Community Call — June 21, 2022

RECAP: What Vendors Get Wrong About Partner Automation Technology

By T.C. Doyle

On the June 2022 Channelnomics Community Call, the economy and partner automation took center stage.

To kick it off, Channelnomics discussed some key data points on the current economy and then compared them to what partners themselves have been expressing and experiencing.

As expected, the call zeroed in on vendor concerns over inflation, the stock market, and business confidence — and with good reason. Inflation is well above 8% in the U.S., and above 10% in certain geographies and markets such as housing.

The Conference Board said this month that its consumer confidence index dipped to 106.4 in May from 108.6 in April. The Fed, meanwhile, recalibrated its view of the economy and said that it expects the economy to grow at 1.9% this year with unemployment rising just half a point to 4.1% by year’s end.

While stressful, the economic situation is hardly dire. The 106.4 rating of consumer confidence from May is still near an historic high level, for example. What’s more, Channelnomics research shows continued optimism, at least among channel partners that are close to customer spending. Consider this: At the start of the pandemic, 40% of channel partners felt the U.S. economy was negative or very negative. As of early 2022, only 13% felt that way. In addition, there have been significant gains in the percentage of partners that perceive the current economy as very positive (36%) and the economy in six months as very positive (39%).

These sentiments are buttressed by some very strong earnings reports from channel companies in the first part of the year, when the likes of CDW, Perficient, Mastech Digital, and other channel companies reported very strong sales in Q1. Conditions, of course, could change. But right now, there’s no need for panic.

After discussing the state of the economy, participants of the Community Call turned to partner automation software, which an astounding half of all tech vendors are implementing or drafting plans to implement sometime in the near future. According to Channelnomics research, better than eight in 10 vendors struggle with getting partners to adopt new products and services, while 83% wrestle with motivating partners to meet and exceed sales goals. Many believe partner automation — a stack of complementary technologies that nestle in between a tech vendor’s sales automation and ERP — will help alleviate these challenges.

The modern channel management stack includes modules for learning management; through-channel marketing automation (TCMA); channel incentive management; partner relationship management (PRM); configure, price, quote (CPQ) and inventory management; channel data management; and ecosystem management.

Today, nearly 200 different software vendors offer some form of partner automation technology, which has grown into a $2.8 billion market.

Despite growing interest in PRM and partner automation technology, many vendors struggle with their implementations. These are common reasons why:

• Ownership: Internal alignment is all over the map.
• Design: Vendors prioritize their own needs, not those of their partners.
• Provider integration: It’s just not there.
• Partner ambivalence: Experiences aren’t great.

One of the fundamental challenges with implementing a partner automation stack is internal alignment and ownership. Vendors have different points of view on who should own and control the channel management technology stack. Some believe an internal IT department should have authority and responsibility, while others prefer that channel leaders themselves take control.

Channelnomics recommends that authority and responsibility reside in the channel organization. This doesn’t mean that other departments shouldn’t have a voice in channel technology management selection or operations, but the ultimate decision-making authority and operational responsibility should reside with channel chiefs and their teams.

Those teams are often best positioned to align program policies and goals with the functional requirements and field operations that channel management technology supports. The starting point for channel technology management and automation isn’t the applications and their endemic features; it’s the channel strategy and corresponding policies and procedures that the systems must support.

Vendors struggle not only with issues of authority and responsibility but also with design. Partners want their automation platforms to present data in dashboards that display information on the most relevant aspects of their partnership, including deal registration, pipeline status, reward accrual, and more. Unfortunately, far too many vendors set up glorified marketing sites that don’t serve partners’ best interests.

Another gripe that vendors often share: Partner automation platforms aren’t tightly integrated, which means partners have to deal with multiple logins, data incompatibilities, and lots of manual data entry. Faced with these limits, partners often neglect automation systems built specifically for them. Partners also grumble when a vendor’s new partner automation platform doesn’t connect seamlessly with some of their favorite, complementary tech platforms, including HubSpot, Salesforce, Zoho, NetSuite, and more.

During the call, channel leaders from different companies shared experiences on implementing their partner automation platforms. They recommend that fellow channel leaders prioritize several things when selecting and implementing a partner automation tech stack:

• True application integration
• Data exchange and intelligence
• Simplified customization
• Ease of management
• Consolidated support
• Reduced TCO and increased ROI
• Higher channel performance

Throughout the call, several key themes kept coming up again and again: Channel leaders must determine what they’re building and for whom; whether their platforms will reside in the cloud or be nestled inside their data centers; and how long they expect their journey to true automation to take. If you’re not up and running in 120 days, said one channel veteran, you must recognize that something is likely amiss internally.

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As usual, Channelnomics reminded channel professionals on the call that discussion topics are fueled by requests for information and by recent research and analysis compiled by the Channelnomics editorial and research teams. Here’s what’s newly available to CiQ members:

ANALYST NOTE — Technology Aggregation Can Be a Bitter Pill to Swallow (Available NOW): Nearly every vendor that Channelnomics talks with today has its heart set on developing a platform for the delivery of anything-as-a-service (XaaS). Platforms are easy to use, lucrative to own, and hardy enough to weather bad times. That’s why (almost) everyone in tech loves a good platform. Channel partners, though, charge customers hefty fees for integrating and administering various digital services, so they don’t view technology aggregation into platforms with the same universal zeal that vendors do. Simplifying technologies into holistic delivery platforms threatens partners’ revenue streams and, in some cases, opportunities to sell complementary third-party products and services.

PODCAST — What Vendors Don’t Understand About Partners (Available NOW): Being a channel chief isn’t easy. Channel leaders face numerous challenges, including getting partners to perform in a way that contributes to company goals and revenue-generation expectations. Larry Walsh, chief analyst at Channelnomics and host of the Changing Channels podcast, posits two possible reasons why channel leaders face the obstacles they do: myopic thinking and a fundamental misunderstanding of partner business models. In this episode of the podcast, Walsh details what vendors get wrong about their partners’ business models and capabilities and what they need to do to overcome the challenge of generating superior channel performance that contributes to their corporate goals.

PRIMER (Essentials Series) — Managed Services: A Shifting, Dynamic Model (Available NOW): When IBM launched the original IBM PC, it built a network of authorized resellers to sell the devices. For a period in the 1980s and 1990s, having an IBM Medallion was effectively a license to print money. Later, the channel grew to include more than just resellers. It also included IT consultants, systems integrators, VARs, systems builders, and more. Then, shortly after the dawn of the new millennium, a new business model began to take shape. It required different skills, vendor relationships, and funding. Despite many challenges, the managed service provider (MSP) model took root. Today, it’s one of the most popular models in all of the channel ecosystem. This primer offers a brief history of how it came to be.

Don’t miss the next Channelnomics Community Call on July 19, when we’ll discuss the state of the special bid desk and what can be done to tame runaway escalations. 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.