navigating the changing landscape of channel partners in technology industry

WHAT MAKES US FOLLOWERS? HOW TO BECOME A GAME CHANGER?

Navigating the changing landscape of channel partners in the technology industry

Performance Improvement Survey

Tabl

e of

con

tent

s

Table of contents

Introduction 3

Methodology and Scope 4

Relationship with Channel Partners 5

Industry Outlook 6

Commoditization 10

Measurement 12

Loyalty and Retention 14

Role of Partners 16

Communication 17

Conclusions 19

About Us 21

Intr

oduc

tion

The speed of change in the technology

industry in relation to products and services

is accelerating, and the distribution needs

of partners are also rapidly evolving to keep

up.

This brings to mind a number of questions:

how is the channel adapting to this

change, is the channel still relevant, are

the roles changing in the channel and how

are vendors and partners managing this

change?

Introduction Status Quo of partner channel performance with in the technology industry.

Met

hodo

ly a

nd S

cope

Methodology and Scope

The research was conducted through an

online survey sent to professionals with

channel management responsibility in the

Asia-Pacific region. The results are based on

analyzing the responses.

The respondent profile was mainly Manager

and C-level executives and was quite evenly

distributed between sales, marketing, and

dedicated channel management functional

areas. The vast majority of respondents had a

regional (e.g. APAC) reach of responsibility.

What is your position within the

organization?

What is your functional area of

responsibility?

What is the geographical reach of your

responsibility?

Regional

70%

Worldwide 7%

National 8%

Multiple countries 15%

Manager

48%

C-Level

33%

CEO / Owner 4%

Other

15%

Marketing

26%

Partner Management

33%

Sales

22%

Customer Service

4%

Other

15%

0%

Rela

tions

hip

with

Cha

nnel

Par

tner

s

Relationship with Channel Partners

It appears that the channel is continuing to

play a vital role in the technology industry’s

path to market. Revenue through channel

partners is still significant with over 70% of

respondents stating that partners contribute

to more than 50% of all revenue.

The number of channel partners varied

significantly among the respondents

What is the approximate number of

channel partners you work with?

What percentage of your revenue is transacted by channel partners?

Indu

stry

out

look

Industry outlook

How do you perceive your industry’s

economic outlook for the next two years?

The overall economic outlook is very positive

among respondents.

Slightly decline

Stay the same

Significantly

improve

Is industry consolidation affecting you?

If yes, where?

Almost 80% of the respondents expressed

that industry consolidation is currently

affecting their business and is here to stay.

Featuring strongly in the responses to

industry consolidation is to improve areas

such as; marketing segmentation, and

marketing intelligence to find innovative

ways to identify and provide a solution to

end clients “pains.” This approach appears

to be a driver for those who are being

affected by consolidation as well as for

vendors and partners trying to extract value

from mergers and acquisitions.

Slightly improve

Significantly declineClients

13%Is not affecting us

21%

All of the above

21%

Competitors 8%

Chennel partners

4%

Indu

stry

out

look

More Consolidation

Less ConsolidationAbout the same

What is the industry consolidation long-term trend?

How is your company adapting to industry consolidation?

What strategic measures are you taking?

Capitalizing on key points of differentiation against

competitors, more strategic analysis to determine future

directions

Close relationship with customers to ensure right response to their business

pains

Be the consolidator

Improving the talentContinue to extend our

solution capability

Low risk subscription licencing models versus high upfront investments

Market segmentationFocus on innovation Horizontal integration

Business ModelProduct

Development Other

“Competitors gain market shares by consolidating, hence we have to think of more innovative

approaches against competitors. Now, it is tougher to protect your market share, let alone increase

it.”

Indu

stry

out

look

When asked what key initiatives are

undertaken to cope with industry change, the

respondents answers can be categorised as

follows:

• Enablement

• Strategy

• Product

• Partner relationships

What key initiatives are taken with regards to the channel in order to cope with the changing

industry environment?

Continuous knowledge transfer, direct

engagement with end customers, and wins with

key partner customers

Partner profitability workshops. More

effective lower cost customer outreach

Training

Enablement

Exploring out of territory, venture in

new business model, more business centric

than product

Strategy

Simplified pricing models

Low risk subscription licencing models

versus high upfront investments

New technology

Product Partner Relations

Expertise programs to drive partners towards

specialization by industry verticals or functional

verticals

Bootcamp programs to help partner’s product

knowledge

Build relevant competency, hiring the

right talent

Recruit new partners (with different

skillsets and level of adaptability to industry

changes)

Improve partner reviews and assessments

KPI’s to improve focus

More attractive channel incentives to push the focus ‘new’

products

In relation to the previous question, what do

partners need to do to adapt to this?

