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10 March 2020
Channel or eco-system? Partnering in the era of complexity
With IT complexity increasing and partner specialisation on the rise, existing channel models need to evolve. IDC have forecast that by 2022, 30% of IT spend will be developed and consumed through eco-systems. In this article we look at the growing importance of partner eco-systems, and the implications for vendor channel programmes.
Complexity on the rise
The world of enterprise IT is characterized by ever increasing complexity. Businesses are using technology to transform themselves in myriad ways – increasing efficiency, fostering innovation and enabling new services and new business models. However, as the possibilities offered by technology multiply, businesses are faced with increasingly complex and dynamic IT environments, with vast networks of servers, multiple cloud platforms, endless lines of code and intricate interdependencies. A single web or mobile application transaction now crosses an average of 37 different technology systems or components.
And while the transformational potential of technology is almost endless, solving any specific business problem presents the challenge of combining multiple, discrete elements – e.g. business applications, data, analytics tools, servers, cloud platforms, security, networks and so on – each with their own complexities and constraints. What is becoming apparent is that with all this complexity and choice, it is getting harder for a single supplier to provide a total end-to-end solution for their customers.
The end of the one-stop-shop?
Which brings us to the channel. Any individual vendor’s offering is only ever a part of the total solution required by a customer, which is one reason why, traditionally, vendors have relied on channel partners to deploy and integrate their products and services. But given the increased complexity of IT, few channel partners have the breadth of skills required to deliver complete solutions as a “one-stop-shop”.
As a result, businesses are increasingly looking to accelerate transformation and plug capability gaps by having partnerships with a broader range of suppliers. The cloud is acting as a catalyst for this change, with many enterprises facilitating multi-supplier collaboration by establishing common working environments in the cloud. According to Forrester, over three-quarters of digitally transforming organizations are actively developing digital-centric collaborations.
The specialist is king
Another important factor impacting the evolution of the channel is customers’ growing preference to deal with specialists for individual initiatives rather than having one overarching “trusted advisor” for technology. One of the reasons is the shift in where IT purchasing decisions are made – Forrester research has found that 65% of all tech decisions now get made within lines of business rather than the IT department.
This growing demand for hyper-specialised suppliers, along with the realization that it is almost impossible to cover all bases successfully, is challenging the business models of many traditional MSPs and VARs, and has led to channel partners increasingly specialising in particular areas. According to IDC, by 2021, 65%+ of partners will focus efforts by vertical or functional use case, and will build their own services, software, and hardware IP.
The rise of the channel eco-system
One of the major impacts of the trends toward increased IT complexity and channel specialization is that collaboration between channel partners is becoming an increasingly vital success factor. Forrester claims that “Partnering with partners is the new paradigm”, and that “the new tech services gig economy will pair the right partners with the right skills at the right time”.
According to IDC, 30% of partner to partner engagements in 2021 will involve more than two partners, with many of these forming a formal consortia. They also say that by 2022, 30% of IT spend will be developed and consumed through eco-systems.
The ability to build collaborative partnerships will soon be a key determinant of channel success. IDC forecast that partners that adopt an eco-system business model will grow 50% faster than those that do not.
OneGTM client, Equinix, is one company that has pioneered this eco-system approach. Equinix’s interconnection hubs are home to a thriving eco-system of nearly 3,000 cloud and IT service providers, many of whom collaborate to solve customer problems. As Equinix themselves say, “strategic partnerships across a strong eco-system of players can accelerate competitive advantage, innovation, speed to market, business reach, agility and value creation”.
Losing the linear mindset
The changes occurring in the market have significant implications for vendors – both in terms of their mindset and the way they structure their channel programmes.
Vendors need to stop thinking of their channel in linear terms – i.e. a straightforward path from vendor to distributor to reseller to customer – and more as an eco-system of partners with different skillsets and specialisms that need to work together to meet customer needs.
To be successful in this new era, vendors should be thinking about how they build programmes that encourage the right types of collaborations between partners, instead of focusing just on pushing their products and services out to market.
They also need to review their recruitment strategies – putting greater emphasis on partners that have specialist skills in a particular market segment, technology area or buyer type, rather than their size or breadth.
Rethinking the partner programme
The vendors that get it right will be those that build healthy eco-systems of specialist partners with a range of complementary skills, and that enable those partners to easily self-serve and seamlessly combine the vendors’ offering with others.
They will stop incentivizing through rigid “gold, silver and bronze” tiering that just rewards volume and technical certification, and instead place greater value on the specialist domain expertise that partners can bring. And they will give more autonomy to the partners, allowing them to select their own onboarding requirements, incentives and level of marketing support.
Only when you have a collaborative community of wide-ranging specialists, each able to work together with you and each other, will your partner channel be ready to thrive in the era of complexity.