Community Call — April 19, 2022

By Alice Gunther

Managing partner incentives. Optimizing channel automation systems. Quantifying and measuring channel performance.

These are but a few of the operational challenges that channel leaders at tech vendor companies wrestle with every day. They were also the subject of the April 2022 Channelnomics Community Call.

During our most recent gathering of channel program leaders and alliance practitioners, business professionals listened intently as T.C. Doyle, vice president of strategic content at Channelnomics, presented findings and insights on key operational challenges from our 2022 Channel Chief Outlook report and led a conversation about how to remove some of the obstacles to an effective channel.

Among the eye-opening revelations:

• 75% of channel leaders struggle to manage partner incentives, rebates, and other compensation plans.
• 68% of channel leaders have difficulty operationalizing and optimizing their channel automation systems.
• 58% struggle to adopt new channel management systems.
• 85% revealed that they wrestle with basic channel operational imperatives, such as quantifying and measuring channel performance.

Why all the trouble? Doyle offered several explanations.

• Needless complexity. Abetted by suboptimized integrations and data incompatibilities, this is a frequent challenge in the channel. Until companies properly integrate and aim for greater data portability, automation will be a struggle.
• Slow movement. Again, unnecessary complexity — i.e., a low ease of doing business (EODB) quotient — is at fault. Doyle cited a company that reduced a 12-page MDF request form to just one page. Afterward, program utilization skyrocketed and partner satisfaction improved.
• Overly dispersed channel management. As Doyle put it, channel management belongs to “no one and everyone.” As a dramatic example of how this can play out, Doyle mentioned an incident during his time at Cisco: The global channel marketing director introduced herself to the worldwide head of marketing for the channel. The two coworkers had never met, despite working in their roles for over two years.
• Multiple constituencies. When businesses operate globally, they have to deal with multiple languages, jurisdictions, market conditions, and data protection requirements, as well as an array of partner needs and expectations.
• Lack of long-term perspective. The typical tenure of a channel chief is less than four years — below the average for a CFO or CIO. That rapid turnover rate results in an overall loss of vision and foresight.
• Limited budgets. This year, the percentage of vendors increasing their channel spending jumped by 20 points to 78% over last year’s number. But less than one in five vendors are significantly increasing their channel spending; the largest channel budget increases are in small companies investing in the development of programs and partners. Channel chiefs are under intense pressure to reduce costs.

Doyle stressed simplification as the answer to many of these struggles, citing the writings of Leidy Klotz, a professor of engineering at the University of Virginia and author of the book “Subtract.” Klotz calls simplification an “untapped science,” illustrating a tendency of human beings — channel chiefs included — to overlook the potential of subtractive change to solve problems. Further, when attempting to make productive changes, channel leaders may run up against longstanding company culture and legacy infrastructure. As legendary management consultant Peter Drucker was famously quoted as saying, “Culture eats strategy for breakfast.”

Still, veteran organizations are defying time-worn dictates in their efforts to reduce complexity and costs in their channel programs, as recently demonstrated by Microsoft’s apparent willingness to sacrifice the “long tail” of its partner base.

In the conversation following the call, channel leaders discussed their own simplification strategies and sought practical advice from other organizations on streamlining their operations.

Microsoft in the Spotlight

Microsoft’s mid-March announcement that it’s overhauling its partner program — replacing a traditional tier structure with a point-based system — has stirred up controversy in the channel. The Microsoft Cloud Partner Program, which replaces the longstanding Microsoft Partner Network, is increasing requirements and expectations, which will likely decrease Microsoft’s partner base, as fewer of its partners will qualify for the program. The move demonstrates a shift away from a sense of responsibility toward the “long tail” — the group of low performers that represent the bulk of vendors’ partner base. Rather than maintain the “long tail,” Microsoft is choosing to focus its energy on its highest performers, a decision that’s likely to influence other channel players down the line.

ANALYST NOTE — Next Tranche of Business Value to Come From Elegantly Tying Together Disparate Systems (Available NOW): Healthcare researchers have long argued that the single greatest advance in medicine won’t necessarily come from the adoption of breakthrough innovations or techniques, but from the consistent and thorough application of what’s already known. Many in technology are beginning to think similarly. This Channelnomics analyst note provides insights into what companies are doing to break down silos between applications, develop consistent experiences across platforms, and provide partners with business-critical information in a single pane of glass.

CASE STUDY — HP Partner Program Overhaul Leads to Improved PX (Available NOW): Recognizing that their go-to-market strategies may be ill-suited for the post-pandemic world of digital services and subscription-based business models, technology vendors large and small are modernizing their partner programs to accommodate new routes to market, elevate sales experiences, and leverage data-driven insights. For an example of a partner program overhaul that prioritizes these and other business outcomes, look no further than HP Inc., which launched the latest iteration of its global partner program, HP Amplify, in the fall of 2020.

PRIMER – Crossing the X-Chasm (Available NOW): Transitioning to subscriptions is an immense undertaking for the channel that involves deep operational, organizational, and financial challenges. Organizations making the switch must navigate their way through a tough period when revenue from traditional sources often drops precipitously before revenue from new streams replaces it — the so-called X-Chasm. This primer examines the X-Chasm in depth, including what conditions create it, which companies experience it, and what must be done to pass through it.

PRIMER — Understanding Automation: PRM Basics (Available SOON): In this primer, the first in a series of pieces about automation in the channel, Channelnomics will shed the spotlight on partner relationship management (PRM) — the processes, strategies, and content associated with using a leveraged business model otherwise known as “partnering.” The aim is to provide an unbiased overview of providers’ technological capabilities and highlight important dynamics in the automation market.

Don’t miss the next Channelnomics Community Call on May 17, when we’ll discuss the long tail and what vendors are doing to rebalance their partner priorities. Our Channelnomics Community Calls, which take place on the third Tuesday of every month, are now open to any channel professional and practitioner. To request your monthly one-on-one call to review programs and other issues, or to schedule your annual channel program review, send an e-mail to info@channelnomics.com.