© 2017 by Channel Disruptor, LLC
Q4 2017
www.channeldisruptors.com
Sales Channels of the Future, Part Two:
Internal Forces Shaping Technology
Sales Channels Whitepaper
Prioritized Channel Trends and Predictions that are Disrupting Technology Sales Channels
Written by:
Braham Shnider
William Vanderbilt
© 2017 by Channel Disruptor, LLC
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Sales Channels of the Future, Part Two:
Internal Forces Shaping Technology Sales
Channels Whitepaper
Prioritized Channel Trends and Predictions that are Disrupting Technology
Sales Channels
This white paper is the second in a series of three documents from Channel Disruptors:
1. Whitepaper One: External Forces Shaping Technology Sales Channels
2. Whitepaper Two: Internal Forces Shaping Technology Sales Channels
3. Executive Briefing: Next Generation Technology Sales Channels
Table of Contents EXECUTIVE SUMMARY ....................................................................................................... 2
INTRODUCTION ............................................................................................................... 3
B2C CHANNELS ............................................................................................................... 4
PARTNER FOCUS .............................................................................................................. 5
INBOUND DIGITAL AND SALES .............................................................................................. 6
FLATTENING CHANNEL ...................................................................................................... 7
BALANCE OF POWER ......................................................................................................... 8
CHANNEL LEADERSHIP ....................................................................................................... 9
SIS AND ISVS .................................................................................................................. 10
CHANNEL DISRUPTOR’S DISRUPT-BENCH .............................................................................. 12
© 2017 by Channel Disruptor, LLC 2 2
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Executive Summary
For years, the technology sales channel has woven a tapestry of Partners and Programs to drive scale, enable the
Partner Ecosystem and activate “the long tail” of the Partner Ecosystem. Within that Channel Ecosystem, changes
have been happening and many more are predicted. For instance, more changes are expected in channel
consolidation, access to investment capital, the value of Vendor certifications, changing Partner business models,
blurring Partner types, emergence of specialist Partners and
the age/demographics of Channel leadership.
Through extensive research and interviews around the world,
Channel Disruptors has documented a long list of predictions
and trends about the Channel Ecosystem. That list was
methodically prioritized by considering the following:
1. Will it be material in 3-4 years?
2. Is it significant by impacting more than 20% of
Channel Partners or creating a large influx of new Channels?
Channel Disruptors has identified seven inside forces that are shaping (and disrupting) the Channel:
1. A Unified Commerce platform and business model is fundamentally changing the nature of B2C. B2C is
moving toward an integrated omni Channel as purely brick and mortar struggles to find profitability.
2. Partners need to decide which business they are in. Either they need to get big and focus on Products, XaaS
or Technical Services or they need to specialize and focus on emerging in-demand Value Added Solutions or
specific niche XaaS applications.
3. For Products, XaaS and even Technical Services Inbound Digital is becoming the new sales outbound. Gone
are the days of a sales led focus. There is now a need to invest in a buyer led world.
4. Digital B2B Marketplaces and B2B Customer integration will flatten the Channel for Products, XaaS and
Technical Services and will offer opportunities for new sales Channels.
5. Balance of power will continue to move from Vendor to Channel in terms of scale, horizontal integration
and Brand power.
6. Channel leadership is Bifurcating. Traditional Channel leadership is aging. Many Channel Start-ups are led
by young entrepreneurial leaders.
7. GSI’s will embrace the new world of data, AI and verticalization and as we become more “Software
Defined,” ISVs and Developers will become more influential.
© 2017 by Channel Disruptor, LLC
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Introduction There has been a lot of noise about how sales channels will change dramatically in the next few years. These changes
are as a result of both external and internal forces. Forces external to sales channels (which we covered in our last
whitepaper) include
• Disruptive technologies
• Disruptive business models and moves to consumption based charging
• The changing geopolitical and cultural environment
• The changing way commerce is being conducted
It is Channel Disruptors’ belief that there is a perfect storm of technology and business model disruption, better ways
to match buyers and sellers combined with significant changes in how customers want to buy. All are occurring at the
same time. We are forecasting more changes in the technology sales channel ecosystem the next three
to four years than there has been in the past twenty years.
