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  • Writer's pictureGeorge Mellor - KloudReadiness, LLC

The Decade of the Ecosystem

Will Traditional Channel Partners Thrive?

Nope… The lion's share of technology channel partners are simply not making the moves necessary to position themselves to take advantage of the power of the multiplier within world-class technology supplier ecosystems.

Transacting partners provide a value element, however, that value is diminishing month-over-month as more technology buyers can easily procure technology via marketplaces or suppliers that have the right business model to perform e-commerce transactions at very low margins – it’s a volume game that few can play over the long-term.

Simply put, channel partners need to position themselves and accept that most of the revenue, and more importantly the margin that will be generated, is within the services solution-stack required to make a given technology deliver the business results that technology buyers require and expect.

So, transacting partners will be minimized and their profit pools will shrink. Non-transacting partners will be center stage and will control the customers' technology spend and their profit pools will expand dramatically.

Jay McBain predicted the shift from channel programs to channel ecosystems and has clearly articulated what it takes to win during the decade and the ramifications of not adapting one’s business model to leverage the multiplier effect that occurs within a healthy ecosystem.

Partner Challenges

The reasons holding partners back are many, however, the issues typically have nothing to do with technology, rather they have to do with focus, culture, and foundational business problems that include:

  • Transactional-laden partner business models that are not correctly aligned with subscription-based recurring revenue business outcomes…

  • Sales models that were created with legacy transactional business models in mind, but are ill-equipped to grow & sustain subscription & digital services revenue…

  • Sales compensation plans that are misaligned, and simply were not designed to drive cloud and digital services subscription revenue growth…

  • Backend systems and processes that are not capable of tracking or managing subscription revenue streams…

  • Lack of business-focused organizational and change management enablement programs from their vendor and distributor ecosystem partners…

In short, this is the first major business model shift that most channel partners have had to deal with in decades and most channel partners are not prepared to cross the ecosystem chasm – simply put they are not making the basic changes necessary to be competitive within the Subscription Economy.

This is important as every major technology vendor has already declared that they will provide all of their offerings in an as-a-service (XaaS) model within the next 12 – 24 months.

Yet all the vendor & distributor enablement programs focus exclusively on technology sales and delivery, not the journey required to create a functional hybrid business model. This oversite has stunted the growth of many legacy channel partners who would like to enter this area but are unaware of where to start or what to do.

Well, whether your strategic technology partners are helping you transform or not – you’ve got to start making the moves necessary to position your organization to take more than your fair share of the dollars generated by standing up a technology solution and then help the customer monitor, manage and operate that environment as you are able to provide more value up and down the stack.

Where should you Start your Journey?

Well, as you would tell your customers - start by performing an in-depth business assessment so you can understand your starting point and better yet - have visibility into the areas that need to be changed so you’re not thrashing trying to build a solid solutions-based business.

Once the assessment is complete and you have analyzed the results, create a strategy and plan that aligns with your current capabilities. Once you have created an economic model that makes sense, based upon your starting point, within a given ecosystem that is important to you – it’s time to begin the heavy lift that transformation and execution require.

This decision is all about understanding where your capabilities align with the customer's problems and the value and impact you can bring to the table to provide the proper solution at the right price.

If you are looking to truly understand the power of ecosystems, the importance they will play within many technology providers go-to-market plans, and the roles that ecosystem participants can play I’d refer you directly to the work of Jay McBain of Forrester who saw this trend well before anyone else in the industry.

Lastly, if you are thinking about how to assess your current digital and business readiness and are having trouble defining your approach and key areas to assess, please reach out to us at KloudReadiness as we would be happy to help point you in the right direction.

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