- Partners are competing with their customers for talent. Here’s how to win.
- How do you deliver a stellar CX when customers are shopping online for bargain IT services — and you only find out when something breaks?
- Dear vendors: We need enablement targeted at end customers, not speeds and feeds.
“Partner” can mean many things in the technology and telecommunications channel. You’ve got agents and subagents, independent software vendors and systems integrators, marketing technology, and emerging technology providers… The list goes on.
Among the partner types that have seen the most evolution in recent decades are value-added resellers (VARs) and managed service providers (MSPs), which in many cases are two sides of the same coin. Most VARs today offer some sort of managed services, and there’s always going to be equipment resale in the MSP business model. We’re seeing these two partner types merge more, often facing the same challenges and opportunities.
|Partner Business||Market Trend||What They Do|
|MSP||Steady to Up||Specialize in desktop and productivity support. MSPs currently integrate cloud services to provide security, backup, desktop software, and end-user support. Revenue comes primarily from customers via monthly subscriptions and secondarily from implementations.|
|VAR||Downward||Provide hardware and software for on-premises systems. Revenue comes from vendors (as a percentage of customers’ large capital expenditures) and secondarily from customers for implementation, consulting, and ongoing support. Cloud services challenge this business model.|
|SI||Steady to Up||Implement and integrate complex business software. May include customizing systems to meet clients’ unique business processes/requirements. Revenue comes from customers for implementation and secondarily from ongoing maintenance.|
|Agent||Steady to up||Serve as experts in specifying and acquiring complex communications and networking solutions. Usually paid by vendors and act as an indirect salesforce, often selling a set of products known to integrate well together. Revenue from vendors is paid as a monthly percentage of the client’s contract spend.|
Here are five trends we’re seeing in the IT channel that VARs and MSPs should capitalize on.
1. Continued talent wars
Technical talent is hard to come by these days. Now that every company is a tech company in some form or fashion and almost every job function requires familiarity with some type of technology, those with IT chops have more offers than they know what to do with. Plus, businesses of all shapes and sizes now need technology architects, engineers, and technicians to help them set up and secure remote work configurations.
IT industry association CompTIA puts out an annual workforce trends report based on a survey that asks about 400 U.S. human resources and workforce learning professionals in the IT sector about their organizations’ future plans for learning and development, among other activities. According to CompTIA’s 2021 Workforce and Learning Trends report, 40% of companies hired IT staff during the pandemic, and 66% have plans to add more in 2021.
Because they’re in high demand, IT professionals can command much higher salaries than just a few years ago, putting them out of reach of many small to midsize businesses. The bulk of VARs and MSPs fall into this demographic — for example, on Channel Futures’ 2020 MSP 501 List, an annual ranking of and report on top MSPs around the world, a full 75% had annual revenues that totaled less than $10 million.
In all likelihood, these shops are struggling to find the salary budget to hire and retain tech talent.
Partners are competing with a strong employer value proposition (EVP) that’s about more than an annual salary. Twenty-six percent of respondents to a recent informal JS Group survey of 50 IT channel professionals say that they recruit new talent not through paychecks alone but with total compensation packages. Think flexible work environments, unlimited time off, a commitment to diversity, education reimbursement, healthcare benefits, and retirement plans.
Organizations are also looking internally, as it’s often less expensive to train current employees than hire new, higher-skilled talent. In fact, that same CompTIA study reports that 42% of companies plan to launch upskilling or reskilling initiatives for current workers. This strategy can be particularly helpful for channel firms that employ help desk professionals, engineers, and other IT technicians who typically already must train, certify and re-certify on technical skills such as security or cloud computing.
2. Cutting out the middleman
The supply chain and digitalization challenges ushered in by the pandemic are reshaping the sell-service-support continuum on which the IT channel has operated for the past two decades. Established go-to-market processes for vendors, distributors, and the partners we’re talking about here have shifted as resellers, MSPs, and end-users scramble to source, procure and implement new hardware from a supply chain turned upside down.
