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Power to the partners

Power to the partners

Gartner's Tiffani Bova talks about the evolving channel landscape

Gartner research director for IT channels, Tiffani Bova, has some strong views about the evolving channel landscape. She spoke with ARN about the shift of power from vendors to partners and how the channel needs to break away from its transactional heritage.

What are some of the overarching trends you're seeing in the channel?

There's a lot of activity at the vendor level around consolidation and focusing on the SMB marketand globalising channel programs to ensure they have consistency. Then there's a lot going on in the customer environment around risk and compliance. Customers want more mobile workers, solutions built for the size of their organisation, and they want to be sold to and buy the way they want to buy. On the channel side, channel companies are getting much more specialised than they have in the past. That's happening because of a couple of reasons - one is that vendors are forcing them to become more specialised to make sure they have the proper coverage in the market. Channel companies are also going the specialist road because they can't afford to be everything to everybody.

Who is wielding the power: the vendors or the channel?

I'd say the power is definitely shifting. A lot of it has to do with the fact that channel companies can't afford to have 10 different vendors in one particular category. Previously, vendors would pick the partners - now partners are picking the vendors. And they're asking vendors what they will do for them to better their business.

Have you seen a reduction in the number of vendors partners work with to date?

There's been a reduction in the number of vendors that channel companies are working with today; vendors are also going through and culling their partners. Vendors used to say they had all the power and made the big decisions. Now the channel is at least getting more say than it had in the past.

What market forces are strengthening the channel's role?

I'd say customers. Customers want high touch; vendors can't afford to touch them, especially in small and mid-markets. Customers are also saying: "I only want to buy what I need, I want it to be modular and scale with my business and I want you to understand my vertical and my specific requirements." It's impossible for the vendor to get that so they're relying on the channel. Channel companies are also getting much smarter about the profitability of their business. And, as alternate delivery models get more prevalent, it's not the sale of hardware or software any more, it's about services.

What's the biggest challenge being a channel partner in today's market?

That you cannot strictly do IT work anymore. You've really got to think about business processes and business outcomes. Ask what the pains of the customer are, and how the customer buys because what they buy and how they buy it is changing. So as a channel company, you have to figure out that if the customer is willing to buy it as a service, then what is the value you add? If my value is about doing consulting, I'm going to go in and ask: "How are you going to use that CRM system, what will it interact with, and what information are you trying to gather? I'll write an RFP and find the right solution for you. Go buy it as a service, but I will do this upfront planning with you to figure out which is the right product."

Once the customer has bought it as a service, I need to make it work in their environment the way we said it would. Although I didn't sell the middle layer and might not be making any money off it at all, I'm doing the upfront planning and the back-end integration work. If they're purely a hardware/software reseller, however, that model doesn't work for them. All they know how to do is transact, fulfill, and the technology itself.

How is this shift being reflected in vendor channel programs?

I would say the majority of channel programs are still around transaction and fulfi lment. You have some leaders in the market looking at competencies and segmentation.

Can you give us some examples?

Microsoft, Cisco, Oracle has some, SAP is doing it a bit more than they used to, but if you look at the whole, most still certify on products. That doesn't fit it into an overall solution - it sells storage or servers. On the other hand, if a reseller is selling business continuity planning, they might sell a bunch of servers and storage but they're also going to sell software, services and upfront consulting. The problem with some manufacturers is that they still train and certify around the hardware instead focusing on the outcomes.

What criteria are vendors bringing in to help with the transition to solution selling?

I'll give you Cisco as an example. It used to categorise partners based on their certifications. Now they're saying you need to have three competencies to be gold, two to be silver, and one to be premier. And competencies might be unified communications (UC) or security. Underneath those, there might be 10 products you have to certify on, but the competency is UC or security. And then they're asking partners to have a segmentation - UC healthcare, UC SMB, or UC public sector. As I was saying earlier, customers want to buy from someone who understands their vertical. Cisco is taking that and mapping it from a capacity standpoint to make sure they have enough partners in each technology competency, in each vertical, and in each geography to cover the market. Microsoft has the same thing with competencies around different applications.

What advice would you give a transactional channel partner trying to shift to selling business solutions?

An exercise I usually give partners is to take a piece of paper and write from top to bottom where they make their major revenues. On another page, do the same exercise but by profitability. I'll bet they don't match up. Resellers need to take the bottom 5-10 per cent and be really disciplined about getting rid of it. That doesn't mean just abandoning customers, but it might mean selling that part of the business model off to another company, or partnering with someone to deliver it so you can re-allocate those resources to things that will make you more revenue.

The second thing is to start building a business that is more predictable and not transactional. If you're a $5 million VAR and your business is project-based, and your entire sales force quit on Monday, how long will you survive? Instead, you could be a $5 million guy but have $1 million in recurring revenue. This is much more predictable and could mean you survive until things get going again. So partners really should start to think about taking the things they can package and scale those into a different pricing model. The last thing I'd say is choose your vendor partners - you don't need five in one category.


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