Channel Mechanics

Unlocking Partnership Success: The State of Partnering in 2024 Revealed

Channel Mechanics

As I consider the outlook for 2024, my prevailing sense is that while there are glimpses of positivity, the outlook is, at best, cautiously optimistic. The environment remains VUCA (Volatile, Uncertain, Complex, and Ambiguous) and all organizations – customers, partners, and vendors alike – are grappling with the challenge of defining what the “new normal” means for them, when it comes to partnering in 2024.

Staying ahead of the curve will be critical for gaining a competitive advantage and winning partner mindshare. In this blog, we explore the top five trends that I believe will shape partnering strategy and partner programs in 2024.

 

Top 5 Partnering Predictions in 2024

 

Partnering Prediction 1: Indirect as Growth Engine

Profitable Growth: In a sluggish economy, there is often a greater appetite to work with partners. Indirect is a more cost-effective (and less risky) route-to-market with a lower cost of sale than building out direct teams. As a result, there is likely to be greater pressure on growing indirect revenue without necessarily hiring more resources. Therefore, vendors will be competing more for partner mindshare. Partnering in 2024 will have an emphasis on accelerating time to revenue for new partners and scaling revenue from existing partners.

3 Key Impacts on Partner Programs and Strategy:

    • Help to close deals faster. To accelerate deal cycles, vendors are likely to provide greater pre-sales support. For example, by providing partners with the presales and discovery tools used by their direct sellers. Another approach could be creating teaming units to support partners in deal cycles. There will also be increased focus on co-marketing, and co-selling initiatives.
    • New incentives for onboarding. Vendors will introduce new initiatives and incentives to accelerate the onboarding journey. The objective being to shorten the time to revenue for new partners.
    • Discounted or free training and certifications. There is likely to be greater attention paid to partner skill development. Specifically, expect to see more vendors offering discounted or free training and certification programs.

 

Partnering Prediction 2: Do less, with more focus, to drive greater impact

Cost Optimization: After a sustained period of economic uncertainty and sluggish growth, the outlook for 2024 appears to be much the same. As such, hiring will remain cautious. Organizations will be under increased pressure to do more with less.

3 Key Impacts on Partner Programs and Strategy:

    • Partner prioritization. Without new headcount, vendors will need to ensure already stretched channel resources are supporting partners who will make the most impact in the shortest time. To achieve this, incentive programs will be refreshed to ensure “more bang for buck.” Some may rationalize the number of partners they work with.
    • Leveraging automation. Successful vendors will augment partner management with advanced automation and self-service capabilities. Advances in PRM solutions, AI, and collaboration tools will be leveraged to liberate partner-facing teams from administrative overhead. Thereby allowing them to concentrate on more revenue-generating activities.
    • More scrutiny of performance. Employing a data-driven approach to analyze and communicate channel performance will be critical. More vendors will adopt advanced analytics, aiding in the identification of successful and profitable partnerships. And equally important, pinpointing those that are not.

 

Partnering Prediction 3: Transformation Demands Program Flexibility

Partner Transformation: The shift from a linear channel to a more interconnected and complex ecosystem is fundamentally disrupting the way the IT industry is structured. We are already seeing its impact. Over the past few years, there has been an influx of new partner types. These include digital agencies, strategy consulting firms, ISVs, cloud-native start-ups, and industry advisors. These partners are performing functions for customers that historically would be considered “channel” activities. We are seeing new routes to market, with cloud aggregators and cloud marketplaces changing the way technology is procured by customers.

Partners will accelerate their own business transformations to align with this new competition, evolving customer expectations, and to remain relevant in response to broader digital transformation. Increasingly, partners will diversify, offering a spectrum of services and engaging in various customer activities, such as consulting, selling, implementing, managing, supporting, and driving adoption and usage.

Many vendors are looking to adjust partner programs in line with these changing dynamics, looking to recruit new influencers and incentivize participation in digital channels. Many are finding that the partner programs, tier structures, and incentive programs of the past are no longer necessarily fit for purpose for the future.

