2020 is (thankfully) almost over. And while just about every industry has been turned on its head this year, the tech industry, in particular, is experiencing a major transformation in how companies go-to-market. Structural changes in our economy (both pre- and post-COVID), new buying journeys, subscription models, marketplaces, and emerging technologies have all contributed to the need for more modern channel programs that prioritize ecosystems over traditional, indirect channel partnerships.
How do ecosystems differ from traditional, indirect channels?
For roughly 30 years, traditional, indirect channels have been responsible for transactional sales. Meaning, they sell a vendor’s technology to their customers in exchange for a specified margin of profit. Ecosystems, on the other hand, are untethered to the financial transaction. They focus instead on creating value, access and attachment to external networks, and partner co-innovation.
Why do I need to build a channel ecosystem in 2021?
In 2021 and beyond, ecosystems will become a critical component of any successful channel program. Here’s why:
We live in a subscription economy.
Cloud computing, the Internet of Things (IoT), and connected and mobile devices have all created the opportunity for us to offer products as services. And while we’ve been trending toward subscriptions for nearly a decade, the COVID-19 pandemic has accelerated the shift. According to Accenture, companies on a former three-year trajectory toward a cloud-based subscription model are now compressing it into three months. Why? In addition to enabling companies to forge deeper, data-driven relationships with customers, subscription models also offer businesses more resiliency.
“Other companies are seeing 50%, 60%, 80% drops in revenue. That’s just not possible in our business model…most of the SaaS companies I talk to are saying ‘Yes, our growth might slow this year, but we’re still growing versus non-subscription companies,’” says Tien Tzuo, CEO of Zuora, an enterprise software company that helps businesses launch and manage their subscription-based services.
But subscription models also present new challenges. Instead of a one-time purchase, we now have to ensure we can add enough value to win our customers’ business back every 30-days. And with more products being offered as services, the number of software companies in the world is expected to skyrocket in the coming years. Few of these companies will offer all-in-one solutions, which means customers will buy and deploy multiple solutions to solve a single problem. To get a piece of the action, we need to ensure our technology plays nice with others. Therefore, having a strategic community of companies to partner or integrate with becomes integral to our ability to close and repeatedly renew business.
Indirect sales are shrinking.
For the last 20 years, 75% of global sales have been indirect. But that’s about to change. According to Jay McBain, Principal Analyst at Forrester, indirect sales will shrink every year for the next decade. McBain explains, “Consumer trends, such as direct to consumer, are starting to shift into business. Brands are developing the capability to sell and fulfill directly to consumers, and this will extend to their B2B buyers, as well.”
Marketplaces are also becoming increasingly popular among today’s B2B buyers. With 73% of B2B buyers saying buying through marketplaces is very convenient, McBain predicts 17% of the $13 trillion in B2B spend will flow to marketplaces by 2023.
Because of this, we really need to rethink the role our traditional partners play in helping us win business. If we’re not relying on our partners for co-marketing, co-selling, and order fulfillment, how should we be leveraging our channel to help us drive revenue? And what does that channel even look like? Forrester reports a 571% increase in incentivizing non-transactional referral partners, while also noting a 23% decline in the inclusion of volume resellers in channel incentive programs.
Rather than fostering a traditional, transactional partner channel, successful companies are cultivating ecosystems of influential brand advocates and giving them the tools to effectively quantify and communicate the business value of purchasing their solutions. This includes business consultants, professional services firms, and influencers with large networks.
How do I Transform my Traditional Channel into an Ecosystem?
Want to dive deeper into the top challenges for channel sales in 2021 and how to build a channel ecosystem to solve them? Download our pre-recorded webinar ‘The Future of Channel: 2021 Predictions’ featuring guest speaker Jay McBain, Principal Analyst, Partnerships & Alliances at Forrester, to learn:
- The key capabilities channel partners need now to succeed with new business models
- The importance of renewals and retention in a world with continuous transactions
- The immediate changes you need to make in your marketing and enablement programs to power channel success
- The critical capabilities you need to scale and capture the 10x opportunity presented by the new channel fabric