Saving the Vendor-Partner Relationship

This article is reprinted from the 2024 Channel Technology Map, from Channel Program. Download now to discover insights and data that you won’t find anywhere else.

I’m a journalist and channel observer, not a couples therapist, but even I can see a problem in this relationship.

On one side are vendors, hundreds of them based on the Channel Program report you’re reading now, and they rely more heavily than ever on channel partners to serve and satisfy end users. In fact, 73.1% of the $4.7 trillion spent on IT in 2023 flowed through channel partners, according to Canalys. And it’s not just true in our industry. Eighty-four percent of B2B sales professionals across all industries say partner selling has a bigger impact on revenue today than a year ago, according to Salesforce.

On the other side are channel partners, fully 80% of whom will reduce the number of vendor relationships they maintain to less than six this year, according to IDC. Not surprisingly, enrollment in partner programs is down too. Per data from CompTIA, 29% of partners are currently enrolled in just one to four programs, a steep year-over-year increase from 2023. And it gets worse: 11% of partners participate in no partner programs whatsoever.

You can see the mismatch here. Vendors want more partners, badly, but partners want fewer vendors. Multiple factors are responsible for these trends, but two stand out in particular:

1. Partners don’t need vendors as much as they used to. The once mighty value-added reseller channel is in long-term decline. In fact, 38% of partners now sell tech services, according to CompTIA, and just 27% sell tech products. Similarly, IDC adds, partners are earning 27.6% of their revenue from product sales on average, versus 32.2% from services. It’s a lot easier to get by with fewer vendor relationships if you’re reselling fewer vendor products.

Vendor relationships become even less important, moreover, if your customers buy the few products you do still sell them through marketplaces. Sales through hyperscaler marketplaces operated by AWS, Microsoft, and others will exceed $45 billion by 2025 and reach $85 billion by 2028, according to Canalys, which also expects channel partners to play a part in over half of that business. Why juggle vendor relationships directly when you can work indirectly with them instead through a marketplace?

2. Working with vendors is hard. Managing partner program requirements, navigating partner portals, tracking renewals, and getting support are all more difficult than they ought to be, a fact reflected in survey data from IDC naming “vendor relations” the number two challenge faced by channel partners.

Intriguingly, though partners have fewer vendor relationships these days, they’re happier with the ones that remain. Indeed, 33% of partners currently call themselves very satisfied with their vendors, up from 18% last year, according to CompTIA. Vendors who get partner programs right, in other words, will be rewarded by loyal partners.

So what does getting it right look like for vendors who suddenly find themselves competing for partners instead of imposing stiff requirements on them? There are lots of answers to this question, but these three are especially critical:

1. Emphasize ease of doing business. Nothing new here. Vendors have long understood that the simpler their portal, the better their support, and the more responsive their channel team, the more devoted their partners will be. But at a time when MSPs are looking for excuses to drop vendors from a narrowing list of partners, ease of doing business is more essential than ever.

2. Accommodate multiple channel business models. When presented with a list of options including managed service provider, VAR, cloud service provider, and systems integrator, among others, partners who participated in a recent IDC survey chose an average of 3.2 categories each to describe themselves. No point in maintaining separate programs for each of those models when you can have a single program for everyone instead.

3. Revamp partner program requirements and benefits for services-led partners. Measuring channel partners who earn most of their money on services by how much product revenue they generate doesn’t make a lot of sense. Better to base your partner program tiering on more relevant numbers like net new logos added and client retention rates. Similarly, partners who mostly sell services will be more faithful to programs that teach them how to design solutions and improve operational efficiency than to those that emphasize technical and product sales training. Channel partners, in short, are rethinking what they want from vendors. Wise vendors will rethink what they provide their channel partners in return.

Channel partners, in short, are rethinking what they want from vendors. Wise vendors will rethink what they provide their channel partners in return.