiefs and professionals last week to capture a snapshot of how COVID-19 is impacting vendor outlooks and channel programs. The survey found that most vendor channel programs are maintaining channel investments at pre-pandemic levels even as they lower their full-year 2020 channel revenue forecast. And most of the channel professionals surveyed are already thinking about how they and their partners will recover when the world gets beyond the coronavirus curve.
Going into 2020, channel professionals – those who run vendor channel programs – were mostly optimistic about channel growth in 2020. In the annual 2112 Channel Chief Outlook survey, released in early February, 57% of channel professionals said they believed global and regional economies would continue to expand relative to 2019 growth. In the COVID-19 survey, they flipped their outlook, with 85% expecting full-year 2020 to end worse than 2019. Of those expecting an economic inversion, nearly one-half are expecting a significant decline.
Channel professionals are already feeling the sting of the anticipated economic downturn. Nearly one in four vendors said they’re seeing a drop-off in channel orders and revenue. One in five is experiencing supply-chain disruptions. And roughly one-quarter said the shift to “work from home” is proving difficult and distracting.
Before the pandemic took hold, three-quarters of channel executives expected partner-driven revenue to increase by at least 6% in 2020. Considering the COVID-19 effect, nearly 40% expect their indirect channel sales to decrease by at least 5% this year.
The good news is that 42% of channel chiefs said their channel revenue will remain within 5% of their original forecast, indicating that a fair percentage of vendors believe their channel programs will bounce back during the recovery.
Some economists are predicting that global and regional economies will contract by as much as 25% in the second quarter. The consensus among analysts is that the U.S. economy, and other regional ones, will rebound in the second half of 2020 with growth of 8% to 12%.
The 2112 survey finds vendors are already pumping aid into the channel in terms of free products and support, credit and financing, and capital investments in strategic partners. Most vendors are not planning to cut their channel sales, marketing, or incentive budgets, believing that contracting their spending will exacerbate the immediate economic downturn in Q2 and make the second-half recovery more difficult.
The general sentiment of channel chiefs is that COVID-19 and the resulting economic and societal damage caused by the pandemic will change the way vendors think about their routes to market and partner operations. According to the survey results, though, it’s too early to tell just how the crisis will affect the channel paradigm.
Some channel professionals said it’s too soon for a survey to provide clear indicators, given the instability and uncertainty generated by COVID-19. While the 2112 Group doesn’t disagree, we thought it essential to capture a snapshot of what’s happening in the initial stages of the crisis. Our intent is to provide insights into what’s happening now and create a baseline for future comparison.
CLICK HERE FOR A COMPLIMENTARY COPY OF THE REPORT
2112 will conduct ongoing research to provide the channel community with data-driven insights into how it’s reacting to COVID-19 and the economic consequences. Additionally, 2112 is creating more resources for channel professionals for guiding channel strategy, operational optimization, program automation, and marketing. Some of these resources are complimentary, while most are reserved for subscribers of 2112 Brainstorm, our exclusive intelligence service.
2112 is offering around-the-clock support to vendors and channel professionals around the world. Our mission is to provide the channel community with the best strategic insights and guidance for building and maintaining vibrant partner programs. We’re in this together with you. And together we’ll get beyond the coronavirus curve.
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@example.com.