In our fast evolving industry, deciding on strategic focus feels like playing a game of cat and mouse for many vendors. In this exclusive piece for MSPX, Channelnomics Chief Analyst and CEO Larry Walsh provides key insights into the trends that should guide our decisions.
Looking back, the year 2019 seemed like a period of relative calm. However, the world has changed more in the past five years than in the preceding 10.
Megatrends are driving change at an exceedingly rapid pace, altering market conditions. These changing conditions create new challenges for technology vendors and partners in the broader channel ecosystem that will last for the next five years and beyond.
The good news for the global channel community is that these challenges are creating new opportunities to apply technology products, services, and skills to create solutions, optimize business operations, and drive new business ventures.
Channelnomics has identified eight challenges facing vendors and their partners in our rapidly evolving world. These challenges — while potentially disruptive and difficult to overcome — are also opportunities for vendors and solution providers to create value for their customers.
1. Artificial Intelligence
Challenge:
Artificial intelligence is a hot topic, and adoption of the technology is accelerating. But that doesn’t mean that AI is without challenges. AI is still emerging, lacks use cases, and requires broad infrastructure refreshes, data organization and management, talent and expertise, higher levels of security, and massive amounts of energy to create and operate generative systems. Customers don’t know where to start, how to implement, or get the most out of their AI investments.
Opportunity:
Technology partners are perfectly positioned to aid customers in their AI journeys by developing use cases and reference architectures that not only add value but also define the technology investments, data hygiene and management needs, staffing requirements, and security levels. Partners can also work with customers to create optimized processing and energy-efficient systems. And, of course, partners can provide ongoing managed services and support around AI systems. This requires partners to invest in developing AI skills and practices.
2. Pace of Change
Technology is rapidly advancing. Artificial intelligence, for instance, went from a discrete function embedded in applications to a mainstream system unto itself in months.
Challenge:
Many vendors are rolling out updates and new products monthly and weekly. The new capabilities are creating complexity. Customers are struggling to keep up with all of the innovations. Vendors note that innovation is outpacing the market’s ability to adopt and consume new technologies. Partners face the same challenge of meeting the training, certification, and practice development requirements. The impact? The pace of change is creating gaps in partner capabilities and customer consumption.
Opportunity:
Partners that build focused technology practices and develop relationships with ecosystem partners to augment their capabilities will have greater value to their end customers. Partners developing capabilities that meet the current and evolving needs of the market will find customers that seek their ability to guide, implement, and manage their digital transformation projects and operations.
3. Talent & Staffing
Challenge:
Technology is now pervasive in every organization, and that means every company, whether a technology vendor, partner, or customer, is vying for the same talent. But the world isn’t producing enough technology professionals.
The security market alone is short 4 million people worldwide. Other disciplines, such as AI, need millions of trained engineers, application developers, and workflow process developers to meet market needs. IDC predicts that AI talent shortages alone could cost businesses $6.5 trillion in lost productivity gains in 2025.
Opportunity:
The channel is an aggregation point of talent. Solution providers will face challenges in recruiting and retaining talent in their organizations. However, solution providers can pool resources and deliver them to customers as services, thus spreading capacity over multiple companies with economic efficiency. Additionally, automation will make the provision of services more scalable for partners and consumable by customers.
4. Economic Uncertainty
Challenge:
On paper, the global economy looks reasonably healthy. Productivity is up, and general spending remains solid. However, business owners and management teams remain pessimistic. High inflation and interest rates are weighing on businesses, keeping them from fully committing to investments. And their concerns aren’t limited to today. Many of these business leaders aren’t certain about what will come next economically, so they’re planning and spending conservatively.
Opportunity:
Economic uncertainty and tight budgets pose an opportunity for vendors and solution providers. It all starts with pre-sales consultations and assessments aimed at identifying opportunities to apply new technologies, processes, and automation that improve productivity, optimize expenses, and open new revenue-generating opportunities. Providing the antidote to economic uncertainty requires solution providers to look beyond technology and provide customers with business advice and support leading to strategies and systems that require technology products and services.
