Community Call — May 17, 2022

RECAP: The Long Tail’s Value — Real or Fantasy?

May’s Channelnomics Community Call focused on “long tail” partners and how new thinking for working with small partners at the furthest reaches of partner programs is influencing tech companies.

The call, which took place on May 17 and was led by me, the vice president of strategic content at Channelnomics, focused on three topics, the long tail included.

May’s call opened with a quick word heralding the release of CQ magazine, the IT industry’s first publication entirely devoted to business professionals who oversee go-to-market strategies and relationships. CQ publishes digitally four times per 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.

I briefly walked Community Call attendees through the contents of the first issue, which includes:

“Crossing the X-Chasm,” a cover feature that examines why so many vendors struggle to transition to a subscription-based, digital-service business model from a transaction-oriented, product-based one.

“Channel Leaders’ Top-of-Mind,” a showcase of viewpoints from Datto SVP Rob Rae, Hitachi Vantara SVP Kim King, and monday.com Senior Channel Partner Manager Sarit Chalamish.

“Harmony & Discord,” a comparative analysis of Channelnomics research reports, featuring study findings from channel chiefs and channel partners.

From there, the conversation shifted to our second topic, which we covered in a recent analyst note that poses this question: “Channel partners embrace sustainability, but will technology idolatry upend their progress?”

In the note, I examined how several channel partners, including Dimension Data, Perficient, and Hill Country Tech Guys, are taking leadership positions in their markets and communities when it comes to environmental sustainability. But I raise the question above because of the sheer amount of energy and human resources the tech industry demands — and the environmental waste it produces.

Tech idolatry has led us to put enormous faith in things like cryptocurrency, which is gobbling up enormous amounts of energy — as much as the entire state of Washington consumes in a single year. It’s also consuming enormous amounts of water for chipmaking and data center cooling. While digital innovations yield enormous benefits, they also have unmistakable downsides that must be reconciled.

Afterward, the conversation shifted to the long tail, small channel partners that some vendors believe hold untold promise. Wired editor Chris Anderson introduced readers to the long tail in a landmark article that he later turned into a book by the same name. In the piece, Anderson theorized how entertainment companies could mine gold from smaller productions, not just megahits. Since then, many in the tech industry have wondered if small and often overlooked partners could be tapped to produce big gains. But it hasn’t happened.

During the call, I shared with participants some research findings of Harvard University professor Anita Elberse, who has studied the long tail’s impact in the media and entertainment industry. She found that only the most active consumers looked for value in the long tail. The digital economy, she found, changed very little about consumer behavior.

As applied to the tech industry, many vendors have found the same. Cost containment is a big reason why. When building programs geared to small partners that don’t generate significant sales volume, most tech companies hew to a common strategy:

-Don’t assign small partners a channel account manager.

-Limit their access to a rich set of expensive resources and rewards.

-Make all support flexible, automated, and self-service.

While ostensibly prudent, the widely embraced orthodoxy has all but guaranteed tepid results in most instances. Indeed, research from the Channelnomics Channel Outlook studies reveals as much. Consider the results from the past two years’ worth of studies on channel chief expectations.

In the Channel Outlook 2021 report, for example, vendors said 59% of their partners were “active” in 2020 — had transacted at least one sale in that 12-month period. While they expected that figure to increase to 69% in 2021, it actually declined to 56%, leading survey respondents to reduce their expectations for this year to just 59% of partners deemed active. The long tail, in other words, is simply getting shorter.

Numbers like these are why 82% of channel chiefs say getting partners to meet and exceed sales goals and contribution expectations is their top priority and challenge of 2022. “Large, top-tier partners are the exception as they’re consistent in their performance,” we noted in our Outlook 2022 report. “It’s the second-tier and long-tail partners that cause vendors the most anxiety.”

But do findings like this mean it’s time to cut the long tail from partner programs completely? Would vendors be better off by simply reapplying investments in small channel partners that contribute very little to higher-performing partners that are already actively engaged at a high level? On this issue, channel professionals are mixed.

During the May call, for example, one channel chief discussed her company’s efforts to work with distributors to reinvigorate casually engaged partners. The efforts produced a 30% jump in productivity.

But can these results be sustained or even replicated elsewhere? Many in the channel wonder, which is why conversations regarding the long tail are likely to continue for some time.

As a reminder, Channelnomics Community Calls are open to channel partner professionals everywhere. Discussion topics are fueled by requests for information and recent research and analysis compiled by the Channelnomics editorial and research teams. Here’s some new and upcoming content available to CiQ members: