Vendors Pressuring Partners to Move to Services, Says Canalys

Vendors might be pushing consumption-based IT services too hard on their partners, according to channel analyst firm Canalys. As a result, tensions exist between vendors and the channel, says the research firm’s CEO, Steve Brazier.

Canalys’ Steve Brazier

“Vendors are desperate to go to ‘as a service’ because it’s a better business model for them. Some customers are interested in it, but many are not. If the vendor puts all its efforts into as-a-service and biases its salesforce toward [that], they’ll have a problem.”

Brazier claims vendors are keen to push consumption-based IT because “Wall Street loves it.” They see the likes of Microsoft and “poster child” Adobe and want to replicate their success on the stock market.

“The marketing power of the vendors is enormous, saying consumption models are the future. Meanwhile partners think capex is a good use of spend on technology,” said Brazier.

“It has worked very well for Microsoft and Adobe. But they have virtual monopolies and can force their customers into to a certain behaviour. It is much harder in a competitive landscape, so we’re going to see that battle play out.”

Brazier was talking at the Canalys Forum 2020 on Friday. He warned partners not to get ahead of themselves when it comes to changing their sales models.

“We talked about the PC being dead 10 years ago, and so partners stopped selling PCs. That was a mistake. Those companies still selling volume goods and a portfolio of products are the ones that are doing best right now. So, swinging too far in the future can also be a mistake.”

Canalys’ Alastair Edwards

“I think some partners have been pressured in moving in this direction and forced to shift their businesses — more so than perhaps all their customers want to go,” agreed Canalys principal analyst Alastair Edwards.

“The established vendors are … following where they think the market is going. And to a certain extent the market is going that direction. But we also believe that this is partly a response to the current situation. There are still a lot of customers that don’t want to necessarily buy that way. There are plenty of companies that still want to maintain assets on their balance sheets.”

On the move to services, Edwards believes that partners should exercise caution.

“With vendors pushing everyone down the as-a-service route, partners worry. Their sales cultures aren’t geared up toward doing it if their compensation models aren’t geared up toward doing it. And all that has to change before they can do it effectively.”

Despite the ongoing pandemic, it’s been a relatively strong year for the EMEA channel. Canalys says it grew 4% in the first three quarters of 2020 compared to an overall EMEA GDP decline of 9% during the same period.