The Evolution of the Channel

By Khali Henderson

The evolution of the technology channel is a preoccupation for solutions providers and suppliers alike. It’s not without cause; the exponential increase in technology’s complexity and variety paired with dramatic shift in how it’s consumed and purchased are forcing the issue. The warning has been delivered the channel must change or else!

“Or else” is to risk obsolescence, to no longer be of value to business technology customers nor their suppliers. That is an unenviable state that channel partners should avoid at all costs, right?

Unfortunately, that’s not the case. “The majority of channel partners remain wedded to the practices of the past,” said Larry Walsh, president and CEO of The 2112 Group, a channel consulting firm. “Channel partners are moving at a glacial pace when it comes to the evolution of their businesses and anticipating future needs [of their customers].”

Some of this may be due to inertia rather than ignorance. New research from The 2112 Group finds a 27 percent difference between channel partners who believe they should have a strategic growth plan and those who actually have one. It’s the business equivalent of knowing you should exercise, but never actually going to the gym.

“Channel partners are too concerned about their own paychecks and maintaining lifestyles than setting goals and stretching their potential,” Walsh said, pointing to the lack of business planning, governance and accountability as evidence. “In reality, even poor business plans that are vigorously executed produce better results than no plan at all. The first step in building and executing a business plan is accepting that it could fail and taking the risk to move forward.”

Walsh challenged partners to step outside their comfort zones. The first step is to identify what and where they want to be over a period of time.

Indeed, the well-accepted definition of evolution is the gradual  process of development from a simple to a complex form.  “Channel partners need to evolve beyond simple skills and reselling products to develop competencies and unique value propositions,” said Walsh, explaining that they need to create complementary offerings professional services, custom applications and packaged solutions that are exclusive to them.

“The mistake many channel partners have made and continue to make is basing their value on the brands of their vendors and service providers,” Walsh said. “Companies that are defined by another companys value remain exposed to risk and disruption.”

Simply reselling another new product or service alone, then, is not evolution. That’s true even in the case of cloud services; reselling cloud backup services, for example, as yet another menu item on a line card is not evolution without the accompanying cloud needs assessment, migration planning, implementation services and change management that goes with it.

The other mistake partners can make is believing that evolution has an end state. As is clear by the experiences of the agents and VARs Channel Partners interviewed (see Secrets & Strategies of Evolving Channel Partners), it’s a journey not a destination. It will be a constant series of development with plenty of trial and error.

That said, partners must have a goal in mind. Walsh and The 2112 Group say that the technology industry and its channel are headed toward “The Services Era.” This is distinguished not only by delivery of technology as a service, but in realizing better business outcomes from services delivered.

Take note that the Services Era is not synonymous with cloud computing. In a white paper, “The Evolving Services Era,” the research firm explains that cloud delivery is a catalyst for this transformation to “as-a-service” delivery, which will progress in phases from experimentation with non-critical systems to adoption for mission-critical systems to outsourced management of infrastructure and applications, and eventually, full business process automation.

“Each stage marks a new level of confidence in the services model and its capabilities, as well as a new level of complexity that the service provider must master to deliver the platforms, infrastructure and applications,” The 2112 Group report noted. As a result, not all solutions providers will progress through all phases. 

And, truthfully, migration to a services model will not necessarily completely supplant a legacy business. Most solutions providers will be a hybrid, offering product sales, professional services and as-a-service delivery in varying degrees.

While solutions providers are making money with their current transactional models, their incentives to transform are small, particularly given the significant investments required. This is a short-sighted approach that does not consider eventual commoditization of their offers. While transformation may not seem like an emergency, evolution can take years, so planning today is key to avoid disruption or devaluation.

Khali Henderson in editor-in-chief of Channel Partners.
Twitter: @khalihenderson
LinkedIn: linkedin.com/in/khalihenderson

MORE INFO

Learn more from The 2112 Group’s Larry Walsh and our panel of solutions providers in the Keynote Roundtable, “Secrets & Strategies of Evolving Channel Partners,” at the Channel Partners Conference & Expo, Feb. 26-28, 2014, in Las Vegas.