Community Call – July 19, 2022

RECAP: Examining the Impact of NSP on Channel Sales, Assessing the Current Economic Climate

By T.C. Doyle

Channelnomics hosted its monthly Channelnomics Community Call on July 19, focusing on new research of its own that examines the impact of non-standard pricing on channel sales. The call also featured a discussion led by Channelnomics CEO Larry Walsh on the current state of the economy. Here’s a review — or a look at what you may have missed.

NSP Pricing: The New Normal

Our research shows that NSP is widespread and growing. Consider some of the findings presented on the call by Channelnomics Research Manager Dr. John Spinda. Channel partners surveyed said they request NSP from their vendor partners of choice in nearly half (46%) of all of their deals, according to Spinda. Half of those requests (49%) are honored. What’s more, 50% of partners anticipate making more requests for NSP in the next 12 months — a staggering number that’s likely to pressure more vendors to accept more requests.

While most partners agree that NSP is important to win business, 14% say NSP is vital to their business.

“Non-standard pricing has had a huge impact on our business,” said one Western U.S. partner in response to our survey. “It has increased our amount of business. We gain more clients when we allow non-standard pricing.” Another partner explained that NSP enables his small reselling operation to close business that would otherwise go to very large resellers such as CDW or to vendors that offer direct sales to customers.

In general, partners request NSP for three main reasons:

• To address customers’ budget constraints
• Because they consider vendors’ list prices to be too high
• Because standard-tier discounts are insufficient

NSP not only taxes vendors (extra discounts on products and services directly impact a vendor’s bottom line); it also can slow the pace of business. In fact, there’s now tension with partners that recognize NSP pricing, while helpful when it comes to winning specific deals, is slowing down overall commerce.

One reason why is a general lack of automation in the configure, price, quote (CPQ) process. Less than half of vendors (46%) have an automated/CPQ pricing management system in place, according to our study, despite the fact that more than half of partners (54%) say vendor CPQ systems are having a positive impact on NSP requests.

Regardless of your level of automation, though, it’s important to note that partners want quick turnaround time on quotes. In fact, the Channelnomics study found that 25% of partners’ favorite vendors make NSP decisions in less than eight hours while 36% of partners’ least favorite vendors take five days or more to decide on a particular deal, according to Spinda.

For vendors struggling with the growth of NSP, Channelnomics makes the following recommendations:

• Determine how much you’re spending and surrendering to win business.
• Identify specific needs cases.
• Develop clear and concise rules for adjudicating when NSP is appropriate.
• Tie compensation plans to NSP accordingly.

A Snapshot of Broad Economic Conditions Influencing Channel Sales

No matter where you are in the Northern Hemisphere, it’s likely to have been hot, hot, hot of late. (Temperatures in New York, where Channelnomics is based, recently topped 100 degrees.) But there’s a detectable cooling trend sweeping through the channel. For perspective, Walsh offered his insights during the call.

Clearly, he said, the current channel economy is seeing warning signs of a recession, such as these:

• Increasing cost of money
• Persistent inflation
• Declining stock valuations
• Destabilized trade routes, energy insecurity, food shortages, and more (as a result of the war in Ukraine)

Despite these indicators, there’s no reason to panic, Walsh said. Unemployment remains very low in most markets, and consumer spending has yet to fall off a cliff. What is worrisome though, Walsh notes, is that PC sales of late have slowed significantly. Business leaders will learn more later this week when three tech giants — Amazon, Apple, and Microsoft — release their earnings.

Regardless of what these companies reveal, there are steps you can take now to prepare yourself for a downturn. Key among them is determining the impact of any budget cuts or fund reallocations before you make a move. If you’re having trouble understanding where to begin, Channelnomics can help. We have a new tool that can help tech vendors understand channel economics before they make any change in their channel finances. For more, reach out to Channelnomics COO Cindy Herndon.

Meanwhile, stay tuned for the next issue of Channelnomics Quarterly and be sure to visit CiQ Databank for newly available content.

CQ Magazine — Summer 2022 (COMING SOON): The Channelnomics editorial team is hard at work on the second issue of Channelnomics Quarterly, which will feature a look at the steps channel leaders can take to reallocate funds if they find themselves in need of a midyear course correction. Also, the upcoming issue will showcase the latest in Channelnomics research, guest commentary from several channel leaders, and insights from Walsh himself. CQ publishes digitally and in print four times a year, providing channel chiefs, C-suite executives, and other business leaders with research, thought leadership, and practical insights for developing and executing effective indirect-sales programs. For more information, reach out to T.C. Doyle, editor of CQ and vice president of strategic content at Channelnomics.

ANALYST NOTE — Master Agent Consolidation Mirrors IT Service Growth (Available NOW): The once-staid master agent segment of the channel is buzzing with activity and evolution. Primed with private equity funding, master agents are on a shopping spree. They’re gobbling up competitors, expanding their portfolios and market coverage, and enhancing their capabilities and value propositions. The driver: increasing demand for services sold via a sell-thru model. The latest analyst note offers insights on the rise of master agents and why they might be a better fit for many of today’s vendors.

Don’t miss the next Channelnomics Community Call on Aug. 16, when we’ll discuss the future of the MSP business model and what challenges it might present to your company. Our Channelnomics Community Calls, which take place on the third Tuesday of every month (except in December), are now open to any channel professional and practitioner. Meanwhile, if you’re a CiQ subscriber looking 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.