Supply chain issues aren’t the only force pushing partners to source software and hardware differently; there’s also the changing buyer’s journey. Companies can now easily source the hardware and solutions they need without going through a partner, and they’re increasingly doing just that.
It’s led to some changes in the traditional sales and services paradigm.
In our JS Group survey, 13% of partner respondents say that customers are going around them to source products or services, including using marketplaces or buying direct from a wholesaler. Seventeen percent say their customers are buying software and services from third parties and then expecting the partner to manage it, and 15% report that customers are buying software, services, and hardware that the partner finds out about only if something goes wrong. In some cases, customers find software and hardware discounted online and buy it for a lower price than a partner can offer.
But end customers aren’t the only ones hitting up marketplaces. Partners are increasingly flocking to third-party cloud marketplaces, in part to avoid distribution and in part to speed up their routes to market. One-third of all U.S. business now flows through eCommerce, according to analyst firm Forrester, and 63% of that is through mega marketplaces such as those run by big tech vendors and hyperscale cloud providers. Traditional two-tier distribution is also dipping its collective toes into cloud marketplaces.
To put this in perspective, that’s a shift of over $2 trillion from traditional retail, dealer, and reseller channels into marketplaces.
These changes aren’t necessarily a bad thing for partners, but they do require some rejiggering of processes. Marketplaces shake up the entrenched service chain, which means VARs and MSPs have to think differently about procurement and delivery. Remember: Your customers will always have progressed further through the buyer’s journey than might be ideal from your perspective. But the answer isn’t fighting to keep the status quo. Instead, keep your eye on those developing marketplaces — they could be your preferred source of solutions in the future, particularly when it comes to the cloud.
3. The rising importance of customer experience
As we’ve said before, customer experience (CX) is the name of the game for many services companies these days when it comes to revenue generation. A subscription model means increased importance for customer retention, upsell efforts, and cross-sell opportunities. Brainyard’s Winter 2021 Survey of business leaders found that CX remains a top priority this year as sales and finance pros seek to minimize customer churn and maintain brand loyalty.
Along with that emphasis on CX come blurred lines between sales, marketing, customer support, and finance as every department works to keep subscription customers happy.
Forty-three percent of respondents to the JS Group survey report they have improved their user interfaces or upgraded ticketing systems/processes to improve CX in the past 20 months, and we don’t see this trend slowing. That’s good news for providers of professional services automation (PSA) and remote monitoring and management (RMM) tools, as well as for MSPs that outsource their help desk capabilities — something we’re seeing more of as resellers, agents, systems integrators, and XaaS providers increasingly offload their Tier 1 support to MSPs that have top-notch help desk operations.
If you struggle with CX essentials like first call resolution or meeting SLAs, offloading those tasks to a partner that already has them buttoned up can make lots of sense.
As those proverbial silos break down, we see teams pay more attention to expanding relationships with existing customers. A full 59% of JS Group survey respondents say they have doubled down on existing customer marketing to increase upsell/cross-sell opportunities, for instance. And partners, especially those moving out of the small to midsize realm and scaling for big growth, are taking a hard stance with their customer support teams when it comes to monitoring and triaging net promoter and customer satisfaction scores.
And, more VARs and MSPs are taking a revenue operations (RevOps) approach to customer support, creating dedicated teams to monitor those scores and remediate any situation that has led to a detractor score.
The key to good CX — like almost anything else in business these days — is collecting, analyzing, and addressing the right customer data and business metrics. MSPs especially should make sure they’re pros at this. Not only is it good for their businesses, but their customers are asking for help with it. Customer segmentation and hyper-personalization are critical to growth for service providers that aim to keep customers coming back every month.
4. Changing customer geographies
Of course, where end customers work has changed drastically over the past year and a half. But it goes beyond companies equipping and enabling employees to work from home. Many white collar city-dwellers, suddenly relieved of the burden of a daily commute, decided to leave cities altogether, bypassing even the suburbs for what are called the “exurbs.”
Think rural areas with more trees and fewer mega malls.
