The Rise of Shadow Channels – Part 1

In the first part of this two part series, Jay McBain, Channel Analyst, discusses the threat of Shadow Channels and why partners must get adapt to the evolving customer buying habits the market is starting to come across.

The rapid shift to public cloud and SaaS based technologies by business leaders is having a major impact on the channel industry. With line of business (LOB) professionals now making the majority of technology decisions, partner business models that were built around traditional hardware, software and services sales are having difficulty staying relevant.

Vendors will need to expand their sales and marketing beyond IT and expand the channel program to include non-traditional partners. Partners will need to examine their own visibility beyond the IT department and determine if they have the right mix of skills to compete for these new buyers.

Business leaders now make 72% of technology decisions (Gartner) and 58% of them are significantly involved in choosing third-party IT service partners (Forrester). These numbers are growing quickly, and some analysts are suggesting that IT departments will take a backseat in almost all decisions in a few years time.

Vendors and partners are increasingly getting shut out of customer opportunities due to their historic focus on the CIO and IT department.

Business leaders are increasingly relying on new influencers when making technology decisions. These new influencers, or shadow channels, include technology specialists focused on a narrow set of SaaS ecosystems, industry-based professional services firms that have pivoted to technology sales and service, ISVs – Independent Software Vendors, born-in-the-cloud firms that specialize in implementation and integrations, and a quickly expanding start-up community. Vendors need to focus on these new influencers to gain visibility with this new buyer.

For partners, a new level of hyper-specialization is required to have success with business leaders. About a decade ago, verticalization became all the rage. Partners were developing industry skills that would better suit them to their regional customer base. Today, customers are looking for focused skills around a specific technology category, sub-industry, segment, line of business, and geography. These five vectors define the level of specialization that new influencers are bringing to the table and that vendors must adapt to.

Over the past 35 years of the channel, the amount of change around technology products, services, and delivery models has been significant.

The one constant, however, has been the customer buying process – until now. This has serious implications for channel partners that have not evolved their B2B marketing and sales processes to include the lines of business in their customers. For vendors that rely on channels to drive opportunities, this has serious downstream implications.

As business leaders have increased their involvement in acquiring technology, they are leveraging new sources for information. For example, 73% of business-to-business buyers find buying from a website more convenient than buying from a salesperson (Forrester). This level of self-service is changing the way technology is acquired and could squeeze the partner community further out of the value chain. In fact, Distributors are reporting that over two-thirds of all purchases can now be categorized as simple or transactional in nature (Forrester), meaning that the complex work was done by the customer prior to order.

Today, a successful channel program relies on knowing who’s “in the room” with business leaders as they are planning, getting recommendations and procuring technology products.

Learning about these influencers will help channel professionals build a program that will be visible, motivating and profitable. In addition to internet research, business leaders are building peer networks of like-minded professionals who consult, install, integrate, and service new technologies. These alternative shadow channels didn’t spawn from the traditional IT, managed services, telco, print or pro A/V worlds.

The change in customer buying journey is a serious paradigm shift for the channel. Vendors must look at their product fit among the different lines of business and understand who the influencers are. It would be risky to assume that all current partners will make a smooth transition into this influencer role.

Channel programs must adapt to these new realities and grow to include new partner types, enhanced B2B marketing, and more robust self-service options. To succeed with business buyers and get on the radar screen of new influencers, tomorrow’s successful vendor will couple a new B2B marketing approach with an expanded channel partner network. The key is to reposition technology solutions around business outcomes.

Tune in to part 2 next month where we will dive deeper into who these shadow channels are, look at the risks facing the current channel, and look deeper into ways to succeed with the new customer buying journey.

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David Dungay

Editor - Comms Business Magazine