In this whitepaper the internal forces that are shaping and disrupting technology sales channels will
be explored. Some of the trends we considered include
• Balance of power moving from Vendor to Channel
• Changing channel business models
• Digital transformation
• B2B Digital Marketplaces
• Emergence of new specialist Channels
• Partner types blurring
• Vertical focus
• The consumerization of the commercial purchasing process
• Channel consolidation
• The changing Channel age demographic
• Access to working and investment capital
• Vendor certifications
• Partners Ecosystems
Through extensive research and interviews around the world, Channel Disruptors has filtered a long list of
predictions and trends about the Channel Ecosystem. That list was methodically prioritized by considering:
1. Will it be material in 3-4 years?
2. Is it significant by impacting more than 20% of Channel Partners or creating a large influx of new Channels?
© 2017 by Channel Disruptor, LLC 4 4
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B2C Channels B2C is moving online while brick and mortar profitability struggles.
Some of the crucial shifts impacting B2C’s move to online include
• Customer expectations for a truly omni-channel experience
• The advancement of unified commerce
• The decline of brick and mortar facilities
• Adoption and advanced capabilities of mobility and mobile pay options
• Improvements in logistics and shipping capabilities
B2C and B2B lines will continue to blur. B2B
customers will be increasingly be comfortable
purchasing through B2C channels. The ease of doing
B2C business will drive changes in B2B Channels to
further develop their digital capabilities.
Brick and mortar will continue to evolve.
Omni-Channel and Unified Commerce will change the
role of the brick and mortar B2C outlets from an end
to end shopping experience to showrooms and product
drop sites. Multi-Channel marketing will offer Customer choice by blending promotional Channels with distribution
Channels such as storefront, website and catalogue/call center. Business model changes will put increasing pressure
on profitability and cash flow accelerating closures and consolidation. Efficiencies in supply chain and logistics will be
a critical differentiator.
Online Channels grow into an integrated Omni-Channel. No longer a unique experience, online B2C will
be common place. Expectations for a hyper-personalized buying experience, immediacy and aggressive pricing will
increase. Mobility will be ubiquitous in B2C. Traditional retail Programs will evolve (i.e. endcaps, floor sales rep
training, etc.) to include integrated social, mobile and online.
“There will be many bankruptcies. There will need to be consolidation.”
David Berman, Hedge Fund Manager, concerning retailers
© 2017 by Channel Disruptor, LLC
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Partner Focus Partners need to decide which business they are in.
Channel Partner’s focus will be driven in two directions
1. Get big and focus on products (anything with a SKU number), XaaS (Everything as a Service) or widely
available Technical Services
2. Get specialized and focus on emerging in-demand Value Added Solutions or niche XaaS
Product (SKUs). Partner’s brand, low pricing and huge product choices will drive traffic. Critical mass will be
required to drive down operating costs whilst highly customized interactions will drive digital experience. Vertical
integration to white labeling will drive incremental growth and gross margins.
XaaS (anything purchased via usage of annuity or consumption model). Brand and referral will drive traffic.
Different types of usage and subscription models will drive Customer experience. Critical mass or Ecosystem
partnering will drive down operating and capital costs. Ease of doing business and subscription renewal competency
will drive sales.
Technical Services (where supply of these services exceeds demand for large skilled disaggregated technical
workforce). TS (Technical Services) availability, matching of many buyers and sellers in easy to use digital platform
and competitive pricing will drive Customer acquisition. Critical mass and
access to a contingent workforce will drive profit. Highly customized
interactions will drive digital experience.
Value Added Solutions (where demand exceeds supply for highly skilled
services required to build new solutions). Faster customer outcomes will
drive repeat sales rather than large SI projects which are hard to measure
success. Vertical expertise will drive channel profit more than horizontal
capability. Multi-Vendor, Industry Clouds and Partner Ecosystems will grow
in importance to create best of breed Customer solutions.
“Know your core competencies and focus on being great at them.”
Mark Cuban, Entrepreneur
© 2017 by Channel Disruptor, LLC 6 6
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Inbound Digital and Sales Inbound digital is becoming the new sales outbound.
Some of the crucial shifts impacting sales channels in the move from sales to inbound digital include
• For products, XaaS (Everything as a Service) and Technical Services, gone are the days of a sales only-
led focus
• There is a greater need to invest in a buyer-led world
• Advancements in digital marketing
• Customer comfort and satisfaction purchasing independently without the aid of sales professionals
There will be a changed Channel Ecosystem.
New Partners will enter whose core business is a multi-
Channel, highly customized digital experience.
Traditional SMB Channels (the “long tail”) will be
threatened as the role of the SMB advisor diminishes in
time. Vendors will need to play a greater role in the
early stages of the digital buying process.
Digital needs to equal Enablement. The role of
the B2B seller will move from being standalone to
being a part of a multi-Channel experience.
Traditional certification Programs will not be relevant. Digital badges may be the new order of certification.
