CCC RECAP: Conservation, Optimization Take Center Stage in 2023

Channelnomics examines channel leaders’ priorities and expectations in the new year

By T.C. Doyle

Based on the results of our forthcoming Channelnomics Forecast 2023 report, “conservation” and “optimization” are likely to emerge as top priorities for channel leaders in 2023 — and perhaps 2024 as well.

Consider some highlights from the study, which Channelnomics previewed during the January Community Call.

When it comes to channel budget trends, just 39% of vendor channel leaders said their budgets for growing sales via partners will increase in 2023. This is a significant drop from the 78% of channel leaders that expected channel budget increases in 2022. By contrast, 45% of vendors told Channelnomics that their budgets would remain neutral in 2023, while 16% said they’ll see budgetary contraction. In 2022, 16% said their budgets would remain neutral, and just 6% said their budgets would shrink.

Still, a surprisingly high number of channel leaders (82%) at vendor companies said they expect their 2023 revenue to increase by more than 5% year-over-year. (By comparison, 70% of those polled for last year’s report expected that level of revenue growth.) In contrast to those who expect meaningful growth this year, just 14% of channel leaders anticipate that their results in 2023 will remain unchanged, while only 4% anticipate a revenue decrease.

Broadly speaking, these findings suggest that vendor channel leaders remain optimistic for 2023 despite budgetary limitations. A contradiction? Channelnomics doesn’t believe so.

From our engagements with clients and our latest research, we note that channel leaders believe they can achieve their objectives by pursuing a strategy that revolves around conservation and optimization. In 2023, watch for more vendors to support fewer partners through various efforts to increase program participation requirements and revenue performance expectations. Working with fewer partners means vendors can focus their limited resources on the resellers, integrators, and service providers with proven track records for making sales and growing business.

Our latest work also signals that vendors will devote a great deal of energy to optimizing key parts of their channel businesses. When polled, vendors listed the following as their top three investment priorities for driving partner revenue in 2023:

• Revamping channel programs/strategies (49%)
• Holding live events/face-to-face meetings (42%)
• Launching or expanding marketing programs (34%)

As for partners, their expectations for 2023 have dimmed from last year’s. The percentage of partners that expect meaningful growth in 2023 (74%) has fallen below the percentage of vendors expecting the same (82%). This is a change from previous years, when partners expressed higher levels of optimism than vendors.

Though the economic winds have shifted, Channelnomics expects vendors and their channel programs to get far more efficient and effective at directing strategic investments, funneling support to the most critical operational areas, and driving measurable results. The anticipated economic downturn of 2023 will produce a more productive and optimized channel that will deliver better performance through 2030.

LESSONS FROM SOUTHWEST AIRLINES — In a new analyst note, “Beware of Channel ‘Debt’ That Goes Unchecked,” Channelnomics analyst T.C. Doyle examines the “technology debt” that Southwest amassed over many years and how it contributed to the company unraveling in December 2022, when thousands upon thousands of holiday travelers were stranded after a massive systems outage. Doyle likens Southwest’s technology debt to the “channel debt” that tech vendors incur when they fail to keep their partner programs and management systems up to date.

FTC Revives Robinson-Patman Act, Presents Potential Challenges to Channel — In this analyst note, Channelnomics CEO Larry Walsh examines why the Biden administration’s decision to resurface the fair pricing regulation could cause significant headaches for channel program managers.