A new channel has emerged, but are you in it?

A new channel has emerged, but are you in it?

Non-traditional vendors and partners have established a beachhead in the market, threatening the status quo of the ecosystem.

Deal making is a delicate art, a craft that when executed well, can transform a humdrum company into a dominant business empire.

Jean Paul Getty was a perpetual deal maker, one of the leading negotiators of the 20th century.

Ranked as the richest living American in 1957, the industrialist and oil magnate was frugal by nature, and famously even negotiated his grandson’s ransom.

But Getty followed the advice of his father in business, taking a long- term view of selling.

“My father said: “You must never try to make all the money that’s in a deal. Let the other fellow make some money too, because if you have a reputation for always making all the money, you won’t have many deals.”

Yet despite Getty’s deal making words of wisdom, history shows that not all executive leaders have seen value in sharing the spoils.

PR driven displays of unity aside, a select brand of boardroom executives have forever labelled the channel as “the ugly stepchild of the industry.”

“You’ll find thousands of books about sales methods, but only very few talk about the channel,” wrote Stefan Utzinger, author of Channel Revolution.

“Therefore, it’s hardly surprising that there are still many senior managers in organisations who think that their company can grow without building a reliable channel.”

In penning Direct from Dell — billed as a self-help guide for any aspiring business leader — Michael Dell quite literally wrote the book on going against the channel.

“These executives are reluctant to give margins to the channel or support their channel partners, since that would mean sharing the wealth created,” Utzinger observed.

“Whenever possible, they’ll push their sales teams to deal directly and compete with their own channel partners.”

Yet as alluded to by Utzinger, these executives continue to fail to understand that there isn’t a single major IT vendor left standing that sells products without using a network of reseller partners.

“Even companies like Dell, who for many years were very successful without using the channel, were forced to change their strategy drastically and started building a channel,” Utzinger said.

“It became imperative for Dell to make this dramatic change after losing market leadership to competitors with strong channels.”

For Utzinger, an important lesson for vendors to consider is that it’s not the best product that wins, but in the long run, it’s the company with the best channel that comes out ahead.

IBM may have coined the phrase “all that counts is the feet on the street”, but who said it had to be your own feet?

“Microsoft has the single most powerful and most effective sales force in the world — a deadly army of channel partners,” wrote Alex Schultze, author of Channel Excellence.

And there’s truth to it, with Redmond’s soaring number of partners now offering extraordinary presence in the global market, creating almost automatic demand.

“There is a second lesson here as well,” Utzinger added. “Dell also lost its market leadership because they simply lost track of innovation.

“Because of their sales strategy, they didn’t understand their need for innovation. Without channel partners and their feedback, Dell had become disconnected from the market.”

New channel

Fast forward 60 years on from Getty’s heyday and the value of selling partnerships once again carries weight in the context of the channel in 2017.

Today, and according to World Trade Organisation figures, about 75 per cent of all world trade flows through indirect channels, with as many as 20 to 50 million reselling businesses worldwide.

Why? Because indirect selling is back in vogue, as manufacturers realise that Rome wasn’t built in a day.

Instead, and as the age-old adage attests, they were laying bricks every hour, with such a sentiment playing out in the technology numbers today.

According to Global Technology Distribution Council research, 61.8 per cent of vendor channel executives believe indirect sales will grow more rapidly than direct within the next 12 months.

In surveying over 70 leading chiefs across the technology industry, 12.7 per cent of vendors align with being 100 per cent indirect, “with no plans on going direct”.

But while the channel remains strong, it’s not the conventional channel that the industry created.

“The channel is at an inflection point,” CompTIA senior vice president of research and market intelligence Tim Herbert observed. “New business models and alternative routes to market for technology are proliferating.

“And a growing number of non-IT line-of-business buyers are flexing their spending muscle and forcing the channel to rethink sales and marketing messaging and shift how they do business — and in many cases, with whom.”

Outlined in CompTIA’s 2017 IT Industry Outlook report, Herbert said new faces in the channel are testing traditional go-to-market approaches, as the ecosystem across the world evolves at a rapid rate.

Triggered by the rise of Software-as-a-Service (SaaS), emerging technologies and changing business models, the channel is on the move to a new world, a world defined by different rules.

“And let’s not stop there,” he added. “Last year ushered in the rise of non-traditional partner types such as digital marketing agencies and an army of SaaS-based resellers.

“These companies are establishing their own beachhead in the channel and quickly expanding the competitive landscape.”

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