Competition, Channel Conflict Make Cloud Business Shaky for Many Partners

These are creating untenable conditions for many channel partners.

Edward Gately, Senior News Editor

June 19, 2017

3 Min Read
Conflict Boxing Gloves

Increasing competition and channel conflict for cloud business are creating untenable conditions for many channel partners, according to a new survey by Techaisle.

From 2013 to 2017, the percentage of partners experiencing competition from vendors has gone up by 15 percent, whereas from distributors it has increased by 55 percent.

At a high level there are three types of channel conflict: competition between the vendor and its channel partners; competition between distributors and channel partners; and competition between similar types of channel partners.


Techaisle’s Anurag Agrawal

“In the traditional product world, vendors have managed over time to reduce the most pernicious forms of channel conflict, mitigating vendor/channel conflict through ‘double bubble’ compensation models and by creating clear guidelines around where the vendor will sell direct and reducing competition between dissimilar channels by enforcing product/territory definitions,” Anurag Agrawal, Techaisle’s CEO and analyst, wrote in his blog. “Conflict between ‘like’ channels is managed to some extent through deal registration, but in limited quantities is a healthy condition for both vendors and buyers.”

However, when comparing across a detailed list of important vendor partnership criteria, survey data show that only 16 percent of partners are seeking simplified deal registration and 12 percent find swift account resolution to be an important criterion, he said. There are more pressing, and other important issues and criteria that channel partners are prioritizing, he said.

“To be fair, cloud by its very nature resists territory-based conflict management strategies, but the current results demonstrate a need for a better approach to cloud channel conflict management,” Agrawal said. “Vendor/channel conflict, reported by the channel as the primary source of cloud competition in over half of cases, clearly requires better strategies than are currently in use. Similarly, distributor sales to end-customers is also well beyond a level that encourages the channel to invest in cloud solutions and enables channel firms to compete on traditional price/value/capability differentiation. Vendors will need to be more crisp in their policies and consistent in execution — and channel members will need to seek out vendors whose approaches allow for long-term channel practice viability.”

The survey data describe a real dilemma for vendors looking to build cloud traction through channels, he said. No one issue is cited as an important vendor contribution to channel cloud success by more than half of channel members, but more than 10 different activities are seen as important by at least one-quarter of channel members.

“This places tremendous strain on the program resources of vendors,” Agrawal said. “The data portrays channel members as being very needy, requiring a wide range of support, but not focused enough to allow the vendor to concentrate resources into two to three key areas.”

Vendors are actively pursuing channel members who are well positioned to advance the vendor’s cloud agenda, and so much of this activity reflects a “powerful business position” established by the channel firm, he said. However, there also are vendors who are migrating to a cloud-first or cloud-only product delivery strategy. In these cases, vendor pressure may be prompting firms to take actions that they aren’t fully prepared to embrace.

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About the Author(s)

Edward Gately

Senior News Editor, Channel Futures

As news editor, Edward Gately covers cybersecurity, new channel programs and program changes, M&A and other IT channel trends. Prior to Informa, he spent 26 years as a newspaper journalist in Texas, Louisiana and Arizona.

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