Is Vendor Loyalty Dead? Why Partners Are More Impatient with Vendors than Ever

Each quarter Channel Futures takes the pulse of the channel via its dynamic Quarterly Market Outlook surveys. Below are key insights from the 2Q24 Quarterly Market Outlook survey that IT vendors/suppliers use to craft successful partner programs and partners use to benchmark against competitors. 

Innovate or Be Replaced 

In the highly competitive IT services market, managed service providers (MSPs) have long relied on a complex web of vendor relationships to deliver cutting-edge solutions to their customers. However, there is a seismic shift in how MSPs evaluate these relationships. With rapid technological advancements, a changing market landscape and increasing pressures on profitability, many MSPs are making tough choices when it comes to vendor partnerships. 

Two major driving factors behind MSPs adding new vendors: supplementing existing tools and technology, and the desire to sell into new sectors. Conversely, dissatisfaction with vendors that fail to deliver, and inadequate product technology were cited by respondents as the top reasons MSPs drop vendors. In a time when cybersecurity services, cloud migrations and AI adoption are booming, the bar for technological excellence has been raised. MSPs no longer have patience for vendors whose products are difficult to integrate or whose service is subpar. 

Related:Channel Partners Raise the Bar Even Higher on 2024 Forecasts

Are You a True Partner or Product Pusher? 

Don’t be confused: MSPs are looking to their vendors for more than just flashy products — they need true partnerships, as highlighted by the four key resources (graphic below) that they said they need from vendors to improve their go-to-market (GTM). Many MSPs feel that vendors are falling short in providing these critical resources and are often left to fend for themselves when it comes to lead generation and training. Market development funds (MDF) are becoming harder to access, with complex approval processes and limited availability. And post-sales support often feels like an afterthought, leaving MSPs to clean up the mess when things go awry. 

This gap between what MSPs need and what they’re receiving is creating friction in vendor relationships, and it could be a breaking point. The industry is based on the principle of channel “partnerships,” but when push comes to shove, MSPs are starting to wonder: Is this really a partnership, or just a transactional relationship? Vendors that want to maintain and grow their channel presence must take a hard look at how they’re supporting their partners.  

Related:MSP Survey: Faith in Channel Waning Amid Economic Struggles

The Rising Threat Landscape 

The role of technology advisors (TAs) in the IT consulting world has been traditionally built on trust, expertise and vendor relationships. But in today’s market, TAs are feeling increasingly challenged on multiple fronts. TAs’ revenue streams are seeing rising threats from various competitors, including direct-to-customer sales by IT vendors, professional services firms, managed service providers (MSPs) and other technology advisors. 

TAs feeling most threatened by IT vendors’ direct sales teams should raise alarms across the industry.

Professional services firms and consulting companies are increasingly expanding their technology portfolios, targeting the same customers with turnkey IT solutions. MSPs are bundling consulting with IT services that overlap with what TAs provide, and other technology advisors are muscling into previously uncontested sectors. In this landscape, competition is more cutthroat than ever. 

Better Together: IT and Telco Solutions 

Despite the growing competitive threats, resilient TAs are seeing noticeable revenue gains from a mixture of IT and telco-based solutions, with services (graphic below). The blend of offerings represents crucial growth areas for TAs, but it’s also a double-edged sword. These are also the types of services where vendors, MSPs and professional services firms are focusing their sales efforts, offering clients comprehensive solutions that bypass TAs entirely. The big question is:  

Conclusion: The Whole Ecosystem Will Always Be Greater than the Sum of Its Parts 

MSPs and Vendors 

TAs and Vendors 

Omdia Quarterly Market Outlook Report: For full insights and analysis of the Channel Futures Quarterly Market Outlook Survey and to obtain a unique perspective on the key trends impacting the channel from the lens of prominent MSPs and TAs, check out the Omdia Quarterly Market Outlook Survey Insights – 2Q24 report.