The key initiatives listed by each category

seem to have not radically changed over time,

as most of these initiatives have been in place

in the channel for a significant number of

years.

Indu

stry

out

look

Whilst 35% of vendors believe partners

are adapting well to selling more holistic

solutions, the responses to how they can

improve suggest that there is a significant

gap in key areas. Respondents felt that

partners need to improve in collaboration

(working closer together throughout the

sales channel) and strategy - from adapting

to the change, recruiting different talent,

managing a cultural shift of product selling

to solution selling to understating client

pain points.

Closer relations

Better understanding of customer needs

End to end visibility

Collaboration

Solution / Hybrid model services

Product

Getting out of comfort zone and start

changing and adapting

Paradigm shift from

StrategyCustomer relations

Reduced price focus

KPI’s to improve focusNew talents

Change of mindset

Find ways to innovate such that customers will see them as their

key advisor to solve all their business needs

Understanding customers’ pain points

¨The business model is evolving where partners are required to be a more holistic solution provider, partners are adapting well to this new posi-tion in the channel.¨

Strongly agree Somewhat agree

Neither agree nor disagree

Somewhat disagree

Strongly disagree

Com

mod

itisa

tion

Commoditization

Product commoditization is seen clearly as

a future threat and not surprisingly it is seen

as similarly impacting both partners and

respondent companies. Strategic initiatives

to combat this fell into three main categories:

product strategy, partner relations and

product service development.

Clients

13%

Yes, it is impacting our business currently and is likely to impact more in

the future. 38%

Yes, it is impacting

our business currently.

12%

No, but there are signs that it will be a future

trend. 21%

No 29%

Is product commoditization affecting your

company?

Yes, it is impacting our business currently and is likely to impact more in

the future. 37%

Yes, it is impacting

our business currently.

17%

No, but there are signs that it will be a future

trend. 21%

No 25%

Does product commoditization exist for

your partners?

However the strategic initiatives listed by

respondents appear to lack uniqueness or

innovation with most initiatives suggested

being very commonplace in the market for

some time.

Com

mod

itisa

tion

Move from products to solutions and services

Value added services and differentiation on

customer service

Product Strategy

Help partners stay relevant to their

customers

Partner Relations

Turnkey offerings rather than single specific

products or services.

Product / Service Development

Other

Compete on value added services, partner with key

alliance partners to re-package products

Identify unique joint value propositions

with Partners, not just product specific.

What strategic initiatives are taken to address product commodisation?

The responses fell into four categories with varying level of complexity.

SaaS model

Solution differentiations

New Product Features

Differentiation and Focus on Business

outcomes

Innovate product capabilities, and delivery channels

Continued development of value added services

Looking at other sources of value add

Release of competitive and innovative products

according to market trends

Customer training

Price drop

Target specific industry verticals or functional

verticals

Mea

sure

men

t

Measurement

With almost 40% of the respondents

indicating a negative view on the channel

performance and only 5% of vendors stating

that their partners are performing above

expectations there appears to be significant

room for improvement. Further the majority

of respondents agreed that measurement

criteria of partners had changed, and whilst

this is not the subject of this survey the

question begs to be asked:

Do the partners fully understand and agree

to the new expectations of the vendors?

It would appear the respondents are using

some fair and reasonable metrics to measure

performance such as share of wallet, with

over 80% measuring this at partner or

customer level or both. Surprisingly 39% of

respondent’s state they measure satisfaction

of the partner at the end customer point.

To maximise the product lifecycle, vendors

are constantly challenged to get their

products from the design floor into the

market quickly. Some vendors are going to

great lengths to ensure both the partners and

customers are primed and ready for product

releases.

Additionally, there is a subsequent

challenge of keeping information out of the

hands of competitors, to slow their reaction

time in countering or diluting the offer.

Speed to market has become a crucial

component of the vendor/partner strategy,

with respondents confirming that it is a core

focus with over 75% performing at or above

expectation.

Whilst no levels of satisfaction were

evaluated, respondents seem committed

to measuring their own performance at the

partner level with over 70% using a metric

of Net Promotor Score or a similar indicator.

Do you feel your channel is performing to

expectations?

