The time has come to reassess partner programmes to ensure mutual success in a mercurial market.
Partner programmes are facing a seismic shift in how they engage with channel partners and the incentives they offer. Well, they should be if they plan on succeeding. A survey by CompTIA has shown that there has been a 30% decline in partner volumes since 2008, with a further 40% eyeballing retirement by 2025.
Duringthis period, the millennial will be stepping into the hot seat, influencing engagement and strategy on their own terms. Changes in the customer buying journey, the rising influence of the shadow channel and an increased focus on long-term customer outcomes as opposed to short-term rewards means that the age-old partner programme is showing its wrinkles.
“Too many partner programmes prioritise revenue over unique skills and specialisations that deliver the differentiation required in a service-driven economy,” says Stefan Diedericks, alliance and channel director, Oracle South Africa. “This is possibly the most important consideration – prioritising skills, solutions and relevance alongside revenue generation – and vendors and partner programmes not aligning to these are out of touch and out of time.”
Partners are far more focused on self-sufficiency and self-determination than ever before, looking to drive their own differentiation and to build on skills and customer engagement. Today, a partner is looking to develop strategic relationships with customers and vendors that allow for long-term, solutions-driven integrations and long-tail profit margins. It’s a move from sales and instant benefits towards engagement, solutions and integration and there are several factors influencing this change.
“Traditional channel programmes are often regarded as just an incentive tool, or a measure of capacity, but they're far more than that,” says Yesh Surjoodeen, channel manager, HP Inc. “The market has changed and so must the design of partner programmes. There will always be the transactional view – what’s in it for me now – and that will prevail for many that occupy an operational expenditure (opex) led service, but for others, this is not the case.”
The catalytic cloud
The evolution of cloud and the services that surround it has opened up the market for the channel, while traditional solutions and systems remain in play, albeit with a different focus and demand. The partner programme needs to pay attention, and catch up. There shouldn’t be a one-size-fits all approach to the channel, not anymore. One subset of partners could still benefit from systems of old, but the rest are left without much in the way of incentive or interest. Repetition must be reduced and differentiation developed.
“A partner programme should be more of a specialisation-driven model and, as the specialisation, coverage, capacity and expertise increases, then the benefit is easily visible to customers employing the service of the partner,” adds Surjoodeen. “Incentivisation of a programme isn’t merely monetary as that’s far too easy to be copied, so it has to evolve to a model whereby the capabilities are matched for the market and the customer base it serves.”
Customers want to work with partners that offer rich expertise and insight, along with a long-term view, as opposed to a large company with big discounts. This is more relevant now than ever before thanks to the relentless renovations brought on by cloud. According to research undertaken by IDC and Microsoft, cloud partners grow twice as fast, have 1.5 times gross profit and 1.8 times recurring revenue compared with non-cloud partners. In the e-book The Booming Cloud Opportunity, IDC predicts cloud spending will exceed $ 500 billion by 2020, including Software-as-a-Service, Platform-as-a-Service, Infrastructure-as-a-Service and the professional and managed services that evolve around cloud technology.
“Building a cloud annuity business requires partners to have a fundamentally different approach to sales compensation and creating customer value,” says Danie Gordon, partner business and development lead, Microsoft South Africa. “Successful partners are those able to package their IP and bundle it into cloud offerings as a competitive differentiator. The most successful partners do this at scale and leverage partner programmes to control a single invoice to the customer for these solutions.”
Flexible enough to fit all
Of course, it isn’t just about cloud. There's still a market for older technologies as there will always be legacy infrastructure and this underscores the next important point in the vendor-partner relationship – flexibility. Channel programmes need to be flexible enough to recognise what each partner stream offers and to deliver relevant offerings that match these streams. The goal is to create solutions that catalyse partner growth and are flexible enough to match these to partner needs and expectations.
“The adage that the only constant is change is very apt in our industry,” says George Smallberger, MD, SS Telecoms. “For this reason, partner programmes that are very rigid are limiting, and this is typically what you find with international vendors. You need to segment your partner base and understand their needs – it should be about adding value. I also think that flexibility comes through in a hybrid model that’s more opex-based than a capital expenditure model as it allows partners to move in a direction that works for them.”
A new breed of partner
This is also a relevant thought when looking to the rise of the smaller, lean and agile partner with fewer than ten employees and a completely different mindset and business model. Smaller vendors with small employee pools, but extensive experience and expertise, are entering the market at speed. Their focus on delivering highly specialised and targeted implementations that are technology-agnostic and cloud-powered has meant that they’re potentially losing any benefit offered by partner programmes that focus on boxdropping, discounts and rebates.
“There’s a play for both the larger system integrators as well as the smaller partners to co-exist because it’s really about mapping the needs of a partner to the demands of a customer,” adds Surjoodeen. “The trick is to reduce the complexity and offer the best ratio of return for each partner. This partnership means that it’s not just in the design of the incentive, but in the design of smarter financial solutions and models, smarter risk modelling, smarter knowledge exchange and, ultimately, risk mitigation between vendor and partner.”
A successful channel programme is, in reality, a mix of multiple benefits. The challenge is to find a productive and proactive way of doing so that’s realistically managed and maintained by both vendor and partner. Just as not all partners are created equal, vendors have their own challenges. They need to create dynamic partner plans that offer benefits beyond just the profit line while adapting to the market changes that impact their bottom line and customer demand. For both parties, there’s another factor swooping in with fresh problems at its heels – the rise of the self-service customer.
Do it yourself
“The biggest danger of the digital age is the drive towards self-service,” says Rick Parry, chairperson and CEO, AIGS. “Why give away margin to a third party when it can all be done online without field intervention? As one principal recently said to a partner – ‘you are my cost of sale and I need to reduce my costs, so why do I need you?’”
This is a view that isn’t going to change any time soon, especially with South Africa’s junk status, broader economic downturn and plenty of financial concerns on the horizon. The customer wants the moon at half the price it was last year. This underscores the importance of building mutually beneficial partner programmes that can adapt to the changing landscape and provide both partner and vendor with stable platforms on which to build businesses that thrive.
“Partners have to differentiate in a competitive market,” says Diedericks. “They’re looking towards consistent education, engagement and awareness creation as well as the ability of the vendor to assist them on their journey into the cloud. The partner asks – help me to deliver solutions to the service-oriented economy. The vendor needs to answer,” he concludes.