If you can’t beat ‘em, join ‘em. We’ve all heard that old adage before. Yet cliché as it may be, that sentiment is taking root across today’s IT channel landscape.
The reason? The evolving makeup of the channel itself and what it means to sell technology in an increasingly complex scenario. There are more players, more business models, more specialties, more competitors, more potential partners. As a whole, the ecosystem has been changing now for years, with a host of formerly unfamiliar players actively selling or referring technology products and services alongside those veterans of the industry. What’s really interesting is that many of those new entrants are not who you’d think. Accounting firms, law practices, marketers are in the game now. For real. They don’t identify as tech companies, obviously, but over time they have become expert in a particular tech discipline or software product related to their industry and have parlayed that knowledge into an adjacent revenue stream. Nice side gig if you can get it.
The Channel Is Changing. Are You?
Beyond those non-traditional firms, there are the thousands of SaaS-focused resellers and referral partners that have blossomed around just as many ISVs selling their applications via marketplaces and hubs such as Salesforce. Based on CompTIA’s recent 8th State of the Channel research study, six in 10 “traditional” channel firms reported encountering such SaaS companies in the market in the last year. Half said they bumped into digital marketing agencies. Nearly a third saw accounting firms selling tech, while two in 10 ran into law firms.
This expanding demographic could be cause for competitive concern among traditional channel firms. Many of the new players are steeped in applications expertise, some vertical in nature. The mainstay channel tends to lean heavily on infrastructure skills around hardware, networking, storage and the like. Building applications capacity is difficult to do organically. It requires hiring people with the right skills or embarking on an extensive retraining effort, not to mention cultivating relationships with a whole new set of vendors. For the average SMB-sized channel firm, this kind of effort is daunting—and often beyond the size of their wallet.
And yet, customers need both infrastructure and software. And typically, they’d prefer to work with a single provider rather than divvy up their engagements among several different entities. It’s cumbersome, it involves time and effort, and customers today just want things to work at the end of the day. They don’t want to have to manage the process across multiple providers.
So, what’s the solution? Again, if you can’t beat ‘em, join ‘em. Some savvy firms today have figured out they can expand their skills offerings, their portfolios, and their competitive advantage by working together versus competing. CompTIA research finds that the incidence of partnering between traditional and non-traditional channel companies such as SaaS specialists, accounting firms and marketers is on the upswing.
In 2019, the number of channel firms that partnered frequently with newer entrants to the ecosystem increased from 20% to 30% compared to 2018. Those that did so occasionally edged up from 42% in 2018 to 45% this year. These arrangements help fill gaps in skill sets or solutions portfolios, mitigate technical complexity that prevents some companies from entering new markets, and enable an easier entry into the emerging tech arena.
Partnering can be particularly effective for small channel firms with limited and largely horizontal infrastructure practices. Our study found that six in 10 firms of this size have engaged in partnering, primarily with organizations specializing in applications or a specific vertical industry. They said they did so to expand skills and broaden their portfolio and rated the experience as positive.
There’s a caveat. Partnering doesn’t typically work beyond a single engagement if the players do not formalize it. Handshake agreements might seem quaint, but they don’t lend themselves well to a long-term, successful partnership. Before you set out on such a relationship, establish the rules: who is accountable first to the customer, will your firms jointly sell, what will your marketing look like, and what is the compensation/pricing structure. Sort those items out, and you’re well on your way.
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Carolyn April is senior director of industry analysis at CompTIA.