The Channel Population Is Getting Bigger
Several vendors have recently asked 2112 about the total size of the channel. The only answer: It’s big and getting bigger.
By Larry Walsh
In the past week, I’ve had three people from different parts of the industry ask me the same question: How big is the channel? How many partners are there?
I have a simple formula for determining the size of the channel: CP ≥ 1.
Yes, you read that correctly. The channel population (CP) is greater than or equal to 1, and that’s the only legitimate answer anyone can give you.
The channel is obsessed with definitions, and that’s the root cause of the population challenge. Because channel chiefs and program managers want tidy ways of defining what a “partner” is, the number of companies – or legal entities – remains variable.
So, let’s get into it: Just how many partners are there?
- Worldwide: Unknown, but let’s say 600,000, as that’s the reported size of the world’s largest channel community – namely, Microsoft’s.
- North America: Unknown, again, but let’s say between 75,000 and 125,000, with caveats.
- Managed Service Providers: Unknown, but the best estimates are 60,000 in North America and 120,000 worldwide.
- Telecom Agents: Somewhere north of 15,000 and south of 35,000.
I can go on reciting numbers, but they’re all largely meaningless. The reason? The definition of “partner” is changing rapidly.
Let’s start with the traditional partner definition. Solution providers encompass the universe of value-added resellers, managed service providers, systems integrators, and direct market resellers (or large account resellers). Vendors love building programs around these partner types because they’re easy to define. VARs resell product. MSPs use product to provide services. Integrators build systems with multiple products. DMRs/LARs move a lot of product. “Solution provider” is merely an umbrella term that was invented because “VAR” at some point became a lesser-value moniker.
While all of those labels still apply, we as an industry can’t easily count how many of each exist. Partners are no longer monolithic. Nearly every partner offers some kind of managed services. Integrators resell product independently from their integration services. And DMRs/LARs are increasingly providing everything from professional services to cloud services. In other words, any census of one partner type will result in an overcount of the total.
Now, let’s complicate this more. What is a partner?
A partner is a company or entity that resells or influences the sale of a vendor’s product, develops products that enhance a vendor’s products (such as independent software vendors, or ISVs), or incorporates or leverages a vendor’s technology in their own products and services.
What does it mean to “influence” a product sale? In a conventional context, vendors tend to think of their relationships with global systems Integrators such as Accenture and Wipro as relationships of influence. Those integrators will design systems and make recommendations to their clients on which vendors’ products to use, but they typically won’t resell product. Vendors design programs to incent influencers to continue developing and cultivating such sales.
However, influence is extending further to different company types. Non-technology companies are increasingly influencing the sale of vendor goods and services. Medical device manufacturers, accountants, lawyers, utility companies, facility contractors, and office furniture dealers are incorporating technology into their practices. And this expansion into the influence – and sometimes resale – of software and cloud services is opening new routes to market.
If we incorporate these specialized partner types into the mix, how does it affect the potential partner population? Well, the United States alone has 42,000 accounting practices and 48,000 law firms, if that gives you any indication.
So, again, the definition of “partner” is changing rapidly as the world becomes increasingly digital through the Internet of Things (IoT) revolution. The increasing number of IP-enabled devices will bring more non-technology companies into the technology channel. Drone, semi-truck, and refrigerator manufacturers will take on roles similar to integrators and ISVs. Moreover, their dealers and resellers will assume many of the support roles of traditional IT partners.
If we extend the partner definition to include every manufacturer and IoT reseller, the number of potential partners extends into the millions.
Business schools teach the importance of understanding the total addressable market (TAM). If you want to know your potential, you need to know the size of the market to which you’re selling, and that holds true with the channel as well. So, why would I say the only formula for determining the size of the channel is CP ≥ 1?
The reason is simple. The total number of partners in the market is unimportant, but the number of engaged partners is not. Vendors are fond of saying they want “the right” partners, the ones that will deliver results. What we know is that the vast majority of the channel population doesn’t fall into this category. What vendors need is a better definition of go-to-market needs and partner expectations to ensure they attract and retain partners that will produce the outcomes they seek.
While I can’t put a number on the channel, I can say the universe is getting larger and more diverse as the technology landscape shifts and evolves.