For years, the Market Development Fund (MDF) has been the dirty little secret of the channel. A clunky, bureaucratic system of financial exchange where vendors offer funds for "marketing activities" that often have questionable ROI, and partners endure the administrative headache to claim what they see as their rightful due. It has been a cornerstone of vendor-partner programs for a generation. And according to Techaisle's definitive new research surveying 4,115 channel partners, it is a cornerstone that is crumbling into dust.

Techaisle data forecasts a stark reality: MDFs will see a continued decline, shaking up the entire vendor incentives playbook. This is not a cyclical dip; it is a structural collapse. Vendors who are still building their channel engagement strategy around traditional MDF are not just wasting money—they are broadcasting a fundamental misunderstanding of what their partners actually value today. They are investing in a dead paradigm.

techaisle channel mdf write up

The death of the MDF is not about partners wanting less support. It is about them demanding smarter support. The nature of value, growth, and marketing in the channel has irrevocably changed, and the antiquated MDF model is simply not fit for the modern purpose.

Following the Money: What Partners Actually Value

If you want to understand the future of channel incentives, you have to look at where partners themselves are prioritizing investment and what they rank as most important from vendors. The evidence is overwhelming.

When we asked partners what types of vendor incentives were important to their firm, traditional MDF/Co-op funds were shockingly low on the list. Overall, they ranked 11th in importance. What ranked higher? Nearly everything that builds tangible, long-term capability. Consider the top 5 most important incentives:

  1. Outcome-based funds
  2. Certifications, training, specialization funds
  3. Front-end discount
  4. Solution development fund
  5. Workshop funding

The message could not be clearer. Partners are prioritizing investments that make them smarter, more capable, and more aligned with customer success.

They want vendors to co-invest in building their business, not just co-fund a stale marketing campaign. An "outcome-based fund" directly links vendor investment to customer success. A "solution development fund" helps a partner build the unique IP that differentiates them in the market. "Training and specialization funds" create the deep skills needed to win complex deals.

These are investments in capability. MDF is an investment in activity. The channel has made its choice.

The data is even more damning when looking at the most advanced and profitable partner segment: Managed Services Providers (MSPs). For MSPs, the preference is stark. Outcome-based funds are paramount (83%), along with workshop funding (76%) and training funds (74%). MDF sits far down the list. The partners of the future have already moved on.

Why is the MDF Dying? A Post-Mortem

The irrelevance of MDF is a direct result of its three fatal flaws in the modern era:

  1. Administrative Overload: The process of proposing, executing, and claiming MDF is notoriously cumbersome. In an agile, fast-moving market, partners cannot afford to spend weeks in administrative cycles for a small marketing payout. It’s a low-yield distraction from their core business.
  2. Misalignment with Modern Marketing: MDF was designed for an era of print ads, physical events, and co-branded datasheets. Today, marketing is digital, continuous, and data-driven. A successful partner's marketing engine is built on social media (62%), email marketing (61%), and analytics (52%). These are ongoing operational expenses, not one-off "campaigns" that fit neatly into an MDF claim form. Partners are funding this themselves, with lead generation being their #1 resource allocation priority (49%).
  3. Focus on the Wrong Brand: At its core, MDF is designed to promote the vendor's But successful partners are now building their own brand. The preference is shifting toward partner-branded solutions, where the partner has control over the customer relationship and can deliver higher margins. Partners are less interested in spending money to be a "Gold Partner of Vendor X" and more interested in being known as the leading provider of "AI-powered cybersecurity solutions for the financial services industry."

Guidance for Vendors: A New Incentives Playbook

Your MDF budget is one of the most valuable pools of capital you have for driving channel growth. It's time to stop wasting it. Liquidating your traditional MDF program and reallocating the funds is the single most powerful move you can make to align with your best partners.

  1. Launch a Solution Development Fund (SDF): Take 50% of your MDF budget and dedicate it to co-investing in partner-led IP creation. Help them build that unique application, that vertical-specific managed service, or that AI-powered assessment tool on your platform. The ROI will be a differentiated solution that nobody else can offer, creating a powerful moat for you and the partner.
  2. Create True Outcome-Based Rewards: Reallocate another 25% to a fund that pays out on specific, measurable customer success metrics—not sales volume. This could be customer retention rates, consumption milestones on your cloud platform, or verified improvements in a customer's business KPIs. This aligns your investment with the recurring revenue models that now dominate the channel (59% of revenue is recurring).
  3. Fund People, Not Campaigns: Use the remaining 25% for what partners value most: skills. Heavily subsidize advanced certifications, specialization training, and technical workshops. Fund "funded heads" by embedding one of your technical experts with a key partner for six months to help them launch a new practice area.

Guidance for Partners: Stop Chasing Scraps

The savviest partners already know this, but for the rest, it is time for a wake-up call. Stop spending non-billable hours trying to fit your modern marketing strategy into an archaic MDF form.

  1. Propose Co-Investment, Not Co-Marketing: Approach your vendor with a business plan, not a marketing plan. Show them how an investment in your technical capabilities or solution development will open up new markets or customer segments.
  2. Quantify the Outcome: When you ask for funding, tie it directly to the outcomes you will deliver. "Invest $50,000 in our solution development, and we project we can land 10 new enterprise customers on your platform within 12 months, representing $1M in ARR." This is a language vendors understand far better than "We need $5,000 for a webinar."
  3. Vote with Your Feet: Prioritize vendors whose incentive programs reflect the new reality. If a vendor's primary value proposition is a clunky MDF program, it is a clear sign they are out of touch with the market and may not be the right strategic partner for your future growth.

The decline of the MDF is not something to be mourned. It is a sign of a maturing, evolving channel that is more focused on delivering real, measurable value than ever before. It is a leading indicator of the shift from transactional relationships to true strategic alliances. Vendors who heed this wake-up call and radically redesign their incentive playbooks will attract, retain, and grow with the partners who are building the future. Those who do not will be left wondering why their most valuable partners are no longer answering their calls.