Gstudio - adobe
Against a challenging economic backdrop, it is becoming clear to more vendors that the channel offers not just a powerful route to market and growth, but also one that is cheaper than operating a direct salesforce.
The expectation that vendors will further expand relationships with partners was one of the key tenets in the keynote from Steve Brazier, CEO of Canalys, at the analyst firm’s EMEA Forum in Barcelona.
“What does the channel do? The channel expands the market for vendors, and that’s mainly why you get signed up. But what do we see in these difficult economic times? It is also cheaper to sell through the channel than to do it all yourself. That’s why we will see more and more companies switch to the channel,” he said.
The channel is also good at delivering results. Brazier praised the top European partners for delivering strong growth of 15% in the first half of the year, even in the face of a difficult market.
“Some of the reasons are growth in the public sector and growth in military spending. Companies need to maintain their IT systems even if they’re not buying equipment, so [they use] professional services. We did also have a boost in the first half from the backlog of infrastructure from Dell, from HPE, from Cisco, being fulfilled, and overall, the software business remains very strong. So, the channel is doing incredibly well in what is a difficult situation,” he said.
Steve Brazier, Canalys
Brazier said the analyst house expected the large tech vendors to return to growth from April 2024, and the position of the channel to handle more of that revenue to continue to grow.
Jay McBain, chief analyst at McBain, said the total addressable IT market was $4.7tn, a decent chunk of which went through, with or via partners. “Important to all of us, 73.1% of this entire pie goes to through and with partners. If you add on partner assist, the number goes beyond 90%,” he said.
“Another interesting thing [is that] 82% of the CEOs around the world in every industry – in banking, insurance, pharmaceuticals, auto manufacturing, wherever they are – are investing more in partnerships,” he added.
“But the conversations are deeper than we’ve ever had. It’s not just the target addressable size they’re after, they want to know the available market and the go to market and roads to market strategy to get there. They want to know the obtainable market. Tell me about each partner, and how they’re going to help us get there,” he said.
McBain added that another factor playing in the channel’s favour was the emergence of more millennials in buying positions across the customer base. “By five quarters from now, our end buyer, both in number of buyers as well as budget, will be a millennial. There comes a lot of different psychology behaviours, a new customer journey that we’re all working with and working through,” he said.
“But suffice it to say, this is a different buyer. We’ve been watching this buyer for a while now in software as a service, how they go through their cycle and how they buy. They use more partners. You’ll never hear a millennial say, ‘I’m looking for a single throat to choke’,” said McBain.