Below expectations

39%At expectations

56%

Above expectations

5%

With almost 40% of the respondents

indicating a negative view on the channel

performance and only 5% of vendors stating

that their partners are performing above

expectations there appears to be significant

room for improvement. Further the majority

of respondents agreed that measurement

criteria of partners had changed, and whilst

this is not the subject of this survey the

question begs to be asked:

Do the partners fully understand and agree

to the new expectations of the vendors?

It would appear the respondents are using

some fair and reasonable metrics to measure

performance such as share of wallet, with

over 80% measuring this at partner or

customer level or both. Surprisingly 39% of

respondent’s state they measure satisfaction

of the partner at the end customer point.

To maximise the product lifecycle, vendors

are constantly challenged to get their

products from the design floor into the

market quickly. Some vendors are going to

great lengths to ensure both the partners and

customers are primed and ready for product

releases.

Mea

sure

men

t

Do you measure your partner’s satisfaction

with you, if so do you use a metric such as

Net Promoter Score (NPS)?

Nearly 70% of the respondents use Net

Promoter Score or similar to measure the

satisfaction.

Has the measurement of partners changed

in line with the evolution of the market?

No

28% Yes

61%

N/a

11%

Do you measure satisfaction of end

customer to partner?

No

50%

Yes

39%

N/a

11%

Below expectations

At expectationsBelow

expectations

It is not a focus

We have a KPI /metric to measure share (of

wallet) at a ...

Both a partner and a customer level

52%

We don’t measure it 19%

Customer level 19%

Partner level 10%

Categorized by customer frequency, by their YoY CAGR & current $/VAR over expected Partner

Long Term Value

Growth, revenue & margin

contribution

How do you measure the cost of

losing a partner?

Only by the top line number as revenue lost.

Past revenue

Market share and share of

wallet

Revenue growth and profitability, though

there are other intangible costs as

well.

Future contribution

Past performance

Other

Loy

alty

and

Ret

entio

n

Loyalty and Retention

The risk of losing or exiting a partner

relationship holds various consequences

and exit barriers include the risk of losing an

end customer. When asked, “When partners

are lost if exited, do you retain the end user

customer? 44% stated that the end user

customers were retained most of the time

and additional 50% were retained some of

the time. With only 6% stating that the end

customer is never retained, it would appear

the loyalty to the vendor is fairly strong,

regardless of their partner relationship.

When partners are lost or exited, do you

retain the end user customer?

If the vendors are exuding so much power

in the channel, this is a possible reason why

there is resistance from the partners to share

information. Significant information gaps

exist with respondents stating the biggest

gaps relate to Visibility, Alignment, Market

Intelligence, Customer needs and Partner

Most of the time

44%

Is there a formal process or technology in

place to gather competitor Intel?

Some of the time

50%

None of the time

6%

No

61%

Yes

33%

N/a

6%

Loy

alty

and

Ret

entio

n

Where do you see the biggest information gap(s) on the partner side regarding your customer

relations?

No visibility

Visibility

Strategy alignment for a true partnership

Lack of engaged hands on between

our services and the Partners offering, continual product

only focus from the Partner Product

team to sales continues to be an

issue

KPI’s to improve focus

Mainly on products/solutions innovation that we have taken and partners not

kept abreast or up to speed on such

innovations.

AlignmentMarket

IntelligenceCollaboration Collaboration

Some channel partners not

willing to share information

Competitive market data

Wallet share and opportunity

analysis

Understanding of ‘sweet spot’ in terms of use

case

Customer’s needs and

decision making process

Partners ability to keep current

Partners are not self-sufficient in the region. They expect

free training and hand holding

every step of the way”

You would imagine vendors have an appetite

for real data in the way of competitor intel

and revenue forecasting, however only

33% have a formal process or technology in

place to gather competitor intel. Also when

asked, “How is revenue forecasted collected/

measured? Is it trustworthy?”.

The responses varied from not trustworthy

through to a high degree of trust and

validation methodologies.

• Not trustworthy

• Through CRM system and quarterly reporting

• Forecast accuracy varies

• In case of a revenue share model

• Through Sales Management

• Somewhat trustworthy through Partner portal

• From internal CRM system

• Top down with no understanding of the

How is revenue forecasting collected /

measured? Is it trustworthy?

regional markets

Rol

e of

Par

tner

s

Role of Partners

Whilst over 75% of the responses it’s not

a surprise that vendors expect partners to

provide visibility on future needs of the

market as a core function they need to

perform. An additional and overwhelming

90 % expect direct feedback on their

products and services.

So whilst it appears partners are demanding

digital and multichannel communications,

with partners needing to have access to

content Any Where, Any Time, Any Device ,

the importance of face to face relationships

with partners remains of critical importance.

