Channel Watch

Channel Execs on Partners: 'They're Not All Going To Make It'

A recent CompTIA survey reveals some juicy insights into what's bugging channel executives about their partner ecosystems.

CompTIA recently released a report that both surveyed IT companies (the channel) and interviewed their IT vendors. The headline numbers from the "State of IT Channel Programs" report mostly came from the survey, which reached 400 U.S. IT channel companies.

Some of the insights: On average, channel partners belong to eight vendor programs. In 2011, 43 percent reported a net gain in vendor program participation. Transition to the cloud is the factor that the largest group of channel partners (59 percent) believes is having the greatest impact on vendor-partner relationships.

All interesting data points, as far as they go. The juicy stuff, however, was buried in part four of the four-part report. It consisted of in-depth interviews with IT channel executives at a cross-section of Fortune 500 technology vendors.

These "Qualitative Vendor Insights," as the section was called, consisted of not-for-attribution comments made by the vendor channel executives. That anonymity allowed for some brutal honesty.

The channel chiefs agreed with partners that cloud was disruptive, along with consumerization of IT and generational shifts in the channel. The channel chiefs' view of their partner ecosystems' ability to transform with the trends? "They're not all going to make it," was a common refrain, according to the report.

"I was away from this channel role for six years," the report quoted a channel vice president of a hardware vendor as saying. "Now that I'm back I see a lot of the same VARs I knew very well haven't changed in six years, and yet the market has changed. The partners still have the same cost model. Cloud, other market dynamics, are really threatening their financial stability."

Many channel chiefs reported a split in their partner ecosystems between companies that were adjusting to cloud services and recurring revenues and those that were continuing with old practices, such as relying on resale margins.

Some were also confident that new partners would emerge as others go out of business, merge or get acquired.

"There are going to be up and comers, the guys coming in and saying, ‘You know what? We don't even know who Tech Data is or Arrow is... We're driving services,'" said a global partner strategist at a software vendor, according to the report.

CompTIA also found a split among vendors, with some simply watching their partners either sink or swim while others try to proactively carve out sensible revenue opportunities for partners and distributors.

Industry pundits have been talking about the need for the channel to embrace cloud and recurring revenue service models for years. The CompTIA report documents that vendors are both seeing and contributing to a channel shakeout right now. Are you feeling the urgency?

Leave a comment below or e-mail me at sbekker@rcpmag.com.

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.