Q2 Channel Futures Partner Market Outlook: Tech Advisors Lean Into Cross-Selling
Partners want lead generation from their vendor partners. But are they getting it, and what's the channel impact if they do?
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A plurality of partners (44%) listed recruiting and retaining talent as a top challenge. While year-over-year staff headcount increased 33% on average for advisors, only 14% of respondents said they’re having an easier time finding candidates than they were last year.
For Randy Jeter, managing partner at Procure IT, compensation factors heavily into that equation.
“To attract and retain talent that can sell technology well, you need to properly compensate and position them for growth. If you don’t, they are incented to take the business and relationships and become contractors themselves so they can make more money,” Jeter told Channel Futures. “The agent/partner space will mature significantly by hiring producers that work for the business while also providing draws and buyout terms for contractors selling through the business under the business’ brand.”
The second most cited challenge for partners was managing vendor relationships. That fits well with the ongoing trend of channel conflict partners have been reporting quarter after quarter. Forty-eight percent of partners listed direct vendor sales teams as their biggest source of competition. Next came other technology advisors (27%) and resellers (21%).
Customer retention came in as the third biggest challenge for technology advisors, and this reflects a larger shift in the industry.
Historically, many partners have passively collected monthly commissions for years and years – even decades – following a deal. Some of these partners simply moved on to the next sale. But more and more partners are seeking to furture nurture those clients by expanding their value proposition beyond brokering.
Many tell Channel Futures that they are hiring in operations to give end customers more support on the back end of the sale.
“The agent/consulting space needs to mature from solely sourcing. Their competitors, VARs and MSPs, are evolving into procurement,” Jeter said. “After the sourcing is done, you need to manage the CX. You have to build professional, managed services and support or you’re not going to be relevant.”
For many partners, cross-selling is the way to growth.
Channel Futures asked partners to list up to three strategies they’re making or plan to make around go-to-market enhancements. Cross-selling and up-selling existing clients was far and away the most popular strategy. Similarly, 25% of partners said they’re performing customer engagement on existing accounts as a way to grow their presence.
Partners are also looking at expanding their sales teams and running targeted branding campaigns.
Only 14% of partners said they are harnessing lead generation from vendors and distributors. Keep that tidbit in mind on the next slide as we examine how partners feel about lead generation.
While only 14% of partners have brought on vendor/TSD lead generation as part of their go-to-market strategy, their survey results indicate that they very much want those leads.
Forty-four percent of partners said the most important thing a vendor can provide for go-to-market support is lead gen.
“In an era where customer acquisition is the lifeblood of business, 44% of partners have spoken; it is lead generation that they consider the most crucial provision their vendors can offer in go-to-market support,” JS Group CEO Janet Schijns told Channel Futures. “This underscores the critical need for companies to not just sell their products, but also to empower their partners with the tools and strategies necessary to identify and pursue new prospects. After all, in the competitive marketplaces of today, the ability to generate qualified leads is not just an advantage, it is the fulcrum upon which business success teeters.”
But Schijns said not all lead-generation programs are created equal. She said vendors who “truly invest” in lead generation are growing at triple the speed of those who are only providing lip service.
Kameron Olsen, president of The Channel Advisors, said it came as no surprise that partners report a need for leads from their vendors.
“The TSDs have done a great job at trying to provide more resources for the partners to use and about the only thing that they stay away from is providing leads. They don’t want to compete with their other partners by running into competing partners in the opportunities they discover,” Olsen said.
Olsen said he was shocked to see that only 11% of partners considered enhanced training the most important thing a vendor could give them.
“I believe partners are having a hard time identifying opportunities in the new technologies (cloud and cybersecurity) because they don’t understand the technology well enough to know the pain points and issues to listen and look for,” Olsen told Channel Futures.
In the meantime, the increased demand from partners for lead gen presents a conundrum of sorts.
“I think one of the biggest issues right now is, suppliers are looking at the drive from TSDs to provide partner leads and from the partners to provide end user leads, and they are starting to ask themselves, ‘Why are we even in the channel?’ The industry is starting to change from its original value prop, and suppliers need to learn how to manage it to their benefit,” Olsen said.
Meredith Caram, president of JS Group, said vendors have reaped the benefits of “funding headcount for partner engagement.”
“While it is not the most important, it really is a smart play in both areas. Most marketing investment lacks balance with revenue attainment, and when profitability gets low for the TSD, the vendor’s mindshare gets diminished there, which results in lack of custom marketing activities with the TSD and their partner community. Investment in a TSD’s solutions lab is also a smart play to align with the technical side,” Caram said.
It’s tricky balance for agents who are position themselves as vendor-neutral, yet also benefit from vendor leads.
“If you’re relying on vendors for leads, then when you get a lead, it’s tied to the vendor, which minimizes your value as a consultant,” Jeter said. “If a TSD were to offer lead gen for agents selling under their brand, then agents could maintain the consultant value prop. However, none have built a consumer-facing digital marketing strategy.”
Jeter added that the partners who offer partners leads expect partners to bring them new business in return.
“If partners don’t have their own pipelines, the supplier will eventually stop sending them leads. Unfortunately, a lot of partners are still getting their own leads from relationships and referrals, not digital marketing initiatives,” he said.