Enablement will expand to the digital experience and how to customize that buying experience to the individual
buyer.
Existing Channel Programs will not be important. Traditional Channel Programs (Vendor branding, targets,
benefits, etc.) will not be relevant to Digital Channels. Economic benefit could be partly modelled on the digital
advertising model and expanded to include early stage (i.e. CPA or Revshare) sell, renew and Customer experience.
“73% of B2B buyers prefer buying from the web, or self-service functionality
from a vendor.”
Forrester
© 2017 by Channel Disruptor, LLC
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Flattening Channel Marketplaces and enhanced B2B integration will flatten the Channel.
Some of the crucial shifts that are causing sales Channels to flatten include
• The rapid expansion, acceptance and transparency of Digital B2B Marketplaces
• B2B Customer integration
• The emergence of new sales channels
Transparency will be the new world order. The IT supply chain is not efficient nor transparent with many
Customers. Customers will gravitate to B2B Marketplaces based on digital experience, immediate availability and
lowest price. Some Partners will use Digital B2B Marketplaces and on-site Customer colocation of DCs (Distribution
Centers) as an opportunity to disrupt. International boundaries are not relevant in a Digital B2B Marketplace world.
The overlap between Distributor,
Reseller and Consumer Channels will
be further blurred. Marketplaces do not
necessarily discriminate between wholesale,
commercial and consumer Channels and
Customers. Distributors are well placed to
set up or participate in Marketplaces. This
will further challenge Distributor business
code of wholesale only.
Technical Services will commoditize fast through disruption. Marketplaces are quickly adopted where
there is a large volume of fragmented, non-optimized supply. A significant portion of TS (Technical Services) will
move from being procured as project based to market based (they will be uber-ized).
“Business buyers are doing the upfront research,
building the solution, and in the absence of self-service
options, are purchasing at the part number level.”
National Association of Electrical Distributors
© 2017 by Channel Disruptor, LLC 8 8
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Balance of Power The balance of power is shifting from Vendors to Partners.
Some of the crucial shifts impacting the shift in the balance of power with sales channels include
• We are entering the world of the “Mega-Partner” (Amazon, Alibaba, Google, JD.com etc.)
• There is a race to scale
• There is a continuous consolidation in the Channel
Partner Brand recognition will be greater
than Vendor Brand recognition. Partner’s
web sites and their digital assets will become the
destination sites for both B2B and B2C selling
products, XaaS and widely available Technical
Services. The stronger these Partner’s brands get,
the more they will marginalize Vendors by getting
them to compete as low-cost providers. Vendor’s
brand equity will continue to erode and they will
need to consider selling directly to keep their
brands relevant with Customers.
Scale matters. It will be a race to scale with product breadth. Scale provides the opportunity to be a low-cost
provider. As these Partners leverage their scale it will give them more opportunity to further lower costs, which in
turn repeats itself creating a highly effective barrier to entry. Many Customer segments from consumers to global
Customers will be attracted by the convenience, low-cost and personalized service.
Vertical integration is a growth opportunity for Channels. As larger Partner’s Brands continue to grow in
influence, white boxing of products and XaaS (Everything as a Service) using their brand will emerge as growth
opportunities. This will pose a major threat to Vendors.
“72% of technology decisions are influenced and/or made by line of business executives.”
Gartner
© 2017 by Channel Disruptor, LLC
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Channel Leadership Channel leadership is bifurcating.
Some of the crucial shifts impacting the bifurcation of Channel leadership include
• Traditional Channel leadership is aging
• Traditional channels leadership and shareholders are reluctant to invest in anything that is not earnings
accretive immediately
• Many Channel Start-ups are led by young entrepreneurial leaders not averse to risk
Start-up Channels accrue most of the value creation. Start-ups receive substantial investments with the
expectation of high risk and high potential reward. As a consequence, those that succeed receive most of the value
creation of new solutions, technologies and disruptions. For newer technologies and solutions Start-up Partners may
the source of early market success.
Vendors need to take a more active role. Proactive engagement of Start-ups and young entrepreneurial leaders
especially for early market success. Succession planning, upskilling Channel leadership and providing investment
funding will be required for business transformation in the traditional Channel.
The Channel’s aversion to risk is its biggest hurdle for future success. Most Partners founded pre-internet
are led by an aging leadership adverse at taking risks, constrained by both public and private shareholders expecting
EBIT and Cash growth quarter on quarter. They generally do not have an appetite for mid to long term investment.