Whilst conferences, incentive and events is

one of the platforms to foster partner face to

face relationships, over 75% of respondents

felt that these played an important role

in partner engagement and further 80%

of respondents stated the ROI on these

investments was greater than average vs

alternatives.


Somewhat agreeStrongly agree

Strongly disagree

¨It is a core function of the channel partner to provide visibility on customers’ future needs¨

¨We expect the partner to pro-vide direct customer feedback on our products and services¨

Strongly agree

Somewhat agree

Somewhat disagree

Strongly disagree


Somewhat agreeStrongly agree

Strongly disagree

¨Our partners are involved in collecting Intel on our compe-titors¨

Com

mun

icat

ion

Communication

¨Partners are demanding mul-tichannel communication, our partners need to have access to our content Any Where, Any Time, Any Device¨

Somewhat disagree

Strongly disagree

Strongly agree

Somewhat agree


¨Events, conferences and incentives still play an impor-tant role in partner engage-ment¨

Somewhat disagree

Strongly disagree

Strongly agree

Somewhat agree


¨Partner relations are suppor-ted by multichannel communi-cations, but it is critically im-portant to have personalized relations with partners¨

How does the ROI of incentives and events

rate compare to other lead generation

activities?

High

33%

The ROI is not

measured17%

Low

11%

Average

39%

Strongly disagree

Strongly agree

Somewhat agree


Com

mun

icat

ion

Enabling technologies

Whist a myriad of technologies are available

to facilitate collaboration and efficiencies,

what has been adapted in the marketplace?

The standouts are common/integrated CRM

systems (45%) and common integrated

marketing systems (35%).

What enabling technologies are you providing

into the channel?

Common/Integrated CRM

Common/Integrated Marketing systems

Data integration Common/Integrated business intelligence/

analytics collaboration,

etc.

Common/Integrated ERP

Con

clus

ions

One of the key aspects that the report

focused on was the industry consolidation

and how it impacts the companies and their

channel partners where the companies

seem to adapt different strategies to reduce

the risks of industry consolidation through

expansion, innovation, differentiation, and

moving closer to end clients.

Another key trend was the product

commoditization as a significant threat.

The respondents presented a wide variety

of initiatives taken to cope with the

commoditization that ranged from simple

tactics to larger strategic initiatives.

An interesting finding from the study was

how companies are aiming to help their

channel partners in the changing industry

environment.

The initiatives were categorized in four key

areas:

1. Enablement - Knowledge transfer and

training programs.

2. Strategy - Remodeling the channel

partner structure and modifying the

existing business models.

3. Product - Improving the product,

technology, and pricing models.

4. Partner Relations - Better measurement

and assessment as well as rethinking the

incentives.

Conclusions The received responses for the channel survey reveal in general a positive outlook for the technology companies in Asia-Pacific.

Con

clus

ions

Interestingly when asked about what the

companies expect from channel partners

in order to better adapt to the changing

environment the majority of the replies

focused on:

• Closer relation and collaboration with

the vendor.

• Reduced price focus and more solution

oriented selling.

• Shift from product management to sales

and adapting out of the comfort zone.

• Becoming a client advisor for business

needs.

Measuring efficiently the channel

performance is evidently one of the keys

to success but the study showed gaps

both in companies current measurement

process as the means to improve the partner

performance to meet the expectations.

Overall the research shows some interesting

areas of improvement especially as to

the vendor-channel relation as well as in

developing models that enable improved

information flow to both directions; thus

gaining competitive advantage through

increased visibility on the market and the

changing requirements.

We hope this report provides some

interesting insights to the relationship

of channel partners with technology

companies doing business in the Asia-

Pacific.

Contact the MCI Performance

Improvement experts to have a

conversation and explore how MCI can

help address the changing landscape you

are facing, and share industry insights

and solutions that focus on these pain

points and provide positive impact to

your business

Abo

ut U

s

About Us MCI Performance Improvement team of experts work with a vast range of corporates in the region desig-ning, implementing, managing and fulfilling channel engagement, incentive and loyalty strategies which focus of different pain points of our clients to provide positive impact to their businesses.

CONTACT OUR EXPERT

Matthew SmithDirector - Performance Improvement

[email protected]

CONTACT OUR EXPERT

Thomas StecherDirector - Business Development

[email protected]

MCI Group Asia Pacific | Singapore20 Bendemeer Road #04-02 Cyberhub Singapore 339914T:+65 6496 5580

www.mci-group.com

http://www.mci-group.com