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Services shift threatens traditional channel and vendor relationships

As the channel looks to grow more of its revenues through services CompTIA highlights a threat to some existing vendor approaches to partners

With resellers increasingly becoming managed service providers, moving into a position where the bulk of their income comes from contracts that deliver monthly recurring revenue, traditional partner programmes are coming under strain.

Traditionally vendors would reward partners based on the amount of their products and services that the reseller sold, with those shifting the most usually landing a platinum or gold accreditation.

But a partner is now looking to develop their own services and get into a position where they bring together various vendor offerings into a single solution. The focus is on a much broader spectrum rather than just pushing one or two brands.

The risk is that as the most innovative partners put the muscle into their own service development they could start to slip off the radar if vendor's continue to stick to measuring their importance with old metrics.

A note of caution about the potential impact on vendor and reseller relationships is contained in CompTIA's IT Industry Outlook 2016 survey.

"In a cloud‐based “as‐a‐service” world, the main source of channel profit – vendor margin – is changing. In many cases, vendor‐provided margin now plays second fiddle to what the partner earns on his or her own raft of services. And with more channel firms calling consulting services their primary business model, this trend will only continue," stated the report.

"As a result, vendors need to be thinking differently about partner program compensation models, which run the risk of becoming antiquated if not updated to reflect how partners make money today. Staples such as upfront discounts and back‐end rebates are declining in relative importance to channel partners while newer cloud vendors with no heritage in legacy hardware or software are wisely building partner programs that recognise this," added the report.

Signs that things are already changing can be seen with the large number of resellers describing their relationships with vendors as "shifting".

For those running channel partner programmes there is not a need for an immediate panic as things are not going to change overnight. CompTIA's report also throws in a counter argument very much for the status quo.

"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. While half of the channel might be evaluating new vendors to potentially work with – or have even dropped some old for new – it remains that a net 93% of them express satisfaction with their most strategic vendors," it added.

The cloud is having the most impact on the channel and the other trends that the report reveals are also around the growing number of resellers that have developed their own IP. The need to stand out from the crowd is driving some to create their own products and services.

Customers are also changing as a result of the cloud and the report advises the channel to get close to those that have the budget to make sure they are continuing to prove their relevance to users that are being bombarded with more options than in the past.

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