New capital is available for acquisitions which need to be immediately EBIT accretive. As a consequence, they miss
most of the value creation and risks associated
with the creation of new solutions, technologies
and disruptions. Transformation to new business
models with different result/risk profiles will
require a change in both shareholder expectations
and management skills.
“Entrepreneurship is the key to emerging technologies.”
James Clark, Scientist
© 2017 by Channel Disruptor, LLC 10 10
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SIs and ISVs GSIs, ISVs and Developers will become more influential.
Some of the crucial shifts impacting the growing influence of GSIs, ISVs and Developers include
• SIs (System Integrators) building ISV (Independent Software Vendor) capabilities
• ISVs developing integration capabilities
• Regional SI consolidation
• Vendor investments in Developers
Developers. Developers will continue to be
critical to early market success, especially for AI
(Artificial Intelligence), IoT (Internet of Things),
etc. where there is significant skills shortage.
Data science will increasingly merge with
application development.
System Integrators. GSIs (Global System
Integrators) will embrace the new world of data,
AI and verticalization. Much of the GSIs revenue
will move to end-to-end vertical solutions using
an ecosystem of Partners, vertical clouds and digital marketspaces to complete their solutions. Discrete SI projects
will reduce in size and scope and give way to more, limited-scope outcome based projects. Mid-sized and/or
Regional SIs will have limited capital or scale to transform fast enough.
ISV Partners. Verticalization will play nicely into ISV core competencies. Much of the AI focus will be about
decision support and self-learning of existing applications which plays to ISVs strengths. ISVs will often be the critical
partner for many in Partner ecosystems and industry clouds.
“It’s not ‘How can we make more money?’ It’s ‘How can we do more?’”
Neil Blumenthal, Warby Parker
© 2017 by Channel Disruptor, LLC
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In conclusion, Channel Disruptors has identified seven inside forces that are shaping (and
disrupting) the Channel. These are
1. A Unified Commerce platform and business model is fundamentally changing the nature of B2C. B2C is
moving toward an integrated omni Channel as purely brick and mortar struggles to find profitability.
2. Partners need to decide which business they are in. Either they need to get big and focus on Products, XaaS
or Technical Services or they need to specialize and focus on emerging in-demand Value Added Solutions or
specific niche XaaS applications.
3. For Products, XaaS and even Technical Services Inbound Digital is becoming the new sales outbound. Gone
are the days of a sales led focus. There is now a need to invest in a buyer led world.
4. Digital B2B Marketplaces and B2B Customer integration will flatten the Channel for Products, XaaS and
Technical Services and will offer opportunities for new sales Channels.
5. Balance of power will continue to move from Vendor to Channel in terms of scale, horizontal integration
and Brand power.
6. Channel leadership is Bifurcating. Traditional Channel leadership is aging. Many Channel Start-ups are led
by young entrepreneurial leaders.
7. GSI’s will embrace the new world of data, AI and verticalization and as we become more “Software
Defined,” ISVs and Developers will become more influential.
This white paper is the second in a series of three documents from Channel Disruptors. Our last whitepaper titled
“External Forces Shaping Technology Sales Channels“ focused on prioritized megatrends and emerging technologies
that are shaping and disrupting technology sales channels.
The third and final segment in this series draws on the internal and external forces shaping technology sales channels
to describe “Next Generational Technology Sales Channels.” This third segment is delivered via Executive
Briefing and reviews how each of the following are likely to evolve:
• Customer segmentation and use
cases
• Channel Ecosystems
• Routes to Market planning
• Partner Business Models
• Channel Programs
• Channel Enablement
• Value Added Solutions
• Significant Threats to Vendors
© 2017 by Channel Disruptor, LLC 12 12
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Channel Disruptor’s Disrupt-BENCH It is our belief that we have perfect storm of technology and business model disruption, better ways to match and
buyers and sellers combined with significant changes in how customers want to buy, all occurring at the same time
resulting in more changes in sales channels than ever before.
With this all this disruptive change, it is very difficult filtering what is, and what is not relevant to each segment of the
Tech industry and individual company. To help sort through all this confusion, Channel Disruptors have developed a
highly acclaimed Disrupt-BENCH™, the future state Channel Sales Paradigm. Our Disrupt-BENCH™, has been
designed for Technology Companies to be able to assess their future sales channel risks and opportunities and do an
“individualized” benchmark against a future state sales channel model.
TO LEARN HOW CHANNEL DISRUPTORS CAN HELP YOU:
Phone: +1 630 335 3684 or +61 419 363 952
Email: [email protected]
Web: www.channeldisruptors.com
