What will the vendor partner programmes of the future look like? It’s an interesting question. CompTIA’s IT Industry Outlook 2016 report believes they will definitely be different in a cloud-based ‘as-a-service’ world where, in many cases, “vendor-provided margin now plays second fiddle to what the partner earns on his or her own raft of services”. It believes that with more channel companies listing their primary business model as consulting services, “this trend will only continue”.
According to CompTIA, vendors need to think differently about their partner programme compensation models, arguing that they “run the risk of becoming antiquated if not updated to reflect how partners make money today”. It claims that features such as upfront discounts and back-end rebates “are declining in relative importance to channel partners” and warns that “newer cloud vendors with no heritage in legacy hardware or software are wisely building partner programmes that recognise this”.
This state of affairs is giving rise to uncertainty in vendor relationships with CompTIA reporting that 48% of US-based channel companies recently described their relationships with vendors as “exploratory” or “shifting” which, it argues, “means they are taking a look at new vendors to work with or they have made a definitive switch already”. According to CompTIA, cloud has been a big driver “as new, more nimble vendors have emerged and are beginning to build out indirect channels”.
Rethink
The organisation says that channel partners are rethinking the value of conventional partner programmes and compensation models because of the way that they make money from cloud solutions around recurring revenue, referral fees and consulting.
The difficulty with traditional models is that they tend to assign status and rewards based on revenue from product sold but don’t work as well in a recurring revenue, consultancy and services world.
So how do vendors achieve the right balance in their partner programmes to recognise the changing nature of what partners do for their customers in the as-a-service world compared to the old install and configure model? What do partners bring to the new model that is of value to vendors and worthy of reward and recognition? Equally, what do partners want from their vendors for the role they perform?
That’s not to say that all partners are ready to jettison the old model. The counter trend, acknowledged by CompTIA, is “that many business models in the channel will continue to rely on traditional arrangements with vendor partners, including placing a high value on vendor-provided margin on product and services”.
Still, it will be interesting to see how things shape up. As with so much else in the IT world, it’s easier for cloud vendors starting from scratch to create partner models that align with their business models. Things are much more complicated and complex for established vendors and their partners trying to make the transition to newer programmes while protecting their customers’ investments as they migrate them to the new model.
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