A new channel has emerged, but are you in it?

A new channel has emerged, but are you in it?

Non-traditional vendors and partners have established a beachhead in the market, threatening the status quo of the ecosystem.

Despite exact numbers remaining elusive at present, Herbert considered alone that more than 100,000 SaaS partners attended Salesforce’s Dreamforce conference in 2016 — “you get the picture.”

But what can partners expect to see as the channel evolves?

“The balance of power between vendors, solution providers, distributors and end customers
will shuffle and flow,” Herbert said. “New cloud vendors with no channel presence at launch will recognise the need for indirect partners.

“The types of partner programs, benefits and incentives those companies design will differ significantly from legacy vendor programs.

“And finally, we will continue to see IT and business consulting take a lead role in the value proposition and revenue streams of channel firms.”

New partners

No longer dominated by resellers of products, Herbert said much of today’s channel is shifting to a services focus and specialising across vertical industries and/or solutions niches.

“In the year ahead, more channel firms will be developing their own intellectual property too, whether that is a piece of custom code or a business process they replicate across customers,” he explained.

“And the players will keep changing: digital agencies, marketing firms, accountants and other non- traditional partners are selling or recommending IT solutions, a development that has upended the traditional competitive landscape.”

In short, the SaaS ecosystem alone is reinventing what it means to be “in the channel”, with a new take on vendor relationships, selling strategies and compensation demands.

“Partners are now playing exclusively in one SaaS ecosystem and are hyper-focused on a particular technology, in a specific sub-industry, segment, line of business and geography,” Channel Mechanics global advisor Jay McBain added.

“I don’t think the channel ever went out of vogue but the difference in today’s emerging channel is the level of specialisation and loyalty to one (or a few) vendors.

“I think the early leaders of the emerging channel are SaaS companies such as Salesforce, NetSuite, Workday, Marketo, Hubspot, etc.”

Of this line-up of traditionally non- channel vendors, McBain said partner recruitment is based on key criteria, covering hyper-specialised, vector players that are running project-based consulting, implementation, and integration services.

For example, the average services revenue for Salesforce partners is US$4.14 for every dollar of SaaS software spend, according to IDC research.

“Agencies have grown up working with lines of business, specifically marketing,” McBain said.

With 72 per cent of all technology decisions now made at the line of business level — according to Gartner research — McBain said market conditions made it natural for agencies to expand businesses into reselling technology and wrapping profitable services around them.

For McBain, digital agencies are an example of shadow channels.

“Shadow channels are defined as those influencers who help line of business professionals make business technology decisions,” he explained.

“There are also ISVs [independent software vendor], start-ups, born- in-the-cloud partners, and industry specific consultants.”

“This phenomenon is also happening with accounting/CPA, legal and other industry-specific firms. Competition in this new world, and vendors partner ecosystems, are going to grow at least 5X in size, scope and complexity.”

The ease of adoption of cloud SaaS is increasingly leading business unit managers to make cloud buying decisions independently of one another and independently of any central authority.

According to Gartner vice president and distinguished analyst Janelle Hill this approach reflects greater freedom of choice for these business units and may improve time to market.

However, it can seriously hamper combined value to the enterprise.

“Independent and uncoordinated journeys into cloud SaaS mean the goals, selection approach, initiation and ongoing implementation of services will be fragmented at best and siloed at worst,” Hill said.

“A coordinated, service-centric approach has the advantage of enabling multiple business units
to benefit from joint decisions and shared support for all of the various SaaS solutions.”

Consequently, by 2025, 55 per cent of large enterprises will successfully implement an all-in cloud SaaS strategy, with this transformation a very different world for the CIO, the IT organisation and the channel ecosystem.


In assessing the evolution of IT, Herbert cited three defining stages when assessing the evolution of IT — the mainframe era, the PC/Internet era, and the cloud/mobile era.

“There are many factors that define distinct eras, but the result is a new foundational platform that supports new tools and techniques,” he explained. “Moving forward, new elements built from a cloud mind-set will play larger roles.”

Naturally, the impact of cloud on the channel continues to be both immediate and profound, creating new partners, new product lines and new business models as a result.

“There’s a natural progression from being focused on selling hardware infrastructure and building a hardware infrastructure 20–25 years ago to evolving to a software solution business and then finally building an application based on the IP that has been built over the years,” Channel Partners CEO Greg Eckstein explained.

Billed as ‘SaaSification’, from the partner perspective, Eckstein said this entails the transformation of a value-added reseller with an on-premise model moving towards a cloud-focused subscription approach.

“While this is a natural progression I caution the channel,” Eckstein warned. “What we see with the majority of the system integrators that are building apps, most of them are failing to get them to market.

“And I think that’s because it’s just a lack of understanding that it is a fundamentally different business model that requires a different organisational team and metrics to get those products to market successfully.

“Product companies need different roles and responsibilities to successfully get those products to market.”

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