Vendors Will Rethink MDF Budgets

Engaging with agent partners typically requires suppliers to get onto a TSD line card. Although signing an agreement with a TSD doesn’t automatically equate to a sponsorship package, many vendors spend money with the TSDs as a way to generate brand awareness. These market development funds (MDF) often tie into events where vendors get the opportunity to meet with and pitch their story to the TSDs’ subagents. For many vendor channel leaders, it’s a key way to stay relavent in the partner community and develop relationships.

But many channel leaders, speaking on background with Channel Futures, say more and more sponsorship proposals are coming in from TSDs and in many cases the prices are rising. Furthermore, they indicate that they are analyzing the value that comes with sponsoring all of the major TSDs, considering that the TSDs tend to have overlapping partner bases.

And all of these discussions are occuring in the context of a recession. Vendors are engaged in cost-cutting more than any other level of the channel. The constant stream of layoffs at suppliers, including in the UCaaS space, is evidence enough that these companies are under pressure from their shareholders to pad margins.

And you can be that market development funds receive that scrutinity. 8×8, whose sales and marketing expenses totaled $80 million in the last quarter vowed to decrease investments in that area (as its 10% workforce reduction indicated). The $80 million number does not refer specifically to MDF, but it speaks to the sharpened focus vendors will place on ROI.

Keep in mind, “rethinking” distributor MDF doesn’t mean ending it entirely. One partner suggested it might mean moving down one sponsorship tier, with total spending with the TSDs returning to 2019-2020 levels.

But on the other hand, more vendors are examining ways to get closer to the end customer with MDF. In increasing cases, that means directly funding a partner for an event that prospective clients will attend. 

Vendor seminent toward MDF differs on a case by case basis as well as in terms of technology type, so it may be better to keep this prediction broad. But make no mistake; the landscape is shifting with regard to market development funds in the channel.