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Dave Sobel is the host of the podcast The Business of Tech and co-host of the podcast Killing IT. In addition, he wrote Virtualization: Defined. Sobel is regarded as a leading expert in the delivery of technology services, with broad experience in both technology and business.
For this week's video, Sobel covers how the term "channel" has become an overloaded phrase and is used to cover a variety of indirect sales paths from different angles. Instead, he believes that "ecosystem" might be more appropriate and explains why.
Transcript follows below.
I recently spotted what I considered an odd hashtag on LinkedIn -- #savethechannel. The thread started with a very positive message.
'What type of competitor sees the finish line in sight and slows down? Answer: NO ONE! The top competitors go all out to finish strong! It's quarter end let's help the channel speed up and make a strong finish -- everyone I tagged is a FIERCE and winning leader who loves to win -- wondering who they would tag?'
I ended up being tagged, and that's certainly flattering -- sure, I like to win. I mean, I'm a gamer. Of course, I like to win. There's a lot of really smart people on the thread, and it generated a lot of enthusiasm.
I looked into the thread -- it's a marketing effort from the JS Group, which is a well-known channel consultancy group. They're a well-respected group, and work on a lot of channel programs. I've never worked with them professionally and do know that they work with a lot of vendors to help develop their channel programs. Most of the respondents to the thread work at vendors or have sales quotas. I was struck by a thought -- that the channel that needed saving … wasn't my definition of channel.
This was my comment: 'Who actually is the channel we're saving? If you're thinking in quarters, you're a public company, and not the those I spend my energy on. Monthly performance is what matters to technology services providers, because hitting those monthly targets is the key to operational success, and quarterly performance is symbolic. Expenses hit monthly. Payroll and rent won't wait for a vendor's quarter. 'Sprint to the end' says 'hit a sales quota,' and I'm running the business performance marathon that outpaces and out delivers -- a monthly machine that delivers, with each and every step, and it's not a finish but a journey, because each step builds that machine. And if you perform that way, you're saving the channel -- the partner.'
I didn't get a response, which I admit bummed me out because I wanted to know more. It's made me think a lot about the word 'channel.'
The 'channel' is an interestingly overloaded phrase
It's used to refer to the indirect sales path for technology, which takes technology and the resulting services delivered not from the vendor themselves through sellers to those end customers. There's a lot of pieces in that 'channel' -- the vendors, the distributors and the services companies, and even more within those three. There's the channel chief -- a vendor employee -- and the channel team, which are generally sales or marketing staff who deal with partners … who are also the channel.
Ready to make it more interesting? Jay McBain at Forrester has broken this out into his trifurcating channel model, where there are now three parts to the non-vendor side. Influencers, transactors and retention channel. He's right -- it's not a monolithic single type of channel.
Here's where it gets complicated -- by my count, if we're adopting Jay's channel model (and I'm totally on board with this) -- we actually potentially have as many as eight entities that can be 'the channel.'
- The distributor and vendor channel teams
- The influence channel
- The transactional channel
- The retention channel
And, the distributors, vendors and channel companies themselves. That's a lot of channel. Cue a little Bruce Springsteen.
I'd argue that the channel that the JS Group is talking about saving is the vendor channel -- the distributors and vendors they do business with. It makes perfect sense -- and if there are concerns about layoffs within these teams such as we have seen with vendors during this time period, I get it. It's implied in the reference to 'quarters' in the social media post.
When I think of the 'channel,' I'm thinking of the providers themselves. As I illustrate in my comment, I'm far more interested in the services company definition. To be fair, that's the group I spent all my time thinking about, those services companies that do business with end customers.
Let me be clear -- both are right. They are both reasonable use of the word channel, although totally confusing.
Understanding which entity is being talked about determines relevancy. There are a lot of thought leaders running around, particularly now, with an opinion on what 'the channel' is doing or what's best for the channel.
The question you, the listener, need to ask yourself is 'which definition are they using,' which is often very closely related to 'how do they get paid?'
If you're in the business of consulting with a vendor or distributor on their go-to-market, you are looking at the space with a different lens than I am, and both are legitimate.
That said, if you are a services provider, you need to understand that the definition of channel is not the same and adjust accordingly. Even a title like channel chief may be confusing, because they may be a chief of a channel … you care about.
Jay reminded me that the word of the day is actually 'ecosystem' -- that the word 'channel' is too far linked to those transactional partners. Ecosystems are the collection of people, process and technology linked together to push toward a common goal. In this approach, even those non-transacting partners are recognized because of the contribution to the collective system.
Now, why do we, the solution provider or technology services company, care?
Here is an analysis lens to apply to your partnerships -- if they are measuring you purely on legacy metrics, they're not going to be the supplier of the future. If their only concern is a quarterly sales number … you're talking to the wrong supplier.
If they're asking you about marketing effectiveness or making a distinction on your sell-to and sell-through efforts or talking to you about adoption rates and renewal rates … they get it.
Providers, start educating yourself on this language of ecosystems, and I'd caution to avoid 'channel' ones. Besides being outdated, they are confusing -- and likely to be used by a supplier of the past, not one of the future.
Words do matter, so take the time to think about the ones you're hearing because they tell you so much about their position. And you want to be dealing with the ones moving you to the next level.
About the author
Dave Sobel is the host of the podcast The Business of Tech, co-host of the podcast Killing IT and authored the book Virtualization: Defined. Sobel is regarded as a leading expert in the delivery of technology services, with broad experience in both technology and business. He owned and operated an IT solution provider and MSP for more than a decade, and has worked for vendors such as Level Platforms, GFI, LOGICnow and SolarWinds, leading community, event, marketing and product strategies, as well as M&A activities. Sobel has received multiple industry recognitions, including CRN Channel Chief, CRN UK A-List, Channel Futures Circle of Excellence winner, Channel Pro's 20/20 Visionaries and MSPmentor 250.