IDC says 25% of channel partners will change focus, be acquired, or fizzle out in 2021

For years, research firms and analysts have shouted from the mountain tops, telling channel partners to prepare for change, modernize services and get familiar with cloud computing. Now a global pandemic has forced channel partners to take a serious look at themselves and determine whether or not they’re actually doing that, because according to IDC if they’re not, they might “stop operating” by the end of this year.

“We think 25 per cent of partners will fundamentally change who they are or what they do in 2021,” Stuart Wilson, research director of European channels and alliances, said during IDC’s latest predictions webcast.*

The data comes from IDC’s partner recovery research and partner survey data. Wilson says the partner “metamorphosis” applies to vendors as well. Vendors will deploy new segmentation strategies and policies while keeping a close eye on partners advancing their skills.

This is easier said than done. “A significant portion of partners were experiencing revenue decreases in 2020 and expecting challenges in 2021,” Wilson said.

Metamorphosis with the help of IP 

One of the more promising data points delivered by Paul Edwards, director of software channels research, concerns intellectual property.

Edwards called 2021 the “year of the IP” as partners finally capitalize on their IP investments. IDC data shows a steady increase in the contribution of IP to partner profitability. 

“Partners are capitalizing on the IP investments they’ve made over the last several years. Even as they increase their investments in IP, we have partner survey data that supports this and showing the share of profit for IP has surpassed the share of profit for resale. Basically, 60 per cent of partner sale at aggregate comes from IP.”

Edwards says he thinks partners are getting better at understanding and addressing customer issues with their IP. It makes it easier for partners to sell and earn repeat sales.

“They’re able to do this because they’re becoming more embedded in their customer’s businesses.”

The trend applies to the Canadian market as well, he added. Vendors are also on the lookout for advanced partners with unique IP, Edwards concluded.

Looking a little further ahead

By 2023, IDC projects that up to 50 per cent of major vendor partner programs will shift focus to customer success and partner expertise.

This means more weight will be placed on partner specialization as customers prefer to search by capability rather than tier level.

Pam Miller, director of infrastructure channels research, pointed out that Amazon Web Services eliminated tiers in its ISV program.

“The badging goes to the solution and not the partner. I think that’s a dramatic change,” she said.

Cisco’s ongoing shift towards software subscriptions and Everything-as-a-Service, Miller continued, has already led to some significant changes to its partner programs. Last year CEO Chuck Robbins said that 51 per cent of Cisco’s revenue came from software and service in FY 2020, just exceeding its target of 50 per cent. 

Also, nearly 80 per cent of its software revenue is sold as a subscription. But Cisco isn’t satisfied, and Robbins has described the ongoing shift to software as a “lengthy process.”

Skills gap – it still exists

The skills shortage is a serious bottleneck to partner growth. Unfortunately, that trend will continue.

IDC projects that the skills gap will be the main inhibitor to success for 30 per cent of all partner organizations through 2023.

“Globally, the drag on productivity caused by the IT skills gap is quite substantial,” noted Brendan Rouse, research analyst for channels and alliances at IDC. He says IDC projects that the financial impact of the skills gap will reach US$775 billion by 2022. 

A greater focus on partner training from both vendors and partners will help each side find more opportunities and make their channel more competitive. Steve White, program vice-president of channels and alliances at IDC, stressed the importance of culture change.

“I think the culture of being a very training-oriented partner is actually very cool. We see a number of partners who do this, who really understand that their capabilities, and building them, drives their own credibility. This is a big area, and definitely something that’s not been in focus as much before,” he said.

White perhaps put it best during the webcast, describing the next couple of years as a bit of a ride through a dark tunnel.

“The light at the end of the tunnel isn’t a train,” he said.

 

* Registration required

Would you recommend this article?

Share

Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.


Jim Love, Chief Content Officer, IT World Canada

Featured Download

Alex Coop
Alex Coophttp://www.itwc.ca
Former Editorial Director for IT World Canada and its sister publications.

Related Tech News

Featured Tech Jobs

 

CDN in your inbox

CDN delivers a critical analysis of the competitive landscape detailing both the challenges and opportunities facing solution providers. CDN's email newsletter details the most important news and commentary from the channel.