5. Platforms & Ecosystem Management
Challenge:
Vendors are rapidly pivoting to becoming platforms on which other vendors — particularly independent software vendors and application developers — attach their products to extend the value of the underlying technology. When vendors refer to “ecosystems,” they’re often talking about working with multiple complementary technology providers to create systems that have value greater than the sum of their parts. For solution providers and their customers, the challenge lies in identifying the right complementary vendors, forming relationships, selling complex deals, and managing such systems.
Opportunity:
Forming multi-party, multi-vendor relationships is difficult. The key for solution providers is focusing on customers’ needs and outcomes. If a solution provider can define the collection of technologies required to address the needs of multiple customers, it can identify the right vendors and ISVs to work with, create reference architectures and deployment processes, and design support services that can scale with their organizations. Focusing on select solutions rather than custom-built systems can make it so that ecosystem relationships are built once and then maintained.
6. Marketplaces & Digital Sales
Challenge:
Hyperscalers and vendors are selling more products through first- and third-person marketplaces than ever before.
They’re responding, in large part, to demographic shifts: Millennial and Gen Z buyers don’t want to deal with salespeople; they want the convenience of buying online. This is causing share shift and conflict with traditional reseller channels.
Opportunity:
The shift to marketplaces and digital sales platforms is opening new opportunities for partners, particularly those with specialized professional services and specific technology capabilities. Acquiring product isn’t a challenge for customers, but knowing how to integrate it with existing systems, optimize its utilization, and gain the most value is often a mystery. Marketplaces may shift product sales away from the traditional channel but will replace them with service opportunities.
7. Customer Experience Expectations
Challenge:
Customer expectations are changing. End users — be they enterprises or SMBs — are focusing less on price and more on their experience with technology and providers. And those customer expectations extend far beyond the initial sale. Customers want a superior experience throughout the entire lifetime of the engagement — pre-sale, during the transaction, post-sale, on renewal, and with expansion of their accounts. Meeting this expectation requires tremendous effort on the partner’s part, and that continuous effort is sometimes seen as a distraction from other activities.
Opportunity:
Partners that excel in customer experience will stand apart from the competition and offer greater value.
By establishing processes and practices that focus on and manage the customer experience, partners will earn customer loyalty, repeat business, and less price resistance. More than half of customers will pay more for a better experience. Meeting this expectation is a growth and profitability opportunity for partners.
8. Justifying Cost-Benefit
Challenge:
Inflation is driving up the cost of everything. While businesses need technology to operate, they can’t afford everything or the best that technology has to offer them. They must make choices based on tight budgets and the management of legacy investments. They also have a low tolerance for mistakes and failed projects. All of this puts pressure on partners to justify their recommendations and define and quantify the outcomes of new technologies.
Opportunity:
Partners are frequently referred to as “trusted advisors” because customers have confidence in their product and service recommendations. Given the complexity of technology, customers depend on partners to identify their needs and steer their investment decisions.
It’s imperative for partners to enhance their involvement in planning and optimizing their customers’ management and IT environments. Additionally, they must offer a broader range of services. Above all, partners must justify investments by clearly demonstrating the cost-benefit ratio to the customer.
Despite the challenges, these issues represent opportunities for growth and advancement for partners. In an evolving market landscape, partners equipped with expert-level knowledge are indispensable. Their deep understanding of technical complexities and emerging trends ensures that solutions aren’t only current but also forward-thinking.
In addition, partners offer skilled resources and capabilities, enabling them to execute and manage projects with efficiency and precision. This proficiency is crucial in maintaining a competitive edge and achieving operational excellence. The relationships that partners cultivate with vendors and within their ecosystems are equally vital, as they facilitate collaboration and leverage synergies that drive mutual success. The world needs partners more than ever to overcome these challenges and those still to come.
Larry Walsh is the CEO, chief analyst, and founder of Channelnomics. He’s an expert on the development and execution of channel programs, disruptive sales models, and growth strategies for companies worldwide.
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