3 Key Impacts on Partner Programs and Strategy:

  • Program Rationalization. Vendors will need to balance the need to simplify and rationalize the number of partner programs they have whilst allowing for the flexibility that partners demand.
  • Flexible Engagement Models. Expect more partner programs to embrace open tracks allowing partners to participate in multiple “types” of programs simultaneously (e.g., resell + managed services.) There will also be an evolution towards role-based programs (e.g., consult, implement, manage), points-based programs, and even self-selecting partner programs.
  • More Granular Incentives. We will see incentives tied to different roles, partner types, and sales motions, recognizing and rewarding the varied contributions of partners.

 

Partnering Prediction 4: Partner Success = Customer Success

Recurring Revenue: Cloud and other subscription-based revenue models (e.g., managed services) are already having an impact on partner business models. The revenue opportunity from the one-time resale of products and perpetual licenses continues to decline. Partners are having to transition from a transactional, one-time revenue model to a subscription-based, recurring revenue model. This has significant implications for partner profitability and cash flow. Partners need to rethink their sales, marketing, service delivery, and go-to-market. In the recurring revenue model, retention and renewal are just as important as the initial sale. However, most partner programs and incentives are weighted toward “closing the deal.” Partner programs and incentives will need a refresh to accommodate the realities of the as-a-service world.

3 Key Impacts on Partner Programs and Strategy:

  • Greater emphasis on NRR. Expect a greater focus on Net Revenue Retention (renewals + up-sell + cross-sell) as a key metric for partner success. Not only is this a fundamental metric for any recurring revenue business, but it is also more critical in the current economic climate. After all, it is far more challenging to get new customers with tighter budgets and longer sales cycles. Partners who thrive will double down on retaining customers, making sure they are happy, that they are delivering value, and that customers are willing to consider upgrades, new features, and new services. Automation emerges as a solution to help partners monitor which contracts are at risk due to limited activation/usage and which are up for renewal.
  • Incentivizing beyond transaction. Many vendors will reconsider how they incentivize partners, with more emphasis on renewals, up-sell, and cross-sell. Expect to see new enablement, incentives, and other initiatives to encourage partners to upsell, drive usage/activations, and foster long-term relationships beyond the initial transactions.
  • Customer success. Vendors will be looking to prioritize partners with strong customer success capabilities. Expect to see vendors placing greater importance on customer success by offering and incentivizing customer success certifications and specializations. Some vendors will start to incorporate partner success measures such as CSAT into their programs to measure a partner’s commitment to delivering value throughout the customer lifecycle.

 

Partnering Prediction 5 – Meeting the Environmental, Social, and Corporate Governance (ESG) Imperative

Sustainability: In response to ESG guidelines and regulations, more and more customers are seeking sustainable solutions and supply chains.  With suppliers that meet these criteria being prioritized over all others. Vendors, distributors, and partners will need to respond to these demands, particularly those selling physical products. Many vendors are launching customer-facing sustainable initiatives like buy-back, refurbishment and leasing programs. However, very few have adapted their partner programs to incentivize partners to participate by, for example, incentivizing partners to sell refurbished equipment.

3 Key Impacts on Partner Programs and Strategy:

  • Partner-facing buy-back, refurbishment programs and incentives. Expect programs to extend to involve partners in the disposal, repurchasing, and recycling of equipment. This includes incentives directed towards the partner’s sales teams to encourage the resale of refurbished equipment.
  • Technology Lifecycle Management. Partners may increasingly explore and adopt technology lifecycle management practices and consider offering leased IT equipment as a sustainable approach.
  • ESG certifications. Expect to see new ESG specializations and certifications for partners to enhance ESG reporting to customers. Some partners and distributors may consider building IT Asset Disposition (ITAD) practices or partnering with ITAD companies.

 

To Conclude

As we navigate the complexities of partnering in 2024, these five macro-trends will shape partnering strategy and partner programs. Embracing a customer-centric and partner-centric approach will be paramount for vendors to thrive in an era defined by constant change, volatility, and heightened customer expectations.

 

 


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