Growing your channel - highlights from AGI's 2014 channel trends survey
Change or risk obsolescence – that is the message from channel leaders who participated in AGI’s 2014 Channel Trends Survey. Fueled by new expectations from customers, shifts in purchasing patterns, and technological advances that are commoditizing past products/solutions, sales leaders are overhauling their organizations and expect their channel partners to do the same. Importantly, many channel leaders surveyed are getting off the sidelines and taking a transformational rather than evolutionary approach to improve their channel capabilities.
Participants, ranging across technology and manufacturing sectors, are bullish with a median company growth rate of 10 percent and a median growth for the indirect channel org at 18 percent. While a majority of companies see opportunity, survey participants fell into two distinct camps: 1) those companies who see the channel as the accelerator to drive growth – we call them “The Growers” and 2) those who see the channel following the growth of the company – we call them, “The Statics.” The first camp is taking a more transformational approach to their channel while the second camp is taking a less aggressive evolutionary approach to their channel.Here is how the results from these groups differed:
The Grower profile had much higher growth expectations from partners than the Static profile. However, the Grower also had a much greater sense of concern regarding the current state of their channel. When asked about their confidence level in their partners having the necessary sales reach and delivering sales value, only 11 percent and 33 percent respectively stated they were satisfied. This contrasts with the Static companies where over 50 percent were satisfied with their channels’ sales capability. While one might ascertain that the Static companies are sitting in a better position regarding their channel partners, the findings also indicated that Growers had a much better grasp on determining the true capabilities and ROI of their current partners. Importantly, both camps indicated the top root cause for this lack of confidence is fear that their channel partners will not be able to evolve with changing B2B market dynamics (increased sophistication of buyers, buyer preference to purchase solutions rather than build solutions themselves, buyer preferences toward service/consumption models vs. capital purchases, etc.).
The Growers are creating a greater sense of urgency in making changes to their channel go-to-market model. Over 50 percent of Grower companies stated that they were making major changes or a complete transformation of their channel GTM (Channel Programs, Channel Enablement, the company’s channel organization, and partner mix). By contrast, only 25 percent of Static companies were suggesting major overhauls, opting instead to take a more evolutionary approach.
It also appears the partners themselves are aligning the two different participant (vendor) camps. Participants who fit into the Grower camp indicated their channel partners’ top focus is centered on transforming their businesses; focusing on strategies for new service-attach opportunities, adding new solution areas, enhancing ability to sell cloud offerings, and gaining access to new customers. The Static camp indicated their channel partners’ top focus is centered on foundational elements; working better with the vendor, building greater enablement, enhancing support, quality and on-time delivery.
While both the Grower and the Static companies listed Channel Sales Enablement (top focus on building sales and technical skills) as their top priority, Grower companies where more consistent in their placement of Sales Enablement as their top channel priority listing it 40 percent of the time vs. 23 percent for Static companies. Growers are also investing more in specific enablement areas: only 23 percent of Static companies identified making a major change in their sales training for the partner while 44 percent of Growers indicated making a major change, and an additional 11 percent indicated making a complete transformation. The difference was more distinct regarding technical/product training, where 23 percent of Static companies see making a major change while 56 percent of Growers plan to make a major change with an incremental 11 percent going through a complete transformation.
Grower companies are more focused (as measured by active partners per internal channel headcount) on a smaller set of active partners. On average Grower companies had ~12 active partners per channel HC vs. over 30 for Static partners. Additionally, in Grower companies almost one-third of their active partners were new. Grower companies are truly “doubling down” either by investing in a smaller set of existing partners or by recruiting and investing in new partners. Both Grower and Static companies saw the largest recruiting efforts in replacing VARs (Value Added Resellers) who would not be able to evolve beyond legacy fulfillment services and adding service providers who can support the shift to services-led models and broader customer solutions.
Some of the above differences are logical given the different emphasis that Grower and Static companies are putting on the channel partners. Anecdotally, all participants indicated they are going through some level of change/disruption. Furthermore, there wasn’t a difference between the two profiles in the percent of revenue flowing through the channel. Overall, Growers are taking a more proactive approach utilizing the channel as a driver of growth.
Current market shifts are changing the role of a partner and forcing companies to re-evaluate their channel strategy. Growers recognize this and are taking a step back to re-examine their channel strategy, partner mix, enablement and programs. However, given market shifts, both Grower and Static companies need to evolve their sales models. The AGI 2014 Channel Trends Survey confirmed that channel leaders are concerned, but best-in-class companies are acting. What are leading companies doing?
Evaluating their current channel partners, determining who will not make it in the new paradigm, and aggressively adjusting the mix
Recruiting new partners to replace those not capable of driving growth
Concentrating on a smaller set of partners
Increasing coverage and investment in enablement programs to ensure enhanced sales and service capability partners – and looking at quality not quantity
Adjusting their partner programs to align with sales and service results
Evaluating their channel-focused HC to ensure they can set up the partner for success
At AGI we agree with channel leaders who are taking a more aggressive approach to evolving the channel. Embrace change or risk obsolescence.
Theodore (Ted) Grossman is a principal in the San Francisco office. He is a leader of the Technology practice. Additionally, he is responsible for business development, management of key accounts and major consulting engagements. Ted has extensive experience in the areas of business strategy, business process re-engineering and organizational structure and design with a functional specialty in sales force and channel effectiveness. Ted’s industry background is extensive within the software, telecommunications and high tech manufacturing industries.