Building a Digital Channel Business: a Channel Partners Evolution Workshop

Led by channel experts and thought leaders, a group of about 30 partners engaged in a high-energy discussion about what it means to be a digitally savvy business, and what partners need to be paying attention to in their pursuit of success.

The partner group was a mix of ‘old’ and ‘new’ channel types, with traditional telco agents and MSPs trading ideas with IT consultants, independent software vendors and one ‘infrastructure specialist. Among the workshop leaders were Penton senior content director T.C. Doyle; CompTIA senior director of industry analysis Carolyn April; Effortless Office VP of sales and marketing Sonia Ziegler Meline; channel veteran Howard Cohen; and channel consultant and Achieve Unite CEO Theresa Caragol.

As varied as the audience and moderators were, there was a remarkable degree of similarities in the challenges and opportunities brought up for discussion, which fell largely into five main groups:

Marketing Now: Omnichannel, Digital & Data-Driven

Sonia Ziegler Meline, vice president of sales and marketing at Effortless Office, opened the workshop with a discussion everyone had questions about: amid all the talk of SEO, blogs, social media and news coverage, what are the things that really move the needle in terms of content marketing?

Meline says that while best practices like setting KPIs, testing different marketing channels and continually measuring the success or failure of different campaigns are important, the number one goal of content marketing is putting yourself in your customers’ shoes.

Ask yourself what your prospective customers are searching for. At the end of the day, they don’t care about the nitty gritty details of version 3.1 of your latest software upgrade or that you’ve achieved gold status in your OEM partner program. The marketing material you put out there should be geared toward your customers, not yourself.

What pain points do your customers share, and what should they do about them? If you’re a healthcare managed services provider, odds are your customers aren’t coming to your website because you published a technical blog about your solution offerings. But a thought leadership piece on “5 Easy Ways to Stay HIPAA Compliant” might get a lot of hits.

Once you land on a piece of content that resonates with your customer audience, leverage it in every way you can. Say you contract with a writer or digital agency to write a thought leadership byline that finds a home in a trade journal. Why stop there? You’ve already paid good money—whether to an in-house writer, consultant or agency—for the content. Take the top three takeaways and turn them into a blog on your site. Do you have interesting stats? There’s an infographic. Content is malleable, and true thought leadership will resonate in many forms: webinars, video tutorials, interactive digital pieces, tweets and Facebook posts are just a few ways to get every last bit of value from good content.

SaaS It Up! Opportunities in Applications Sales

If you’re a born-in-the-cloud solution provider, making money off of SaaS shouldn’t be a stumper. But for the traditional channel, adding SaaS to your solution offerings brings an entirely new different set of challenges.

Most partners incorporating SaaS into their offerings do so because of customer demand, says Carolyn April, senior director of industry analysis at CompTIA, especially from the new LOB buyer. But unlike previous channel iterations, partners aren’t making a lot of money off of selling SaaS applications or licenses. In many cases, the customer has already bought the application before ever consulting their trusted IT advisor. But once they have it, they discover that there’s a whole lot more to adopting a new SaaS application than just clicking Download.

It’s at this point the real cash opportunity for partners presents itself in integration and customization services. By offering these ‘after sale’ services, partners who once were traditional resellers can turn themselves into business consultants. As a bonus, these services can morph into a scalable, repeatable offering that turns into recurring revenue and ‘sticky’ customers.

“The more down-market you go, the more you can repeat your technology and services,” says April.

However, recurring revenue from SaaS, while certainly nice to have, doesn’t necessarily keep the lights on. The partner workshop attendees shared a slew of ‘wraparound’ services they provide attached to SaaS: provisioning, deployment, support, training and management, to name a few. The trick is that many traditional partners have historically offered such services as part of the sales process instead of charging for them and establishing a solid services revenue stream. If you create a hybrid business model where you charge upfront for these services, you can get that initial chunk of change to keep the doors open and establish a nice residual, recurring revenue stream.

“For years, we’ve been consulting for free in order to make the customer experience as good as possible,” said one partner. “Now we’re learning that the more we give away, the more it gives the customer an opportunity to move away from us to someone who’s putting a solid dollar amount next to the value they’re providing.”

Creating the New Channel

Change is coming to the traditional channel from two directions, says Theresa Caragol, CEO of Achieve Unite and longtime channel consultant. First, there’s a convergence of partner types. How many straight up resellers are succeeding in the channel today? Resellers are consultants are managed service providers are cloud service providers are IT solution providers—the lines blur more every day.

