Channel analytics, data quality and channel growth in 2016

John DeSarbo

What issues will inhibit technology channel growth in 2016?

We believe 2016 will be an exceptional year for some in the channel, but not all.

Vendors continue to introduce new innovations in key technologies like cloud, mobility, security, BI and more. Plus, customer demand is strong despite ongoing global macroeconomic challenges. However, many vendors are struggling to capitalize on this demand and achieve growth expectations.

The biggest issue we see inhibiting growth is that vendors underinvest in executing their channel strategies. We recently surveyed over 100 U.S. hardware and software providers to assess confidence in their 2016 channel plans.

We found that the majority of vendors understand market trends and feel that they are setting the right goals. However, many vendors doubt that they have the right plans in place to achieve these goals.

Vendors are not sure how best to allocate channel investments and execute strategies. As a result, when it comes to partner programs, many vendors are maintaining the status quo and are not making strategic changes in channel budgets.

The consequence is that they are overinvesting in the traditional partners, offerings and programs that have been successful in the past. Unfortunately these may not be the best investments to drive growth going forward.

By underinvesting in newer partners, offerings and programs, many vendors may be missing opportunities for growth in 2016.

Why do so many vendors struggle to optimize channel investments?

Based on our research, vendors have difficulty finding the partners with the greatest potential to drive growth. Most vendors can easily identify partners who performed well in the past. However, many vendors struggle with 1) objectively assessing loyalty among their largest partners and 2) identifying smaller partners who are investing in critical competencies and focusing on key high-growth industry verticals and solution areas.

Because vendors can't identify the best partners, they continue to peanut-butter spread investment among their biggest partners, many of whom may not be investing in the same high-growth areas or are also struggling to innovate and transform their business.

The source of the problem typically is inadequate channel data. Many vendors don't have the information they need to identify innovative, high-growth potential partners. Those who do have data often don't have the resources needed to mine the data for insights to build a compelling case for change.

Vendors have struggled with channel data quality issues for years. Why isn't the industry making progress to overcome these challenges?

Actually, some vendors are making progress. Recent ZS research found that a number of companies have significantly improved data quality and are developing sophisticated channel analytics capabilities. Others, though, clearly have not been as successful for a couple reasons.

First, many channel operations teams focus efforts primarily on gathering sales transaction data from the channel so that they can determine who sold what to whom. This data is important for reporting and to operationalize key elements of their programs, but it is only a piece of the puzzle.

There has not been enough focus on gathering data to understand partner investments in new capabilities and the focus of partner marketing campaigns - this type of data often provides more information about where partners are headed versus how they performed in the past.

Second, channel operations teams find it difficult to prove ROI in channel data improvement initiatives. Because they can't demonstrate the value of improving channel data quality, companies are reluctant to make required investments.

The channel is under pressure to cut costs and improve efficiency. How can channel operations leaders convince their organizations to invest in initiatives to improve data quality that will help them with partner relationships?

They key is to walk before you run. It is easy to get bogged down in complex IT system challenges by trying to do too much. Channel operations teams are typically tied up in the administration of partner programs and are not able to provide insights for channel sales and marketing teams. Consequently, they are viewed as back office cost centers that are not able to drive revenue growth. A way to shift this perception is to develop a channel analytics proof of concept.

Take a small group of partners and use the data that is available, both internally and via public sources, to quantitatively assess partners' loyalty, growth potential and propensity to sell priority offerings. By using analytics to identify high-priority partners and measure the impact of increased investment in them, channel operations teams are able to show the value of investing in channel data improvement.

What steps should vendors take to develop channel analytics capabilities?

Our research found that there is not a one-size-fits-all recipe to improve channel analytics capabilities: Vendors fall along a maturity spectrum. Some are way behind when it comes to leveraging analytics to drive channel investment decisions, while others are further ahead. Depending on where vendors fall on the spectrum, they struggle with different issues and should focus on different priorities.

Vendors need to objectively assess where they stand relative to industry leaders and build a roadmap that outlines how they will adopt best practices over time.

How can channel partners help their vendors?

Partners can add value to vendors by proactively communicating their business strategies and investment plans.

Too much of the dialogue between vendors and partners today is focused on transactional and operational issues. There is not enough collaboration about strategy. Vendors need more information from partners regarding market trends and how partners are evolving their business models as a result.                

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