For the channel, 2020 was a tale of two cities. On one hand, customers and governments recognized partners as an essential service and central to their ability to rapidly respond to a worsening pandemic. On the other, customer demand shifted to automation, cloud acceleration, customer/employee experience, and e-commerce/marketplaces, where many technology channel parts were left in the cold. The industry experienced a “K-shaped” recovery where partners who had skills, resources, and prebuilt practices around the business needs of their customers excelled with double- (and sometime triple-) digit growth. Yet many smaller VARs and MSPs were down by double digits, relying on government, vendor, and distributor funding to survive. This will persist through 2021.
The following are a few examples of further channel trends we can expect to see this year:
The changing future of work benefits the channel
The pandemic was an acute symptom and accelerant of larger factors already altering the workforce. The levels of systemic risk and global exposure organizations face are rising, robots and automation are reshaping the workforce, and the balance of power is tilting toward employees. The output of this will be a remote topology requiring new levels of service, support, infrastructure, security, compliance, and continuity. The percentage of firms that outsource some or all of their IT will likely start to increase again by double digits — for the first time in five years.
As a result, the channel will begin implementing edge intelligence, edge management, and edge networking technologies. The channel must broaden the scope of cloud strategies beyond public and hybrid to include content delivery networks (CDNs), telecommunications, colocation data center edge fabrics, and domain-specific converged edge infrastructure.
Security threat vectors are also intensifying due to the changing future of work. Changing business models, regulatory oversight, litigation, and third-party pressure are forcing partners to secure products and services they sell at a new level. This next-level security protection is an opportunity to expand the conversation into advanced edge, network, application, data, web, and even physical security in a residential-scale network.
The channel must also consider its own future of work. Delivering a new level of customer, employee, and partner experience will determine winners and losers in 2021. The roles of channel account managers, sales, and marketing professionals are radically shifting to serve increasing digital-only customer journeys. This year, reimagined events, social selling, digital attribution, and rapidly changing programs will accelerate.
Subscription/Consumption models become mainstream – but the channel isn’t ready
Three years of consumer behavior change was squeezed into one year in 2020. Consumers now demand online experiences and want everything at the click of a button. Responding to the changing buyer, as well as pressure from stakeholders, several large vendors announced significant changes to the way they go to market. Additionally, traditional partner relationships are being disrupted almost overnight. This recurring business model may align well with MSPs and telco agents, but most of the VAR channel will experience material disruption.
Vendors are busy building ecosystems of transacting and nontransacting partners as well as traditional and nontraditional. They are not increasing channel investments (gross to nets) to do this but instead moving money around to where they can earn more customers with higher lifetime value.
Marketplaces, product-led growth, and direct-to-customer will further challenge resell
E-commerce grew more in the first three months of COVID-19 than the last 10 years combined. With 60% of customers appreciating the convenience of marketplaces, Forrester predicted 17% of the $13 trillion in B2B spend would flow to marketplaces by 2023. We will likely hit that much sooner.
Marketplaces represent the continual digitization of traditional channels, and sit at the intersection of traditional resell-based partners and the world of ecosystem partners. Customers use this channel early in the buyer’s journey to explore and compare different offerings, reducing cost and complexity of working with traditional channel sales.
Product-led growth (PLG) is an end-user-focused growth model that relies on the product itself as the primary driver of customer acquisition, conversion, and expansion, looking to avoid channels. Companies with successful PLG strategies can grow faster and more efficiently by leveraging their products to create a pipeline of active users who are then converted into paying customers.
Software-as-a-service firms traditionally grow direct until their sales and marketing become repeatable and ripe for franchising. A large number of these companies are looking to break from the linear channel model and avoid being constrained by labor and financial-intensive lead generation, sales, and customer success processes. The intent is to get to hypergrowth mode at scale.
As technology buyers start to behave more like consumers, direct to consumer (DTC) companies are inspiring companies to relook at their customer experience and build more intimate relationships directly with buyers. As Millennials are at the forefront of driving change in the economy, customer expectations are shifting, with preferences for more streamlined and digital purchase experiences, maximum convenience, and an authentic brand experience.
A perfect storm of better technology and full-service buyer tools will complicate channel partners’ ability to get in front of the buyer early and lock in their value for the long term.
Channel Process automation becomes reality
The largest opportunity for the channel coming out of 2020 was automation. Robotic process automation (RPA) vendors are now valued at $17 billion, and 45% of global data and analytics decision-makers have implemented or are implementing RPA in a project, per Forrester.
Combining this trend with the movement into ecosystems has led channel and alliances leaders to look at new levels of automation within their programs, processes, people, and technology. Ecosystems have, on average, 10 times more partners than transactional channel programs and require the core elements, such as recruitment, onboarding, and management, to scale comparatively. Ecosystem leaders are not given 10 times the resources, so channel process automation (CPA) has percolated to the top of the list.
In CPA workflows, bots will take on the most predictable, mechanical, and repetitive activities, while channel professionals can specialize in using judgment, creativity, and language.
The channel revenue management technology category grows up
The second-largest trend in channel software is the maturation and expansion of the revenue management category. Salesforce made a huge splash in 2021 when it announced Revenue Cloud, a combination of several products, including CPQ, billing (including new multicloud), B2B Commerce, and channel software (PRM). This reinforces industry trends such as subscription/consumption models, marketplace growth, and pan-route strategies vendors are considering.
As marketplaces become the connective tissue of ecosystems, revenue management technology that automates and streamlines multiple routes and go-to-market strategies will provide a critical toolkit for buyers, sellers, partners, and distributors.
To understand the business and technology trends critical to 2021, download Forrester’s complimentary 2021 Predictions Guide here.
This post was written by Principal Analyst Jay McBain, and it originally appeared here.
