Channel Chameleons: Why More Vendors Are Hiding Their True Colors

Disruptive changes in technology always drive irrational channel sales behavior. When vendors are under intense pressure, solution providers are always the first to fall subject to the whims of top management aiming for short-term transaction gains rather than long-term strategic strength.

Just as solution providers have to change their business models to adapt to the cloud computing revolution, so do vendors. That is why there has never in the history of the channel been so much irrational channel activity—moves that make no sense whatsoever—but are put in place in a fit of desperation to drive short-term results.

Building a successful channel takes a minimum of three to five years. Many solution providers, in fact, want to see a stable program and management team with long-term channel vision and DNA before they place a big bet. For solution providers, the decision is a strategic one, not a transaction-based one.

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A chameleon changes color as a survival mechanism. That is just what a number of vendors are doing as they adapt to cloud market dynamics. Becoming a channel chameleon means looking at your channel as a replaceable transactional part vs. the never-changing strategic center of the company.

Are you dealing with channel chameleons? Here are five signs.

1. No-Warning Channel Shifts: A vendor that has built its channel business model for years on limited/zero product revenue with a commitment of services opportunities changing course. In this case, the vendor is suddenly telling partners it is going to provide free migration services, leaving partners high and dry.

2. Margin-Cutting Madness: A vendor that changes product pricing to meet quarterly earnings targets. This kind of channel behavior is almost always caused by a vendor trying to avoid a Wall Street wipeout or provide increased margin for itself at the expense of partners as a short-term financial Band-Aid.

3. The Incredible Shrinking Channel: This is the vendor that is never short on channel rhetoric but slowly and surely takes away more and more incentives and market development funds. This chameleon slowly changes colors. When you see a vendor that was once as high as 75 percent channel go down to 25 percent channel sales, it's time to wake up and smell the coffee.

4. We'll Figure It Out Later: A company—even one with as much as 80 percent channel sales—quickly pulls together a technology or channel strategy shift to plug a hole without any regard for the impact on solution provider partners. This chameleon is becoming more prevalent as companies wake up to find their traditional business shrinking with the shift to cloud services and attempt to make up all the ground lost with a Hail Mary technology strategy pass.

5. Communications Breakdown: The invisible chameleon. You know you are in trouble as a partner when the lines of communication go dead. Think of this one as the spouse who dumps you by simply moving out with no explanation.

BackTalk: Are you putting up to win in the cloud computing market? Contact Steven Burke at sburke@thechannelcompany.com.