Jay McBain's Top 5 Channel Trends, Part 5: Mystery Drives Margins

The VAR Guy is coming to you from Austin, Texas, where this week we’re attending the Channel Partners Evolution conference. Vendors, traditional resellers, managed service providers and all of the “new” types of channel partners are represented and engaging in energetic discussions about how the traditional channel is changing and how to “skate where the puck is going.”

The conference kicked off with a keynote speech from channel guru Jay McBain, who recently joined Forrester as a channel analyst. McBain’s talk encompassed all of the high-level discussions the channel is having today as it navigates the digital transformation and tries to build a successful future. The VAR Guy will be bringing continual coverage of Channel Partners Evolution, but will dedicate a daily article touching on one of the five main discussion points McBain touched on in his keynote: the aging channel, the rise of the line of business buyer, the need to “hyper-specialize” in order to solve for business outcomes, the new types of partners comprising what McBain calls the “shadow channel” and how to navigate the increasing level of complexity partners must figure out in today’s IT landscape.

Look for a new piece of this series each day this week, as well as coverage of the panels, workshops and keynotes from the thought leaders in our industry.

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If you’ve read the first four parts in this series, you know that the channel isn’t as cut and dry as it was in the days of one-time sales and spiffs. Between the new LOB buyer, a whole new cadre of wacky competitors, and the 35 million opportunities that lie in the new hyperspecialization vectors, the complexity can be daunting, especially for partners headed toward retirement with no desire to upend the businesses they’ve successfully run for decades.

The increasing complexity is challenging, to say the least. When you add up all the different trends that are re-shaping the channel, the permutations are off the charges. But McBain says that where confusion and mystery reign lies opportunity…if partners can focus their efforts on one of those intersections.

If you don’t know where to start, he recommends going back to the basics. Take a look at your existing customer base, even if revenues are declining. Odds are a pattern will begin to emerge. Maybe three or four of your clients share the same subindustry. Maybe one of your salespeople has had a lot of success lately selling to the marketing LOB. Maybe your engineers or technicians have learned how to equip a midsize business in their sleep.

Whatever theme emerges will highlight the areas of your biggest opportunity. Use those customers as case studies to prove your expertise, figure out exactly what your target customer is looking for and start having one of those millions of conversations.

McBain says channel business owners essentially have four options: Build, partner, acquire or merge. You need money to build, so get creative with your business plan. Identify where your margins are too small to drive big revenue or the area of your business you’re bleeding cash. Analyze your current capabilities, capacity and willingness to change. What’s your roadmap for the next few years?

If you don’t have the funds to build your business out organically, consider making strategic alliances with other partners whose offerings complement your own and develop your own partner program that’s tit for tat: You sell the products of partners like ISVs, they sell your services and everybody wins. The key, says McBain, is to think through your partnerships just like your vendors do.

If you have the resources and a gap in your product offerings that’s hampering your growth, consider acquiring the missing expertise or merging with another shop rather than building it from the ground up. We’re starting to see quite a bit of M&A activity in the channel, which is a new paradigm for many partners. There are a good number of digital agencies, for instance, buying up tech services companies—so if you’re looking to age out, figure out how to position your value proposition so that a larger company wants to bring you on for your expertise.

Whichever road you choose, it’s essential to expand your marketing and sales approach to the new business buyer. Very few LOB executives have the “vector skills” required to package and integrate solutions successfully, and so the doors are open for partners to walk through. Not sure how to find your buyer? McBain says it all comes down to three questions:

The answers to these three questions will guide your marketing plan. Educate yourself by reading literature on the industry wherever you can find it. Go to the conventions and conferences they go to and pound the pavement. And finally, establish relationships with the super-connectors they follow. It won’t be difficult to find them: They’ll be the ones on stage at the conferences you attend, writing the thought leadership you read and leading the industry associations you join.

The channel is turning into a new beast, and all of that change can feel overwhelming to partners. Just take a deep breath, decide what you want your business to look like in the next few years, and dive in. While some partners will choose not to evolve alongside the industry, those that commit to riding the wave of change will find big opportunities.