5 Trends That Will Dictate The Future Of The Channel

Changing The Channel

Will the next wave of IT buyers embrace the channel, or will they opt to go it alone? And, at the same time, will millennials grow into leadership positions within channel organizations, or do these companies need to transform in order to ensure that these young professionals will be willing to take over at the helm? Those are some of the concerns that Jay McBain, Forrester principal analyst of global channels, shared with solution providers at the Channel Partners Expo in Las Vegas this week.

As the channel changes, opportunities are emerging for legacy solution providers to reinvent themselves, while up-and-coming leaders are looking for opportunities. Here are five trends McBain shared that will shape the future of the channel over the next decade.

The Problem At Hand

Of the solution provider organizations today, 40 percent of their leaders plan to retire in the next six years. While their succession plans may be complicated, there exists a big opportunity for incoming leaders should they choose to take it, McBain said. In the next six years, 75 percent of the entire channel will be made up of millennial-age staffers, he added.

"Five years ago, my prediction was that these millennials would buy these companies or build new businesses and continue the tradition, but we are finding that it's not happening," he said.

The Need To Transform

Traditional channel organizations need to transform to stay relevant. That's because 29 percent of buyers are not involving the IT team in their purchasing decisions, McBain said. Moreover, a whopping 68 percent of buyers prefer to do research on their own and are working with vendors directly, rather than work with a solution provider.

"Today, we walk into a dealership and know more about the car we are going to buy than the sales rep, and the same thing is happening here [in the channel]," he said. "With that in mind, we need to question now -- what's the play when it comes to resell, and how important is it going to be going forward?"


One consistent fact that Forrester keeps picking up on is that customers often don't believe solution providers are specialized enough, McBain said. Partners should be drilling down into the industries they are good at, and localize their offerings. Otherwise, customers will bring in "shadow channels," he said, which are often startup solution providers that have been brought up in the business application layer.

"Vendors can't get that direct, but partners can get into those conversations. As a channel partner, there's a lot of conversations happening within your current accounts that might be outside your purview … the richest margins today in the channel are in that business application layer," he said.

The Born-In-The-Clouds

Born-in-the-cloud solution providers are changing the channel game because they aren't reselling solutions or relying on the traditional methods of earning as a channel partner. Instead, they are acting as the "adult in the room," earing their money from customers -- not vendors -- by providing solutions such as back-end integrations, security, backup and disaster recovery solutions, McBain said.

"These companies understand the nuts and bolts, but they haven't built their business model around legacy ways to make money," he said.

What Does It All Mean?

The size of the channel is growing, but it won't be growing in the traditional sense, McBain said.

"For vendors, these aren't partners that will fall into your Gold, Silver or Bronze program," he said. "What are the sub-industries and technology plays that you're really good at, and do you have the capacity or will to change, or will it take some partnering? Because two-thirds of decisions are starting to be made outside of IT, make sure your content, messaging and marketing is built around these new decision-makers."