The Channel Is Changing

Recently while on one of my market research expeditions I had come across several references to the shift in how the technology OEM's (software publishers and hardware manufacturers) are approaching the way they get their products to market. What I was reading was the on-going affirmation of the notion that the sales channel is shifting and the reseller model of the past isn't likely going to survive the evolution.

The matured adoption of consumption-based technology offerings such as software-as-a-service and cloud infrastructure have changed how enterprises procure technology. For many of the mission critical technologies that businesses depend on, the days of the multi-phased, expensive, timely, and disruptive roll outs of years past have been replaced, to some degree, by a simple on-line shopping cart transaction. This new procurement model has expanded to encompass nearly every aspect of IT spend today.

These changes have significantly impacted the roles of the long standing multi-tiered sales and fulfillment channel. The field of resellers and distributors who have led the supply chain in the past are having to transform in order to find new ways to provide value and remain relevant in the future. Some of the most notable shifts I have seen:

• The fulfillment role of distributors is being replaced with the collection and aggregation of usage reporting of consumption licenses.
• Distributors have added services to their offerings.
• Top-tier resellers are taking on functions once held only by distributors.
• In the mid-tier, the new cloud economy and IT-as-a-Service have given life to a new breed of value-added-resellers (VAR's).

These new and improved 2.0 VAR's are providing managed services and helping their enterprise customers navigate the new options for creating and maintaining an IT infrastructure. These managed service providers (MSP's) and VAR's also now have new procurement options. Streamlined licensing fulfillment, hosted solutions offerings, and sell-through cloud offerings have enabled a broader field of resellers.

Here is where it gets interesting.

With the addition of an expanded field of new resellers and the role of the traditional resellers and distributors changing, the competitive landscape is getting fuzzy, at best. Resellers are now selling to resellers. Distributors are competing with resellers. Distributors are competing with MSP's. VAR's have become MSP's. MSP's are becoming resellers. Resellers are becoming MSP's. MSP's are selling to MSP's. Oh my. And if you observe the acquisition activity in the channel you have seen the merging of some strange bedfellows. But wait, there's more. Let's throw the mass retailer in the mix, Amazon. If any of this is confusing to you, imagine how confused the buying community must be. Who's on first?

This market frenzy does place the OEM's in quite a predicament. They have to place bets on the winner of this race to ensure the best return on their go-to-market efforts. They really aren't in any position (yet) to eliminate any of the players as they still need most of them to help facilitate the remainder of the on-going adoption phase of all this new technology. However, a few OEM's have taken the approach to circumvent this whole mess by eliminating the need for any middle-man and focus strictly on direct B2B. Sheesh. For most of the OEM's there will still be, and always be, a dependency on a channel of middle-men as a route to market. No OEM, regardless of size, can achieve the economy of scale and reach that is made possible with the support of a well-built channel. Those solutions that are ancillary in nature, that we all call the "drag" part of a broader solution, are even more dependent on a channel. To that point, the business community will still depend on the guidance of a cross-brand, cross-functional solutions provider and consultant to guide them through all the options available to meet their business needs and advise on when and how to embrace and integrate new innovations as they arise.

Ponder these 5 thought provoking questions that I muddle over daily:

• Who will be left standing when the channel dust settles?
• Which reseller profile will act as the best resource for the enterprise businesses to navigate all the changes and new options?
• Which reseller profile will best serve the OEM vendors for growth?
• How will the OEM's focus their sales enablement down through the multiple tiers and how will that scale?
• What role will distribution play in the future?

In my humble opinion, the managed services model, the MSP, is the strongest contender. Market data suggests that enterprises are getting more comfortable with outsourcing IT functions and they are choosing those providers that can provide the widest breadth of offerings, even if through the support of partnerships with other MSP's. Niche providers and vertical specialists will still have their place. Specialists, such as security solutions providers, will help fill in the missing skill sets that a "generalist" provider can't provide. I do see the burdens of hardware supply chain logistics being the sustaining life blood for the traditional distributors. I anticipate an on-going blending through mergers or partnerships of many of the legacy channel players as they take on new roles and find their place. Some may not survive.

Whether I am right on or way off on some of my speculative perspectives, I can tell you that I am very captivated by what is unfolding. I can't wait to see how all this plays out. I consider myself fortunate to have been in a position in my recent role to see this transformation happen from a very unique perspective. I am humbled to have been a part in laying some of the ground work that is enabling the new channel model of the future. I have brainstormed on how to build a successful new channel strategy with some of the biggest companies in technology and the influential and successful members of the channel that work for them. So I have some skin in the game and hope to continue to play some small part in the successful outcome!

Let me know your thoughts on the topic. How do you see it differently? What have you heard, seen or read that supports or contradicts my perspectives.

Here are some additional reading materials on this topic of a changing channel that might interest you:

• Understanding the Channel - Global Technology Distribution Council - https://gtdc.org/research/Understanding-the-Channel.pdf
• The Changing Landscape of IT Distribution: Howard Cohen - https://www.channelinsider.com/news-and-trends/the-changing-landscape-of-it-distribution.html
• And if you haven't read it or it's been a while, this book is one that I always look back on: Consumption Economics, by J. B. Wood, Thomas Lah, and Todd Hewlin - https://www.tsia.com/research/books-by-tsia/consumption-economics.html