Channel software adoption to increase in 2021: Forrester

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Channel software adoption to increase in 2021: Forrester

The IT channel is expected to increasingly adopt channel software innovations in 2021 as economic recovery continues, according to research firm Forrester.

In the latest predictions from Forrester principal analyst Jay McBain, channel organisations will be met with disruption brought by the events of 2020, expecting changes not only in customer demand but also with vendors finding more ways to go direct.

McBain listed ten predictions on customer behaviour, vendor trends, new ways to sell solutions direct from the vendor like marketplaces, channel software adoption, and where the MSP market is headed.

The first prediction is that the channel will continue benefiting from the changing workplace dynamics as companies will now require new levels of service, support, infrastructure, security, compliance and continuity.

Next prediction is that vendors will start following the lead of Cisco and Dell in moving to a 100 percent subscription/consumption business, with IBM and HPE right behind. McBain however believes the channel isn’t ready, and recommends that resellers adopt a “trifurcated” channel model — moving program investments before the transaction (influence) and after the transaction (retention) to support adoption, integrations, stickiness, and upsell/cross-sell.

With distributors, McBain expects they would struggle to adapt to the move from SKU- or product-based economy to an embedded, white-labeled future of solution “building blocks.”

“In an embedded future, customers will become partners and partners will become customers — the delineation of partner types will continue to be difficult,” McBain said.

“To be relevant in the new world of bits vs. atoms, bought via subscription and consumption models through marketplaces, distributors with deep industry expertise must reorganize themselves to aggregate, facilitate, and orchestrate ecosystems of value creation.”

Resellers will also face increased challenges from marketplaces, product-led growth (PLG), and direct-to-customer (DTC) models.

Marketplaces allow ecosystem partners — such as alliances, affiliates, advocates, ambassadors and affinity — to be more amplified.

The PLG model meanwhile relies on the product itself as the primary driver of customer acquisition, conversion and expansion, allowing them to bypass the channel. Some vendors using this model include Zoom, Slack, Expensify, Calendly and Dropbox.

DTC vendors, or those who independently manufacture, promote, sell and ship their own products, are also on the rise and are “rapidly changing” the business landscape.

Another prediction is that vendors will want to start taxing services offered via its marketplaces.

“The economics of the channel is changing rapidly, given the shift to marketplaces, subscription/consumption models, and the trifurcation of channel program dollars toward customer influence and long-term retention,” McBain said.

A “majority” of channel programs have started being rebranded as “ecosystems”, which have on average 10 times more partners than transactional channel programs, so channel process automation (CPA) has seen an uptick in sales among the channel.

“In CPA workflows, bots will take on the most predictable, mechanical, and repetitive activities, while channel professionals can specialize in using judgment, creativity, and language,” McBain said.

“Bots have the potential to take on unattended tasks equivalent to 2.0 to 3.5 channel account managers, allowing ecosystems to scale effectively.”

The love of automation has also extended to channel customers, with robotic process automation (RPA) and no-code/low-code SaaS environments getting increased attention, with RPA vendors now valued at US$17 billion.

Meanwhile vendors who are on the way to developing an ecosystem will adopt new ways to bring in more channel partners, as 2020 made them realise old-school methods of recruitment no longer work.

“For ecosystems that cover multiple new partner types, buyers, sub-industries, geographies, segments, and product areas, there is no linear method to recruitment and collaboration anymore,” McBain said.

“Leveraging customer and partner communities — basically, what they read, where they go, and who they follow — is the most effective way to find, recruit, nurture, and activate partners. Influencers and superconnectors are the (digital) gateway to earning trust and endorsements in front of new types of partners, and the process of finding and leveraging them has come into more focus since last year.”

Managed services providers are expected to see more compliance, consolidation and accelerated price compression in 2021.

Two major regulations will come into effect this year, Europe’s General Data Protection Regulation (GDPR) and the US’s Louisiana Act 117/Senate Bill 273 that requires MSPs that manage infrastructure or end user systems for “public bodies” to register with the state and notify the state in the event of a cyber incident, including any ransomware payments.

“In 2021, vendors will deliberately choose to do business with partners that commit to data ethics and adopt data handling practices that reflect their own values and their customers’ values,” McBain said.

“The economics of managed services will continue to be challenged as price per device or user continues to fall, larger private equity firms gobble up local players with lower pandemic-driven valuations, the battle for local talent intensifies, and the cost to deliver in a remote topology accelerates.”

Another channel software seeing more love this year is revenue management, following Salesforce launching its new Revenue Cloud vertical last year. The new vertical is aimed at businesses that want to create a single point of reference for customers’ transactions — from renewal to revenue recognition.

“As marketplaces become the connective tissue of ecosystems, revenue management technology that automates and streamlines multiple routes and go-to-market strategies will provide a critical toolkit for buyers, sellers, partners, and distributors,” McBain said.

This year will also see the rise of the “ecosystem orchestrator”, or someone who will manage large ecosystems composed of transacting, non transacting, traditional, and nontraditional partners.

“Ecosystem orchestrators will not deploy a linear approach to partner recruitment and management,” McBain said.

“Orchestrators will team with a broad network of partners that create value for customers through all stages of their journey — a journey that now never ends. They will be measured on how they tailor their partner experiences to ensure the ecosystem has enough capacity, coverage, alignment, and is appropriately supported.”

McBain also pointed to a number of ecosystem-focused companies currently building automated technology for these orchestrators, including recruitment (at nonlinear scale), attribution (moving from consumer marketing attribution into B2B influencer), account mapping (innovative data escrow-type services), enablement/collaboration, tech/API integrations and ecosystem management.

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