Channel Influencer Spotlight: Forrester’s Jay McBain on the ‘Shadow Channel’ Threat

… transactional, tactical selling. I could spend three or four hours – the length of a hockey game – getting through 10 companies.”

It worked, and IBM’s market share in the province of Manitoba rose to 72 percent — the highest, by far, of IBM’s 300 territories around the world. Top IBM executives flew from Armonk, New York, to Winnipeg, to learn about McBain’s maverick selling tactics.

By 2000, McBain, now living in Toronto, was running Canada for IBM as national manager of strategy and operations and, later, national sales manager for SMB, public sector and telesales. Again, he found a way to use data to soar to greater heights.

At the time, IBM was sorting PC sales opportunities by company size – small-to-midsize business, midmarket and enterprise — not by the 27 industries it served.

This didn’t make much sense to McBain, and so he began mapping out a knowledge-worker index. Patterns emerged. In manufacturing, 20 percent of employees used a PC. In insurance, 80 percent. In technology, close to 110 percent (many employees had more than one PC). This meant that a 1,000-employee manufacturer had roughly the same PC sales opportunity as a 100-employee tech company.

“I could actually get an entire list of every company in Canada, multiply it out by their industry – how many PCs they ought to have installed – and put it up against our wallet share,” McBain says. “I literally had a list of hundreds of thousands of companies sorted by wallet share. The companies we thought we were doing well in, we weren’t. The companies we thought we were small in, we were actually large.”

IBM stopped sorting PC sales opportunities by company size and started using the knowledge-worker index.

Highway to the Danger Zone

With data, McBain has the uncanny ability to lock in on markets. He’s taken this skill to a new job. Last summer, he became a principal analyst covering global channels at Forrester. As a researcher, he saw an unsettling scene unfolding: a dogfight in the cloud, with clear winners and losers.

Many of the losers are going to be traditional channel partners, McBain says. They face powerful headwinds because they can’t relate to line-of-business executives (LOBs) — the new shot callers in tech. A Forrester survey found that business leaders lead or influence 65 percent of software-buying decisions.

McBain says LOBs have dramatically different buying behaviors, preferring to research products on their own online. This will force tens of thousands of smaller channel partners out of business and drive further consolidation of midsize-to-large partners and distributors.

“There’s a big threat that 80 percent of the partners are going to be relegated to infrastructure and the single-digit declining business for the next 20 years, which are managed services, hardware sales, and CIO and IT department-led initiatives,” McBain says.

Meanwhile, the winners are going to be newcomers and outsiders emerging from the shadows with guns blazing, aiming to strike down traditional channel partners, McBain says.

Here are five types of what McBain calls “shadow channel” companies: SaaS consultants with deep expertise in one or two ecosystems vendors, such as Salesforce, Marketo, NetSuite and Workday; independent software vendors with products inside these ecosystems; born-in-the-cloud companies offering …