Channel Growth Strategies in the Age of XaaS

Change or risk obsolescence. That is the message from channel partner sales leaders. Fueled by new expectations from customers, shifts in purchasing patterns and technological advances that are commoditizing past offerings, channel sales leaders are overhauling their partner strategies.

In a recent survey of high tech channel sales leaders who are moving to XaaS offerings and re-evaluating their channel programs, the following strategies rose to the top:

• Re-evaluate channel partner mix
• Concentrate on a smaller set of partners
• Increase investment in new types of channel partner enablement programs to enhance sales and service capability
• Adjust partner programs to ensure alignment with sales and service results

Re-evaluate channel partner mix

Many channel leaders expressed a specific lack of confidence that their current channel partners will be able to evolve and succeed in a XaaS environment. With this in mind, leading companies are re-assessing their current partners and recruiting partners based upon a new set of criteria.

Some of the top criteria include:

1. Access to line of business (LOB) and IT buyers
2. Ability to identify and qualify customer business value proposition related to the offering
3. Ability to provide service and/or product extensions that enhance customer value and make the total offering more “sticky”
4. Have “true” on-going customer relationships
5. Provide customer success tools and resources
6. Have revenue growth as a core strategy

Given the aforementioned criteria, many companies are recruiting new partners to replace VARs (Value Added Resellers) who are not able to evolve beyond legacy fulfillment services. New partner targets include a host of service provider types who can support the shift to services-led models and broader customer solutions. To highlight the shift in partner mix, many companies expressed that up to one-third of their current active partners were new within the last 18 months.

Concentrate on a smaller set of partners

Channel partner leaders who are driving higher relative growth from the partner (vs. direct) channels are focusing their investments on a smaller list of partners. Individual partner focus shows up when measuring active partners per internal channel headcount (HC). In companies where channel growth is paramount to overall growth, the ratio of active partners per channel HC is 12 versus an overall ratio of 30 partners per channel HC in other companies.

Increase investment in new types of channel partner enablement programs

The partner mix of the future will consist of an eco-system with strengths across the customer value chain. To ensure this happens, many companies are investing in their partners with new types of development funds that go way beyond the traditional MDF (marketing development funds). Specifically, companies are identifying new ways to invest in helping partners focus on new service attach opportunities, co-developing and co-selling new solutions, enhancing ability to sell cloud offerings and gaining access to new customers.

Top of the list is channel partner sales enablement which includes investments in building partner sales and technical skills. Often this includes re-evaluation and upgrade of existing channel sales training to include soft-selling skills, developing business acumen and business value propositions surrounding Cloud and XaaS.

Adjust partner programs

With current market shifts toward XaaS fundamentally changing customer expectations for both vendor and partner, the partner program must adapt as well. Companies that focus on partner channel growth are making significant changes to their current programs. Organizations are currently evaluating and implementing the following key changes:

1. Focus on growth. Companies are valuing relationships not only on total revenue run through a partner, but on year over year growth. In many cases, this focus shows up as extra incentive dollars for partners willing to provide extra mind share in growing the business.
2. Master partner programs that are not specific to a “partner type” but rather focus on rewards and investment for partner actions (e.g., co-marketing identifying opportunities, selling with, reselling, co-developing, providing customer success, or renewing). In this manner partners don’t have to belong or participate in multiple programs. Instead they can customize their relationship with the vendor within a single program.
3. Significant increase in co-development funds and arrangements. Vendors are increasingly partnering around co-developed and embedded solutions that both parties can sell. Companies are shifting overall channel incentive dollars into these types of relationships in the hope of higher returns on investment.

Embracing changes to the partner mix, the partner focus and the investments in enablement and programs is key to growth. At Alexander Group we agree with channel leaders who are taking a more aggressive approach to evolving their channels; we have developed many time-proven frameworks and practices to support this effort.

To find out how Alexander Group can help your company improve its channel growth strategy, email Michelle Rittenberg.

Read more Alexander Group insights on revenue growth strategies.