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The Doyle Report: Penton Xpert Jay McBain Calls Out Channel for Lagging Behind the Biggest Trend in Business Today

Thanks to a combination of ineffective K-12 education, unexpected market shifts and hidebound thinking, the channel finds itself out of synch with the biggest trend in technology today, software-as-a-service (SaaS). But it need not be that way.

doylet

August 5, 2016

5 Min Read
The Doyle Report: Penton Xpert Jay McBain Calls Out Channel for Lagging Behind the Biggest Trend in Business Today

“Action needs to be taken – and fast.”

That’s how Jay McBain, CEO of ChannelEyes and Penton Technology Channel guest Xpert, sums up his observations after attending ChannelCon 2016, which wrapped this week in Hollywood, Fla.

What’s got McBain so upset? A coupla things. But mostly it is this: thanks to a combination of ineffective K-12 education, unexpected market shifts and hidebound thinking, the channel finds itself out of synch with the biggest trend in technology today, software-as-a-service (SaaS). To wit, most of the leading SaaS companies do not leverage traditional information and communication technology (ICT) partners, be they VARs, MSPs, consultants, telecom agents or cloud service providers, in a meaningful way. Similarly, traditional technology providers who work in the channel do not generate much in the way of sales from SaaS applications.

Sensing a missed opportunity amid a massive market transition, McBain penned an open letter to CompTIA, which hosts ChannelCon, and the channel at large this week. In “The McBain Manifesto,” he highlighted some unsettling trends that convinced him to speak out. They include:

  • Young men and women are ill prepared and thus not thinking about careers in IT integration

  • Which is a scary because 40 percent of channel business owners will retire in the next 10 years

  • Already, the traditional channel has already shrunk by an estimated 30 percent

  • While there is great hope for opportunities in mobility, the IoT and security, new developments in software are proving disruptive to the channel and beyond as predicted famously by tech innovator and investor Marc Andreessen

  • While CompTIA and others work hard to stay abreast of the top trends, NONE of the Top 100 SaaS companies in the world had a booth at ChannelCon 2016

While you may take umbrage with some of what McBain says, he makes valid points. I’ve been saying for months that the future of the channel must involve SaaS. SaaS apps are what business buyers want. These professional, McBain notes, account for nearly three-quarters of tech spending today, and will soon account for as much as 90 percent, according to Gartner.

We’ve long known that line-of-business buyers that work in sales, marketing, human resources, legal, accounting and more constitute a new “shadow” or “rogue” IT. But did you know the companies that cater to this audience are not traditional channel companies but a new “shadow channel” instead? That’s what McBain believes.

Instead of turning to a local ICT channel company for technology solutions, shadow IT buyers are looking to online marketplaces managed by vendors including Salesforce, Google and others. But many of the companies that comprise this “shadow channel” do not look beyond their own apps or consider their customers’ complete needs such as regulatory compliance, data security and business continuity. The situation is analogous to the problem in healthcare today in which no one seems able or willing to take responsibility for the complete patient but instead only their part of his or her diagnosis.

“[The Shadow Channel] is putting customer businesses at risk everyday by playing fast and loose with customer data, financial and even HR data,” says McBain. “Proprietary information is flying everywhere across public clouds by smaller startups with little control or regard for the ramifications (or regulations).”

Which brings me to you.

SaaS is a great opportunity for a myriad of reasons. For starters, it’s what customers want most today. What is more, customers are clamoring for general contractors and virtual CIOs who can look out for their complete ICT needs. If you’re not selling and supporting SaaS apps, be they vertical market or functional department-focused, then you’re missing out on one of every five dollars available to you.

Then there are the vendors themselves. While estimates vary, only a quarter of SaaS vendors have formal channel programs today. But most are expected to develop them over the next two years. To wit, MSPmentor wrote about one SaaS provider of HR solutions last month that is doing exactly this, Jazz.

“Given the advances in our technology and that 80 percent in our target customers have no solution for this at all, it really is a greenfield opportunity for channel partners to get in early on what is now a very hot and rapidly expanding market,” says Jazz CEO Pete Lamson.

Lamson is only one of a growing number of SaaS CEOs who have eyed the ICT channel as a source of new revenue. This is a good thing. But some issues remain. How to properly compensate channel partners for introducing customers to SaaS apps is still an inelegant art at best. The one-time referral fee that many SaaS companies think will suffice is woefully short. Similarly, permanent revenue sharing for basic account management is not something most SaaS companies are open to. And don’t get me started on who gets billing responsibility or who takes on level one support.

But these dilemmas can be overcome.

Which leaves the existential “threat” that the SaaS economy once posed. I say “once” posed because the dozens if not hundreds of SaaS apps your customers’ line-of-business managers have purchased directly in the last three years are proving unwieldy to manage and support. They are also proving to be prohibitively expense to secure, backup and protect. Recall that at the previous CompTIA event in Chicago this spring Datto CEO Austin McChord said an internal audit of his own company revealed that it had some 100 SaaS apps in use. How they were being managed, protected and backup-up was a mystery, he conceded.

But as everyone knows, any time there has been mystery, the channel has found opportunity.

Credit McBain and CompTIA for revealing how this could be true once more.

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