And partners have admitted this much, saying that they struggle to justify paying for marketing campaigns, let alone hiring a marketing person. It’s just too expensive, Jeter said.
“For that same reason, suppliers are not going to set up digital marketing to hand off leads to a partner, except for small deals, which cost the supplier more to handle internally,” he said. “Agents might get bigger leads if they were willing to give up points to account for customer acquisition costs.
Jeter said partners must combine “brand presence, marketing toolset and a mature consulting talent” going forward.
“Customers want more value from the partners. They need to have a CX team and tools to support the customer. They’re going to need to get more intelligent about how they serve the market,” he said.
And what about everyone’s favorite topic – AI?
According to the Q2 survey, 33% of partners are using generative AI to augment their own lines of business. The most common uses were for email and social media marketing (both 64%). Partners also reported using programs like ChatGPT for building website text.
Another 27% of partners said they used AI to write contracts and agreements.
It makes sense that the technology advisor community would turn to ChatGPT-esque tools to take care of these writing activities. Many of them do not employ marketing personnel and must wear multiple hats. Artificial intelligence can help them focus on some of their core activities, such as selling.
On the other hand, partners are reporting challenges as to how they should position AI as a product for their customers. Partners in a recent article with Channel Futures vented about how UCaaS and CCaaS providers are re-branding old capabilities as AI.
For the first time in the history of this survey, more respondents said customer spending appetite has gone done than those who say it has gone up. Twenty-eight percent of partners said businesses’ willingness to spend money on technology decreased compared to Q2 2022. On the other hand, 19% said it went up. Another 53% reported to no change.
Jeter said reality is more nuanced than that.
“Tech spending isn’t necessarily going down; it’s just moving to process automation and advanced consulting engagements around applications. It’s about how businesses automate and build better outcomes. As a result, it may seem like spending is less to partners who are selling commodity services. During a downturn, buyers’ needs will decrease, but we’re seeing an increase in advanced consulting needs for customers looking to use the latest technology. One of the reasons we’re not seeing the impact of the downturn is we’ve hired vertical experts who can go beyond an engagement on a commodity services or a price-based sale,” he said.
Several different technology buckets saw sales growth for partners last quarter.
WAN/connectivity and UCaaS saw the most “significant increase” at 18%, but all of the technologies grew more than they decreased.
Mobility and IoT saw a nice lift, with 29% of partner reporting a slight increase in business.
Contact center decreased slightly for 14% of partners, but 32% of partners reported an increase of some kind.
Surveying partners about their TSD usage shows that a select number of distributors are growing in a big way.
Four parties seemed to distance themselves from the rest of the pack: Avant, Telarus, Intelisys and Sandler Partners. Thirty percent of partners said business with Avant increased, 24% said business with Telarus increased, 20% said business with Intelisys increased, and 17% said business with Sandler increased.
And Pax8 saw growth as well, seeing an increase from 10% of partners. However, 86% of partners said they don’t use Pax8.
Twenty-eight percent of partners said their reliance on TSDs increased last quarter, compared to 6% saying it decreased.
Surveying partners about their TSD usage shows that a select number of distributors are growing in a big way.
Four parties seemed to distance themselves from the rest of the pack: Avant, Telarus, Intelisys and Sandler Partners. Thirty percent of partners said business with Avant increased, 24% said business with Telarus increased, 20% said business with Intelisys increased, and 17% said business with Sandler increased.
And Pax8 saw growth as well, seeing an increase from 10% of partners. However, 86% of partners said they don’t use Pax8.
Twenty-eight percent of partners said their reliance on TSDs increased last quarter, compared to 6% saying it decreased.
Partners are turning to cross-selling and upselling existing customers on new technologies as part of their plans to expand their go-to-market strategies, according to a new survey by Channel Futures.
The Q2 Partner Market Outlook, which queried 36 technology advisors (agents) about the changing nature of their business, shows the high priority partners are putting on deepening their client accounts. When asked what go-to-market enhancements they have made or plan to make, 44% of tech advisors said they are cross-selling or upselling with existing customers. That was by far the most common strategy, followed by expanding the sales team (25%).
It’s not a shocking fact that partners prioritize cross-selling. Some of the partners that have merged with one another have explicitly stated that they see an opportunity to bring adjacent technologies to their legacy customer bases. Leaders of technology services distributors (TSDs) have touted the opportunity for advisors to sell multivendor deals, and they themselves have reported increased cross-selling. Telarus, for example, reported a 25% increase in deal size in 2021.
At the same time, partners say they could use help from their suppliers in identifying new customers. Forty-four percent of technology advisors said lead generation is the most important thing their vendors can provide them in terms of go-to-market support. One channel consultant said lead gen is proving to be an area where vendors can differentiate themselves from their peers. But another consultant said some vendors are expressing frustrating that partners expect them to find customers for them.
At any rate, only 14% of partners reported that vendor/TSD lead gen comprises part of their latest go-to-market enhancements.
Channel Futures asked partners 19 different questions around topics like hiring, technology sales, TSDs and generative AI. Scroll through the nine images above to see some of the most significant findings.
Also, check out the Q1 survey results if you missed them.
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