Six Key Trends to Ensure Your Channel Partner Program is Profitable

Tech’s New Partner Ecosystem

Channel partner ecosystems in the technology industry are rapidly evolving. Channel partner executives need to ensure their partner programs stay relevant and are aligned to support profitable growth.

From a partner perspective, the ecosystem is evolving with many traditional partner types transforming their business model to deliver a wider set of capabilities and revenue streams. Thus, traditional partner types are breaking down, and partner companies are defining their own unique set of capabilities and values.

Additionally, technology vendors are looking at their channel partners in a new light and with a new set of expectations. Technology vendors want their partners to provide increased value through deeper expertise, enhanced solutions and service offerings that create competitive advantage for the vendor’s offerings.

Channel Programs are Being Impacted: Six Key Trends

Channel executives are responding to changes in the partner ecosystem by evolving their partner programs to keep them relevant and maximize partner engagement. Alexander Group has observed these six key trends in partner programs.

Trend #1: Creating a unified program vs. multiple partner-type defined programs

Traditional partner types (such as value-added resellers (VARs), distributors, service providers, system integrators, ISVs, etc.) are transforming their business models to deliver a wider set of capabilities and revenue streams. Thus, traditional partner types are breaking down, with each individual partner defining their own unique set of capabilities and values. Partner programs are evolving to respond to the changing business dynamics of their channel partners by shifting from having multiple programs that correspond to a specific partner type to a unified program that provides modular incentives based on the partner’s willingness to engage across multiple value activities. This flexibility engages a channel partner based on how they are transforming their business.

Trend #2: Higher focus on the development of partner expertise

End-users are increasingly asking their IT vendors to provide a seamless integration into their tech stack.  Channel partners play a pivotal role in implementation services and successful integration of the vendor’s offering. Vendors are providing their channel partners with a more tailored offering for onboarding and ongoing technical training through enhanced certifications and badging programs. To properly execute these enhanced programs, vendors have increased specificity, accuracy and governance on certification and badging programs. The achievement of the certification and badging programs are also being leveraged for program eligibility and tiering status and benefits (such as placement on the vendor’s website, priority access to the vendor’s field organization, etc.)

Trend #3: Increased use of sourced and influenced revenue metrics

As vendors ask more from channel partners, vendors need to have metrics to track and report on those new and increased expectations. Vendors are increasingly using sourced and influenced revenue metrics to delineate the impact of channel partners in the sales process. These metrics are also being utilized in the partner programs through eligibility and tiering criteria and financial incentive structures. However, sourced and influenced revenue is not as straightforward as tracking transactional revenue. Channel executives cannot implement these new metrics overnight. They need to ensure they have a clear definition of the metric, the underlying systems and capabilities, and the proper governance in place to ensure accurate tracking and reporting.

Trend #4: Measures and mechanics tied to strategic value

Additionally, vendors are structuring programs to reward channel partners for their contribution to the end-user. In legacy programs, transactional revenue reigned supreme. Transactional revenue will always continue to be a key metric. However, channel executives are shifting program incentive dollars to better align with strategic engagement and contributions the channel partners deliver. For instance, many channel executives are rewarding partners more for finding new opportunities and/or owning the proof of concept in addition to processing the purchasing order. The challenge these executives will face is balancing simplicity with the addition of these more targeted metrics.

Trend #5: Shifting away from straight discounts to more rebates

Discounts provide a clear earnings opportunity on a per-deal basis whereas rebates can offer incentives for broader business objectives. Channel executives want to reward channel partners that are growing the business, investing in strategic offerings and delivering a high-quality customer experience. Rebates provide an incentive structure to reward those business objectives beyond what a deal-level discount structure can deliver. The use of rebates delivers a higher partner program ROI by aligning pay for performance. A good rebate program needs to be clear on the metrics and earnings opportunities so a channel partner can accurately predict cash flow.

Trend #6: Programmatic vs. proposal-based market or partner development funds (MDF/PDF)

Vendors use MDF/PDF dollars as a mechanic to drive top-of-funnel activities through their channel partners. However, a high percentage of these funds go unused each year. Legacy programs are bogged down with the time required to fill and submit proposals and then wait on reimbursements. Channel executives are shifting to programmatic fund disbursement to increase the use and impact of those funds, as well as improve the ease of doing business. By shifting to programmatic MDF/PDF, channel partners can better forecast the available funds and allocate them in the annual marketing campaign planning process. This leads to an increased usage of funds and associated outcomes that maximize partner engagement and program ROI.

Maximize Partner Engagement

Channel partner ecosystems in the technology industry are undergoing rapid evolution, and partner programs need to evolve to stay relevant in this ever-changing landscape. Channel executives need to define a process to take strategic and thoughtful steps to refine their partner programs to drive increased alignment across value activities. Channel leaders who successfully navigate this new world will be able to maximize partner program engagement and ROI to deliver profitable growth.