For example, 4.3% of Manhattan residents moved out of the city during the pandemic; for San Francisco, that’s 3.4%, according to USPS mail-forwarding data. And while data showed a slight increase in people moving back to East-Coast cities in May and June of this year, the rise of variants and continued delays in bringing folks back to the office don’t spell good news for real estate companies in big metropolises. It’s worth noting that the East Coast is the only place analysts saw evidence of even a slight return to urban living for those who left the city over the past 20 months.
JS Group’s data backs up this analysis, with 53% of respondents saying that one or more customers changed some or all of its service locations from centralized urban areas to the suburbs or exurbs. Considering factors from affordability to quality of life and ongoing pandemic restrictions, this is another trend we don’t see slowing down.
That’s a reality many will celebrate. Accenture reports that 83% of those who can function from anywhere prefer a hybrid work model, and 63% of high-growth companies have adopted a “productivity anywhere” workforce model. VARs and MSPs should be ecstatic about this trend for a few reasons.
First, somebody has to do all of these remote-work configurations, then manage them on an ongoing basis. Resellers will have increased opportunities for hardware and edge data center real estate, not to mention all of the cloud services companies are demanding today. MSPs will reap the benefits of supporting and managing a distributed workforce with needs around network, connectivity, productivity software, business continuity, and a slew of other services that are moving out of a centralized office and into homes.
Second, all of these home workers are in desperate need of security training and services. VARs and MSPs don’t need us to tell them that security is a huge opportunity. Security awareness training is a really easy offering that’s essentially nothing but margin, and it helps clients keep their networks safe while, in many cases, lowering cybersecurity insurance premiums. Truly a win-win for service providers and their customers.
Finally, this presents a significant opportunity for partners as the need for internet connectivity and computer equipment increases. According to IDC’s Future of Work report, by 2023, 75% of the Global 2000 will make a commitment to providing technical parity — that is, requiring that all workers have secure access to the resources required to do their jobs no matter their preferred device or if they are local, remote, in the field or switching between locations.
Companies will also need to provide experience parity, meaning a consistent experience with connectivity, collaboration applications, productivity applications, and security measures no matter where an employee works from.
The Great Pandemic Migration is good news for channel partners.
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5. Demand for true partner enablement
Vendors have a bad habit of misreading what partners really need when it comes to enablement. They’ll provide product slicks with features and benefits all day long because they’re selling to the partner. But VARs and MSPs are actually clamoring for sales and marketing materials geared toward their own customers.
Partners need and want to show their end users the value of their solutions as part of a holistic strategy, aligning with customers’ business imperatives. Case studies and use cases are always worth their weight in gold. In a virtual world, partners have increased dependence on content marketing and webinars. And distributors have not only the opportunity but, we argue, the obligation to help partners conceive of, configure and market offerings that span the entire technology and telecommunications chain, especially as organizations settle deeper into their remote-work realities.
Some vendors and distributors are coming around and offering marketing enablement and sales support that address the end user’s problems. Over the past 20 months, suppliers have scrambled to meet partners “in the field,” so to speak, by hopping on more joint sales calls or lowering MDF requirements for partners to gain access to marketing enablement like virtual lunch-and-learns or co-branded white papers.
Of course, vendors want to see returns on these efforts, so partners need to be prepared to feature the suppliers that are going the extra mile with mentions on social, by highlighting vendor logos on their websites and by making those products and solutions a part of their dominant line cards. But partners are in a unique position to demand better support and enablement as everyone in the ecosystem learns to sell to the new all-digital, at-least-somewhat-remote workforce.
The Bottom Line
It’s a lucrative time to be in the channel. Check out one final statistic from our JS Group survey: 91% of respondents say the pandemic created some or significant positive opportunities for growth. Not many industries can boast a similar boost. We’re closing in on two years of living with the pandemic and its systemic changes. While no one is arguing that the past 20 months have been a good thing, they’ve presented significant opportunities to MSPs and VARs.
The outlook is rosy for the channel, and partners that jump on these trends and are willing to evolve their business models accordingly are poised for growth.
Written by By Kris Blackmon, chief channel officer, JS Group
October 21, 2021