Risk v Reward ends in a no-contest
Are channel companies risk-averse?
It’s a question I have to ask after reading a summary of the CompTIA State Of The Channel 2024 report. It suggests that despite all the talk of our fast-moving and innovative technology industry, channel businesses are not big risk-takers, with only 23% describing themselves as having a ‘high risk tolerance’.
Conducted over six geographic regions, including the UK and Ireland, it appears that spending money to make money is still a concept that most channel firms aren’t comfortable with. According to Carolyn April, vice president of industry research, at CompTIA: “The channel is historically very risk averse. That often keeps channel companies the same size year after year after year. They are not willing to take the risk.”
The question that arises, I suppose, is whether being risk-averse is a bad thing? There are many circumstances where it might be the most sensible course. In any case, it’s not about channel companies being risk averse but about the level of risk their customers are prepared to accept.
Many of us can remember there was quite a lot opposition at the time for subscription-based software and software-as-a-service (SaaS) because of the risk that partners could lose or diminish their relationship with customers and end up being cut out of the loop altogether. They weren’t just protecting their own interests, however.
Delivery of software remotely had certain inherent risks that needed to be addressed and mitigated before it was fit for purpose for customers. Vendors could not just expect people to sign up for something because it suited their needs or assume channel partners would act as the propaganda wing for their latest brainwave.
So there are definitely times when caution is the better part of valour, especially when, as the channel partner, you own the relationship and will be the one facing the customer’s wrath when something goes wrong.
So there’s an argument for saying their aversion to risk demonstrates that channel businesses have their feet on the ground and can offer a reassuring level of solidity and security to customers. In this scenario, not spending money to make money might be better framed as not throwing money away on another possibly crazy vendor scheme.
Besides, channel businesses are not exactly awash with spare cash to blow on a potential mechanism to increase their revenue. They want to be fairly certain that what they’re doing will generate a return and benefit their customers. If they’re not spending money to make money, maybe they’re just unconvinced they will make a good enough return on their cash.
Finally, and you’ll forgive me if I sound a little bit heretical here but maybe, despite all the hype, technology is not an industry that has a ‘high risk tolerance’? Don’t get me wrong, there are clearly some companies that take risks and disrupt technologies or markets (and 23% is probably a bit high generally) but the vast bulk of them don’t. They follow along, usually at the point where customers are prepared to spend money on that innovation because it’s reached a point of maturity that makes it acceptable.
Maybe many channel companies are happy to stay the same size because they are confident they can support their customers. And perhaps many of them have reached that point of maturity where they can get along quite nicely, assured that when changes occur, they will be needed by vendors to help deliver them at the right time and with the least amount of risk.
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