Second, a new class of partners is forming what Jay McBain, analyst at Forrester, calls the ‘shadow channel.’ Digital agencies, independent software vendors and startups are a few forms these new type of partners take.

If vendors hope to keep pace with the changing nature of their partners, they have to understand how to realign their programs to focus on business outcomes and include the shadow channel as part of ‘the tribe.’

“The customer used to be at the bottom of the sales pyramid, then the partner, then the vendor on top,” said Caragol. “Now the customer is on top. There’s no pyramid to support the channel when every company is a tech company. The traditional programs are unnatural in today’s world.”

So, too, are the traditional delineations between the IT channel and the telco channel. One attendee pointed out that the two traditional channel communities are organically complementary to one another.

“IT sees cloud as a challenge because of the smaller margins it carries, but it’s just a shift. The cloud is essentially just a remote data center, and the IT channel knows how to sell data centers,” he said. As for telco, he explained that subagents see the cloud as a workload that justifies more circuits. The two go-to-market strategies are a perfect convergence.

“Telco agents are masters of sales. They’re aggressive, insightful—sales is second nature. On the other side, the IT channel today is consumed by how they’re going to deliver services because that’s their go-to-market strategy.”

In the telco sphere, agents sell and carriers install…but installation is the longtime expertise of the IT channel. If the two could come together and find a way to merge strategies, it could be the birth of yet another form of channel partner.

Growing Big by Getting Focused

Penton senior content director (and The VAR Guy head honcho) T.C. Doyle says that the key to bigtime success in the future channel might lie in developing a niche focus. Partners that want to go this route should take a hard look at their existing clients to find commonalities that naturally lend themselves to what McBain calls ‘hyperspecialization.’

The biggest benefit to developing a focused practice is the ability to replicate solutions. If a partner can create a highly customized mix of technology, consultative services and ongoing support services, they can offer business owners the IT expertise business buyers just don’t have.

Vendors, too, are coming around to the idea of driving revenue through specialization in industry verticals and LOB functions.

“They’re starting to offer a continuum of business models and advice on services that partners can wrap around the technology,” said Doyle. “They’re leveraging that ‘trusted advisor’ to drive sales.”

Partners looking to specialize should try to think of the intersections between broad customer definitions such as industries, business functions, geographies and technical functions. Where an MSP might have once just been able to focus on healthcare, for instance, now that same partner can drill down further: marketing solutions for midsize dental offices in Texas, for instance. Once you have the know-how to advise in such a specialized field for one customer, you can take that success story to other potential clients and be able to directly speak to their desired business outcomes.

Bigger Customers, Bigger Profits: Capturing the Large-Enterprise Business

If your goal is to sell to enterprise-scale customers, Howard Cohen, senior resultant at TechChannel Partners’ Results Group, says there’s one very important thing to remember: It’s more important to be interested than interesting.

“If you’re interested in your customer’s problems, you’ll get in the C-suite,” says Cohen. “It costs just as much time and effort to attract an SMB than a large customer. You still have to talk to people. They’re all just people.”

There are three ways that partners can net new business, he explains:

1. Price and delivery: This is the old-school channel play. Get the best price in the shortest amount of time, and win on cost savings alone. The problem here is that the customer is only loyal to their last best price. The second someone undersells you, you’ve lost the account.
2. Quality of relationship: Show your customers you fundamentally understand their concerns and are the best person solve them. Sometimes partners can leverage pre-existing relationships for this type of sale: your brother-in-law’s college roommate, the mom of another kid on your daughter’s soccer team. But most of the time, the quality relationships you can bank on transcend common connections. Consider, he says, what happened after September 11, 2001. “It wasn’t just in New York. All around the country, relationships got more solid. There was a sense of ‘we’re in this together.’” But just like any relationship, the customer relationship can sour in an instant.
3. Convey the value you offer: “People don’t buy solutions. They buy value. People buy your smarts.”

If you’re looking to drive profits, you’ll never do it with the first option, and only sometimes with the second…but you’ll always win with the third.

“MSPs commoditize themselves and don’t sell on value. Successful partners don’t lowball their prices.”

Traditionally, there’s been a correlation between the size of the partner and the size of the customer, says Cohen, rendering the enterprise customer unattainable by SMB channel shops. But that correlation doesn’t exist in the new channel for the LOB buyer. There’s a mismatch now between the big national partners and their customers.

The opening for small partners lies in specializations that get them in front of specific lines of business. Don’t just be a managed service provider. Be a data service provider, or a cloud service provider. Focus on a specific job function, and you’ll get your foot in the door.