Shifting sands – do re-sellers realise time is running out?
The channel is constantly shifting, and resellers are finding it hard to react. The CEO of Vortex 6, has noticed that over the last few years many of the large enterprises have had to restructure their business models to keep up with the changing industry and many are finding it difficult to change as quickly as they need to.
So, Peter wanted to offer his advice on why vendors are finding it a challenge to change and how he believes they can solve this problem
Never has the channel had to operate in such a competitive and a tough environment than it is today. Margins are being squeezed, rebate programs are rapidly evolving and resellers have more complex rules that they have to comply with in order to remain compliant with the vendors’ programs. In the last few years, there has also been an added challenge of more disruption to resellers, as many of the large vendors restructure their business models, shifting away from hardware sales to focus more on software, cloud, services and annuity income.
But all this talk about cloud and cloud adoption is good news, right? Perhaps for the customer, but it’s hard for the reseller to restructure overnight. And while the channel grapples with this change in focus so the vendors are fast moving partner rewards and programs towards those resellers who are selling services and software rather than hardware. Resellers must adapt quickly, however not all the partners have the agility to do this as quickly as they would like. The sand is shifting under their feet as resellers strive to keep up and as they work to redesign their solutions and sales model and restructure the business.
The shift in vendor rebate and partner programs has caused many partners’ income to drop significantly, in some cases we’ve seen rebate program income reduce by as much as 50%.
Many vendors are focussing on ‘lifecycle practices’. This covers the whole software annuity lifecycle with partner programs aligned to focus on ensuring resellers work with customers to land, expand adopt, and renew (LEAR). In other words, the focus has shifted from not simply concentrating on closing the deal, but now also making sure the customer adopts all the features that are relevant to their business so that they are seeing the value the solution brings to them. So rather than close the sale and be done, vendors are rewarding resellers’ renewals and recognising when they expand the features that the customer adopts. Rebates are reducing on hardware and increasing significantly for ‘lifecycle’ business.
This means resellers are having to change their product and sales strategies to reflect demand for consumption-based services. One-time capital equipment sales aren’t going away, but there is an increased focus on services where revenues are spread over the term of the contract.
This presents a short-term challenge when revenues are spread over the contract period. It is a significant shift in how resellers do business and the need for improved visibility through automation to enable informed decision-making is more important than ever.
Now herein lies the challenge. Managing compliance with multiple vendor partner programs with vendor tools of varying functionality is challenging and risks resellers becoming non-compliant. The cost can be significant and, as already stated, could affect profits.
So why are these vendor programs so difficult to manage?
First, most are complicated, all are slightly different with varying levels of complexity. Second, resellers invariably use spreadsheets to manage their compliance with these programs. Data comes from the portals of each vendor and typically a reseller has anywhere up to 6 to 10 relationships to manage. This is quite a challenge and when you layer in the siloed, manual management approach you can see how difficult it is to maintain.
“So why aren’t all the resellers using Fusion?” I hear you cry. Often, partners don’t realise that there is a solution that already exists, and many organisations are paying more money to have staff manually doing what Fusion does automatically.
To conclude, the landscape is changing but it presents significant potential upside for the smart reseller. We’ve done the maths and if you manage your rebates effectively you can earn significantly improved income, the shift in the vendors’ focus could bring really fantastic returns.
But the burning questions are - is the channel moving quickly enough, will it grasp the opportunity, and will behaviours change in order to reap the rewards? The smart resellers will be those who invest in automating their processes and who have real-time management information to get visibility and control around their vendor compliance programs and rebates. My final piece of advice: an out of date spreadsheet for multi-vendor compliance is not only very inefficient and resource intensive, it is a high-risk approach that could cost the business dearly.