The following is an excerpt from our 2016 State of Partnering report: 10 Trends for a 2020 Vision, using survey responses from over 100 vendors, 200 solution providers and years of industry data.
Partners engage with more partners, and with more vendors.
As the transaction model shifts to the cloud and channel partners become more ingrained in developing full solutions for customers, they will develop more partnerships as well. We’ve been talking about peer-to-peer or partner-to-partner relationships for almost a decade. In the age of reselling in 2006, the thought was almost unimaginable. VARs only partnered with other VARs under duress – in cases when they needed to partner for the bench strength to service customers with dispersed regional offices. This year, nearly 40% of solution provider respondents reported regularly partnering with an average of three to five other solution providers. And 30% of respondents regularly partner with six to eight other solution providers. This is a 10% increase over just last year. And less than 10% reported they didn’t partner at all with other solution providers. In ten years, we’ve had a complete reversal of these metrics.
We’ve also seen a steady increase in the number of vendors with whom a solution provider partners. Just five years ago, in 2011, solution providers reported having an average of two strategic vendor relationships. They actively focused on two product lines, even though they would access many more through distributors. With today’s complex IT products, solution providers report an average of five strategic vendor partnerships with 25% of them indicating they have deep relationships with up to ten vendors.
Interestingly, from the solution providers’ vantage, these relationships tend to be long-standing, with an average of eight years. Not surprisingly, the vendors report an average about half as long. They seem to recruit en masse and then drop non-performers fairly quickly. (Solution providers don’t even register that as a partnership.) Nearly 40% of solution provider respondents indicated the average length of their vendor relationships is getting longer, with the remaining 60% indicating it’s staying about the same.
Make partnering (solution providers, ISVs, consultants, carriers, etc.) central to your company culture. The first question when evaluating any initiative should be “how does this affect our partners?”
Partner-driven revenues are on the rise.
With all this partnering going on, you’d expect vendor revenues driven by solution providers to be increasing. And, you’d be right! To a degree. Vendor respondents reported a nice bell curve to the question, “what percentage of revenues were driven (not simply fulfilled) by partners?” While the majority of respondents indicated 26% to 30% of their revenues were driven by partners, this is actually an increase over what we saw five years ago.
Additional good news is that 74% of vendor respondents expect the percentage of revenues driven by partners to increase in the coming years with only 2% expecting a decrease. We shifted to measuring partner-sourced/driven revenues five years ago, but most of the vendors we talk with are still measuring overall partner sales. When we expand the definition of partner revenues to include those sales in which the partner simply fulfills the order (doesn’t drive the sale), vendors report an average of 68% of their entire company revenues comes from solution providers. But we feel lumping in fulfillment revenues is misleading to the performance and success of your channels and you should focus on partner-driven revenues.
Effective communication can accelerate partner success.
The good news is: there are many opportunities for vendors to accelerate the revenues driven by their solution provider partners. When we asked for the top mistakes vendors make around partnering models, solution provider respondents unleashed a flurry of shots in volumes we haven’t heard since the product conflict days when we started this research ten years ago. The solution providers top complaint was a basic lack of communication. We heard comments like “insufficient communication about programs and/or changes,” “not enough engagement,” and “not explaining rules clearly,” time and time again from solution provider respondents.
The second top complaint the solution providers have is that vendors focus on themselves too much, instead of engaging, enabling and managing partners. We heard comments such as, “Not allowing partners to retain ownership of customers,” and, “They believe the world revolves around their product and do not understand engaging with a solution provider to include their product.”
Since solution providers are partnering with more vendors, you are going to see more competition for partner mindshare in coming years. Remember, partners have the power, so staying far away from these typical mistakes will give you a huge lead in the race for increased mindshare.
