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January 22, 2021
The COVID-19 pandemic will continue to heavily impact ongoing channel trends throughout 2021.
That’s according to Jay McBain, principal analyst of channel partnerships and alliances at Forrester. This week he released 10 channel trends to expect this year.
Forrester’s Jay McBain
“The pandemic created this new remote topology where there are some long-term opportunities after they rushed to get laptops and UCaaS, and everything installed to get them operational, to get it well managed, well governed, secure, more compliant, better continuity — all the other things that partners know how to do really well now come into play,” he said. “The phase two, or the maturity of this remote topology, is a huge opportunity for 2021.”
We recently compiled a list of 20 top UCaaS providers offering products and services via channel partners.
Customer demand – especially medium, midmarket, public sector, and enterprise – later in 2020 shifted to automation, cloud acceleration, customer/employee experience, and e-commerce/marketplaces, he said. That left many parts of the technology channel out in the cold.
“This led the industry into a K-shaped recovery where partners who had skills, resources and prebuilt practices around the business needs of their customers excelled with double- and sometime triple-digit growth, while many VARs and MSPs were down by double digits and relying on government, vendor and distributor funding to survive,” McBain said. “This will persist through 2021.”
Among 2021 channel trends:
The channel will benefit from the changing future of work.
Subscription/consumption models go mainstream, but the channel isn’t ready.
The embedded/white-labeled future replaces the SKU, and distribution struggles to adapt.
Marketplaces, product-led growth and direct-to-customer further challenge resell.
Marketplaces start taxing services.
Channel process automation (CPA) becomes a reality as most channel program rebrand as ecosystems.
Ecosystem recruitment and partner-to-partner collaboration rely on a community approach.
Compliance, consolidation and price compression accelerate in the MSP market.
Channel revenue management matures.
Enablement takes center stage.
Beyond the basic remote infrastructure delivered in response to the pandemic, the channel will capture the opportunity in edge computing, McBain said. The rise of edge computing is among channel trends this year.
“The pandemic has accelerated the importance of edge,” he said. “Also, many of the emerging technologies that we’re watching – IoT, AI, automation, blockchain – involve and are necessary to have compute storage at the edge.”
The first three months of the pandemic prompted more movement in e-commerce and marketplaces than during the last 10 years combined, McBain said. A surge in marketplaces is among his 2021 trends.
“We got to the point where one-third of the U.S. economy was going e-commerce by the third quarter,” he said. “We had predicted 17% of the channel’s business, the vendor’s business, would go the marketplace by 2023. We’re starting to think now that it’s going to happen this year. It’s accelerating because of the pandemic. And now that it’s 17%, it makes a material impact on those partners that rely on the front- and back-end margin of vendors.”
Subscription and consumption models are directly correlated to a marketplace, McBain said. It’s the only way you can consume a metered-type service.
Also, embedded technologies like AI and automation are …
… not themselves products, and therefore lend themselves to the marketplace, he said.
“You’re not going to hire your local agent or MSP who drives a white van to track down all these companies and become a partner, and get you a special deal, and pay them every 30 days forever in a subscription model,” McBain said. “We just know that 60% of customers want to move in this directly quickly. And this is going to be on a rapid, upward swing for the next decade.”
This forces the channel to rethink the margin part of the business, he said. There’s also the multiplier effect.
“Vendors are getting better at talking about the opportunity for partners, which ranges from a five and nine multiplier,” McBain said. “So instead of making 30% of a deal and collecting the money from the customer, start focusing on making $2 for every $1 a vendor makes by doing all the up and downstream opportunity that it creates. It’s a different lens. The partners that get it are growing significantly. The partners that don’t get it are going to find a squeeze.”
In terms of partner programs, the typical model with a limited number of partners is quickly being replaced by ecosystems, he said. An ecosystem is about 10 times bigger than a partner program on average. Your customers become partners, and your partners become customers.
“You’ve got at least a dozen –if not two dozen – different partner types working on a deal, and again, and they’re non-transacting and their nontraditional,” McBain said. “You have an accountant, you have a lawyer, you have a digital agency, an integrator, an MSP, an agent and an ISV. You’ve got all these people — on average, five of them working with the customer. And that’s how you build your ecosystem. So if you have 10,000 partners today, your ecosystem tomorrow needs to probably have about 100,000 players that are driving influence, driving the transaction, whichever way the customer wants to buy, and then obviously driving the long term.”
Automation is essential for ecosystems, he said.
“If you have ten times more partners, there are about 100 things you need to do with those partners to be part of a program to make it repeatable,” McBain said. “You have to onboard, educate and train, incent and motivate, and drive loyalty. You have to cross-sell and co-market with them. The problem is your CFO is not going to give you 10 times the money. You’re not going to able to hire 10 times the channel account managers to be able to deploy 10 times the amount of incentives and resources. So you’re going to have to spread it a little bit like peanut butter. But you’re going to have to automate it.”
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