Techaisle Blog

Not long ago, channel partners tended to fall into two camps: those primarily engaged in transaction-client relationships and those who believed (or wished to believe) that their customer relationships were consultative and advisory.

Today, the channel window has changed. Forget the “trusted advisor” moniker; become a “success partner” because shared risk agreements are reshaping the channel landscape.

Shared Risk, Shared Success: The New Channel Paradigm

Techaisle has seen a rise in outcome-based relationships – in which customers define their target objective (rather than issuing an RFP detailing a specific set of products) – and shared risk agreements, in which the client contracts for a specific outcome (often, one which is tied in some way to financial metrics), where the partner is paid on achievement of the goal rather than delivery of a bundle of technology.

Techaisle’s recent Channel Survey confirms that this migration is well underway. Across all 2,115 channel partners, more than 45% describe their current “relationship philosophy” as outcome-based or shared risk. These new relationship models are best established in the MSP community, where shared risk is a primary philosophy for more than one-third of the survey’s MSPs, with an additional 23% reporting that they primarily engage in outcome-focused agreements.

Shared risk is also a critical relationship model for SIs. This seems like a logical step forward; SIs have often been targets of complaints about solution timeliness or completeness, and a shared-risk agreement helps forestall these potential objections. In contrast, VARs are only half as likely as SIs to pursue shared risk agreements; they are far more likely than any other channel group to establish transactional relationships.

The End of "Trusted Advisor"? Why Channel Partners Must Embrace Shared Risk for Mutual Success

There are few more cherished channel objectives than attaining the position of being a 'trusted advisor' to clients. The phrase connotes a relationship rooted in respect, where the channel partner provides sage counsel to clients who rely on the partner for technology and strategy. Channel partners who act as trusted advisors can direct client attention and investments in ways that enhance the long-term relationship between supplier and buyer.

Users recognize the value of advisory services. More than three-quarters believe that there is a real advantage in a supplier's ability to respond to business pain points with helpful advice. 71% report that a partner that "listens to business needs and guides a customer towards the right technology solution" provides a vital service. Nearly two-thirds believe that a firm that "shares vision and partnership with both IT and business units" facilitates outcomes important to supplier selection.

Techaisle’s landmark survey of 2,115 channel partners, representing a cross-section of the partner community, indicates that while pressure for change is mounting, partners have not yet coalesced around a path forward. The Techaisle channel survey shows that the partner community members are searching for a roadmap to success. That roadmap will vary across partner models, as will the opportunities and requirements for suppliers. In this time of transition, effective channel collaboration will determine growth and viability for both individual channel businesses and their vendor suppliers.

The early years of this decade have been challenging for individuals and businesses in all sectors. In some cases, the pandemic – or, more recently, rising interest rates and declining consumer confidence – have caused tremendous upheaval, with suppliers finding that traditional definitions of the market, sales motions, and fulfillment no longer applied.

The current decade has brought an even thornier set of challenges to the IT channel. In addition to the macro conditions that apply to all businesses, and against a backdrop of changing business models, shrinking product margins, and the need to build profitable services practices, channel members need strategies to cope with:

• A shift in core customers – from technologists to an organization-wide mix of personas, including businesspeople who define technology in terms of business rather than IT functionality.

• A shift in buying and selling models – from fee-for-product/service to approaches that involve outcome-based evaluation and contracting or shared risk agreements that tie payments to achieving defined business goals.

• A shift in solution composition – from monolithic systems to modular stacks that address target functionality via APIs – as well as a corresponding change in the underlying business approach, from “design once, deploy many” to a need for individualized solutions tailored to a fluid set of customer needs.

These conditions have combined to place the channel under tremendous stress. Channel members have explored different business models, different product mixes – accompanied by demands for new skills and service capabilities – and other marketing, selling, and partner relationship configurations.

Both channel businesses and their vendor suppliers are vested in understanding how solution portfolios are changing and how the channel and vendor communities can best work together to bring solutions to market. These are complex questions, but their answers are at the heart of a wide range of sales, marketing, and executive imperatives. This study provides valuable input to those discussions.

Aligning to Changing Solution Portfolios

The starting point for an analysis of alignment to changing solution portfolios is the portfolios themselves – what is the channel selling, and how fast is revenue associated with these offerings expected to grow? Data shows that more than 80% of partner firms are selling cloud and/or collaboration, and more than 60% sell customer experience, employee experience, or analytics solutions. From a growth perspective, 80% or more of channel members anticipate growth in cloud and 5G, and 70% or more expect growth in collaboration, analytics, SD-WAN, virtualization, and/or SD-WAN.