Jay McBain on the 'Top-Down' Shift of Building Ecosystems

Vendors that wish to move into the vaunted ecosystem model will need to embrace top-down and bottom-up changes to their interactions with partners, says Canalys chief analyst Jay McBain.

McBain in a blog post this week outlined more than a dozen key steps key shifts channel leaders will need to make if they wish to become platform chiefs.

And indeed, titles are changing. Channel Futures has already adopted the nomenclature "channel leader" instead of "channel chief," and Canalys points to a further reframing of the top channel executive. Nearbound.com has observed appointments of 267 people to a "chief partner officer" role.

"This is not just a promotion for the channel chief to the boardroom. It is a new job role with expanded KPIs and broader platform objectives. Companies are making these appointments to coincide with their platform ambitions," McBain wrote.

Canalys' Jay McBain

A key aspect of the shift to a chief partner officer and a larger ecosystem approach is their de-centering of the actual transaction. McBain writes that the chief partner officer now oversees the "transactional-focused" channel executive, who might have previously led the entire channel.

McBain comes from IBM and Lenovo, where the value-added reseller (VAR) model might have sat atop the channel food chain in the past. But McBain's vision of an ecosystem challenges that hierarchy, taking into consideration emerging partner types like managed service providers (MSPs), technology advisors (agencies), systems integrators and consultants. McBain has argued that the average customers works with an average of seven partners in every buying process.

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Source: Canalys

And the definition of a partner can expand even more broadly. While MSPs (who may manage technology they didn't sell) and systems integrators (who may implement technology they didn't sell) may come to mind as non-transacting partners, McBain points to referral and affiliate partners who influence deals well before the actual sale.

"Partners of all types need to be enabled to add value in direct business, marketplace or indirect business transacted through other resellers. How money changes hands in a platform is somewhat irrelevant," McBain said.

Implications for Resale

McBain said ecosystem/platform leader at historically reseller-focused vendor must challenge a VAR model that was for 43 years a "top-down down approach."

While suppliers must still take that top-down approach – which includes identifying key distributors and resellers to partner with – they must also move from "the bottom-up" at the same time.

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"We are not selling commodities; we are selling highly considered purchases to a new, younger buyer who surrounds themselves with seven trusted people," McBain wrote. "The permutations for most vendors reach into the tens or hundreds of thousands of people who surround the buyer in their TAM."

One must "influence the influencers," said McBain, who encourages channel leaders to frequent "channel watering holes" like distribution communities, trade associations and media publications.

McBain also challenged platform leaders to move "beyond precious metal tiers." While he stopped short of calling for the demise of tiering, McBain – as it is "still best for driving performance in a reseller motion" – he noted that points systems can properly reward the non-transactional participation that vendors need from partners.

McBain also observed that large digital marketplaces have reduced their fee structures to 3% or lower.

"Customers are quickly recognizing that the 'cost' of reselling looks a lot like a credit card swipe at a restaurant. This is challenging for pure resellers because the cost of configuring, pricing, quoting and then taking money on behalf of a vendor is higher than that," McBain said. "Adding the time value of money (net 30, net 60 and so on), the risk the customer does not pay, and then the costs of recovery of bad debt are on top of this. One added wrinkle is when vendors put the risk of non-payment back on the partner to complete the contract time period (such as Microsoft)."

With the economics shifting, many vendors have made or are making the shift to points systems, McBain said.

"Awarding points for partnering moments before, during and after the transaction, as well as co-innovation, co-development, value creation, and network effects that stem from technology, strategic, and business alliances, is how platforms are operationalizing the model," he said.