Improving When You Can’t Afford to Replace

When building from scratch is neither efficient, nor possible, strengthening your assets is your best bet for creating success.

By Diana L. Mirakaj

Making the most of a difficult situation is often the mark of a good leader. That talent can be put to the test when a leader is told to do more with less. In business, it’s always important to have options. But what do you do when your only option is to improve – not replace – your existing team or partner base?

In previous channel expansion periods, new technologies, combined with an influx of talent, allowed solution providers to form and thrive. The introduction of the PC, the Internet, and data networking came with low barriers to entry. Available talent and technical expertise made business formation straightforward and inexpensive.

On the other hand, the services model, mobility, and business analytics come with higher technology and investment requirements. Hosting applications and resources, providing advanced integration services, developing and managing software services, and providing end users with expert analytics require levels of capital, technical sophistication, and marketing acumen that go beyond those applied by solution providers during the early PC and Internet periods.

This higher barrier to entry and adaptation is causing the channel to contract. It takes more capital, talent, and business acumen to thrive, so fewer solution providers are forming.

In 2014, The 2112 Group’s research found that the channel is shrinking and would continue to do so for some time. Many observers and industry experts had noted a high level of mergers and acquisitions among solution providers over the prior several years as the cause, but in reality, the channel’s population decline is speeding up not because of solution providers dying off, but because of a low birth rate – or a decreasing number of new start-ups.

Is a smaller channel necessarily a bad thing? Maybe not. There are fewer partners for vendors to support, more opportunity as supply is constrained, and greater price stability for more predictable revenue and profits for all businesses in the value chain.

A smaller channel does introduce a different set of potential challenges, as we’re continuing to see today, and likely will for quite a while, as adaptation to change and a constant need for improvement become the new norm – for solution providers and vendors alike.

Solution providers need growth to fund and sustain their businesses and provide the capital for future expansion and evolution. Over the past decade, the technology industry and channel have undergone sweeping changes as new products and models disrupt the status quo. Keeping up with these changes requires the money to invest in new operating paradigms, technologies, training, and market expansion.

A lean competitive landscape has created a different dynamic for both sides of the channel. Solution providers have found themselves in a position where they need to improve their overall value proposition – step-up where they are today. Evolved solution providers with greater capabilities in the products, support, and services they offer remain better positioned, with fewer competitors for customer and vendor attention. They continue to gain greater market share in their operating regions, as well as exposure among vendors to their business and technology acumen when it comes to cloud, IoT, mobility, and other emerging trends.

For vendors, though, a contracted channel lessens their ability to prescribe terms to partners. While some may have initially welcomed a decreased population, as it focused internal resources and lowered support costs, it has also led to a decrease in the partner pool – and available talent in indirect sales. This shift has required vendors to rethink their channel engagement, enablement, and go-to-market strategies now that they’ve become the ones competing for the attention of the highest-performing solution providers available.

To become one of those top performers, solution providers should look at their overall performance and apply The 2112 Group’s 3C’s Methodology as a starting point. These are some steps that partners might consider taking:

  • Measuring Channel PotentialIdentify current sales focus, revenue sources, technical capabilities
  • Define current and potential value proposition
  • Evaluate current and future sales and technical competencies
  • Calculate ability to invest in operational and market capacity
  • Measure current and potential investments in growth
  • Assess risk tolerance for investment in growth

Ensuring that a clear strategy is in place, and well-communicated, is mission-critical to effective delivery of a channel program from the boardroom to the sales team, and eventually the end-user. At a time when building from scratch is neither efficient, nor possible, strengthening the assets you have in place – including people – is your best bet for creating success.

dianaDiana L. Mirakaj is president and chief operating officer of The 2112 Group. You can follow her on Twitter at @dlenam.