Are you culling the herd or protecting vulnerable partners?
In our recent channel chief virtual roundtable event, we discussed the effects of the global pandemic on partnering plans and programs. Accelerated digital transformation ushered in by social distancing practices is driving all ten participants to change some aspect of their channel model. Framework adjustments include new compensation plans, shifting to virtual education platforms, delaying program launches and changing criteria for spending MDF. But the most divergent conversation regarded what to do with small and medium partners who are financially struggling during these uncertain times.
At the onset of the pandemic, there was a political and social debate about whether to protect the most vulnerable in our society or allow the virus to run its course and create herd immunity. My state of California took a protectionism stance while other locales such as Sweden initially went with the herd immunity strategy. Both strategies have taken their toll.
It’s interesting to hear this debate play out amongst channel chiefs regarding partner mortality. Large solution providers have access to capital markets to ensure cash flows. No worries on their behalf in these tumultuous times. But smaller partners – those that are $10m, $30m and $40m businesses – are already highly leveraged and burning through their two months of Payroll Protection Program payments. They are at significant risk of going out of business.
Lend a Helping Hand
One side of this debate argues vendors should help these partners however they can to slow the consolidation among the solution provider community. As one attendee put it, “Trust me when I tell you consolidation is not a positive thing. Some of these smaller partners have strong relationships with customers that we want to keep on our technology. In this situation, two plus two probably equals 2.5.” This approach advocates to keep alive the partners that know you, have invested in you and are expected to successfully deliver customer outcomes with your technology.
This is the time to support our partners and customers rather than prioritize the bottom line. One channel chief described the lengths he is taking to ensure the success of his partners: “We have put out additional incentives, extended some payment terms, waived partner fees, and made it easier for aligned partners to move up tiers. We are making our products freely available to people who have been laid off or furloughed. We are also doing a lot more communications and outreach. We’ve started up an executive sponsorship program, rolled out new certifications and shifted MDF spend. My message has been that partners will remember what we do during these times, for good or ill. And it is a lot harder to recruit new partners than to support existing partners. We are focusing on culture, alignment and community.”
Only the Strong Survive
The other side of this debate was also eloquently articulated by channel executives in attendance. This is the survival of the fittest or ‘culling the herd’ strategy: “COVID-19 is just accelerating something that would have happened anyway. The partners that offer value to customers will survive. Others will not – and that’s OK.” Regardless of size, solution providers who had already transitioned to offering managed services and adopted a digital-first marketing and sales strategy are better positioned to survive (and even thrive) during this pandemic.
Additionally, some participants argued that channel consolidation could be good for both vendors and struggling partners. Vendors could support their partner ecosystem by connecting organizations looking to merge or acquire, acting as a matchmaker. One channel chief hypothesized “potentially helping the failing solution providers connect with larger partners that might be looking to acquire talent or customer connections or knowledge of a business vertical.” Another channel chief described the potential benefits to her organization as the ability to redirect internal resources: “it could be a good thing for channel programs. Having fewer small partners to manage means freeing up resources to focus on the top partners.”
Both strategies have merit. What side of the debate are you on? It’s times like these I’m glad I don’t hold the fate of other organizations in my hands. Those are some tough decisions, my friends.