Vendor-Partner Conflicts Rising as Channel Firms Lose Sales

A new study from CompTIA cites challenging economic times, new technologies and new methods for selling information-technology (IT) solutions as reasons for an increase in conflicts between vendors and channel partners.

Six in 10 IT channel companies, the study revealed, say conflict has risen in the past two years. Eight in 10 say it has affected their business negatively; 21 percent of those say the impact has been “major.”

Conflict between IT vendors and their channel partners is not a new issue, but its a dynamic that ebbs and flows,” said Carolyn April, director, industry analysis, CompTIA. Right now, the channel is roiling for many firms.”

So what, specifically, is behind the rising tension? Poor economic conditions, for sure. A number of technology vendors have focused more on direct sales to customers as a result, and at the expense of their channel partners. Second, new methods for reaching customers with technology services, such as cloud computing. And third, new entrants into the market, such as telecom companies that now offer IT services in addition to traditional voice services.

It’s all resulted in a loss of business for many channel firms. More than three-quarters said they lost one or more deals in the past year due to channel conflict. The most common response from channel firms to lost business is to complain to the vendor, CompTIA says. But some firms have taken more punitive actions. About a third attempted to sell a competing vendors product to the same customer. Three in 10 dropped the vendor in question as a partner.

One area with the most tension is deal-registration programs. When executed properly, these programs help to avoid or reduce channel conflict by preserving opportunity rights to a particular deal for the channel partner registering it first into the systems. Vendors benefit from greater visibility and tracking into their indirect sales pipeline. More than eight in 10 channel firms surveyed by CompTIA say the existence of a deal-registration program is a critical or important factor into their decision to partner with a vendor.

At the same time, these programs can prove challenging for both parties and cause headaches and hard feelings for channel partners, CompTIA noted. Problems most often occur in three areas poor communication, cited by 61 percent of channel partners: examples include insufficient reporting on approvals and payout status, and lack of information on incentives; technical challenges (cited by 49 percent of partners) when deal-registration systems and tools are hard to use; and inconsistency (cited by 27 percent of partners) when rules of engagement and adherence to rules are constantly changing.

More than a third said that a set of best practices would make a huge difference” in improving deal-registration programs.

Vendors, too, have interest in coming up with deal-registration best practices that span the industry, not just an individual company; however, there is concern about surrendering competitive differentiators, CompTIA noted. Areas where industry wide best practices may work include: clear guidance on when a deal should be registered; simplified deal-registration processes; compensation for partners who register a sale, but lose the deal to a direct sale or have it poached by another firm; and clear rules of engagement to spell out which accounts are managed by the direct sales team and which are available to channel firms.

There was some positive news in the report. A significant number of channel firms are taking the bull by the horns and reinventing their businesses to better respond to the conflict.

Theyre looking inside their own organizations to get their own house in order to become more appealing to the customer,” April explained. Theyre improving their own service capabilities, specializing in vertical markets and making the move to a managed services business model, which cements them to a customer.”

The findings are included in CompTIAs “Third Annual State of the Channel Study: Channel Conflict and Deal Registration Trends.” The nonprofit interviewed 350 U.S. IT company executives in February and March to come up with its results.

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