What mistakes are vendors making with their partner ecosystem?
A major data point driving home MAKE FEWER MISTAKES is the list of open-responses from partners* detailing mistakes vendors make as they are engaging a solution provider organization. Direct from partners, the submissions center around three themes again this year:
The primary goal of vendors focused on recruiting and onboarding partners is to identify and engage new types of partners. These are organizations that aren’t traditional IT solution providers and yet have influence in cloud-based technology solution purchases. Jay McBain of Forrester calls them shadow channels as they aren’t engaging with customers or vendors in the traditional way. We at PartnerPath take a bit more positive nomenclature and call them next-generation channels.
The Roles of Enablement, Spending and Distribution in a Cloud Sales World
Does enablement ever end?
Enablement is a key tenet to partner success. Both the vendors* and the solution providers* want to invest in enablement. The better trained a partner is the more they design effective solutions to customer needs, produce differentiated marketing campaigns, accurately position the products and troubleshoot issues. Enablement is really a win-win for all sides – vendor, partner and customer.
To capitalize on the growing cloud market and drive solution providers to resell cloud solutions, leading vendors are investing heavily in empowering their current partner ecosystem and finding new cloud-focused partners.
What are the vendors’ key priorities?
The vendor respondents’* top priority for growing and managing their partner ecosystems is to recruit and onboard new partners. Of the vendors eager to recruit, over 50% of them are looking for born-in-the-cloud solution providers and on average, they’re hoping to recruit and onboard about fifty of these partners in 2019. Systems Integrators and Managed Service Providers also top the list of the types of partners prioritized to recruitment and onboarding in 2019.
The vendors* changing the role they expect partners play in cloud offerings aligns with the solution providers’ indication of their changing sales. 60% of respondents indicated they’re generating more than a quarter of their sales from activities they weren’t engaged in 24 months ago. That’s nearly double the number from the 2015 report. And 75% of the solution providers indicated this would increase in the coming years. Not surprisingly, more than 40% of the solution providers indicated those new sales activities were focused on the high gross margin managed service offerings.
For the last decade, an agent model has been the easiest way vendors had to engage solution providers in cloud offerings. The shifts a cloud business model demands in marketing, sales, compensation methods and customer success are difficult for both vendors and solution providers. Thus, a simple referral or an agent model was a quick win for vendors looking to gain awareness of their cloud offerings. There isn’t enough margin available in a referral deal for the solution providers to be profitable long-term so we've seen growth in other solution provider roles in cloud models.
Focusing on customer experience and success is one way to support the solution providers’ evolution to cloud-based business models. There are a host of other barriers to their transition and the survey results show a bit of a disconnect between the vendor and the solution provider perceptions. Finding, training and retaining top talent has always been a barrier to growth for solution providers (or any company for that matter). The vendors* cited this reason the most for the solution providers struggles in growing their cloud models, but it was ranked third by the solution provider respondents. Not wanting to change their business model was the second-most cited reason by the vendors. Moving the model is tough, but there is little doubt of the solution providers’ desires to do so. This issue didn’t even make the top five barriers to transition ranked by the solution providers.
Shifting to a cloud or subscription model is a tough multi-year journey that requires changes across every department. Often the new business blooms alongside the traditional business to keep revenues flowing.
Vendors in our State of Partnering study corroborated IDC and Gartner predictions about increases in cloud revenues growing as a percentage of overall sales. However, when we removed the increasing number of vendors who are 100% SaaS or cloud-based, the lion’s share of vendor sales are still traditional on-premise solutions.
In the multi-year transition to cloud models, we've found six key trends affecting how vendors engage, enable and evolve their partner models and programs. From the data gathered in the 2019 State of Partnering study, corroborated by hundreds of partner interviews and dozens of client engagements, the themes introduced in last year’s State of Partnering Study are getting a few updates.