Challenging economic times, new technologies and new methods for selling information technology (IT) solutions have contributed to an increase in conflicts between vendors and their channel partners. The result has been lost business for many channel firms: More than three-quarters in a recent study said they lost one or more deals in the last 12 months due to channel conflict.
The study, released by IT non-profit association CompTIA, found that six in 10 IT channel companies say the incidence of conflict has increased in the last two years. Eight in 10 say conflict has affected their business negatively, including 21 percent that described the impact as “major.”
“Conflict between IT vendors and their channel partners is not a new issue, but it’s a dynamic that ebbs and flows,” said Carolyn April, director of industry analysis at CompTIA. “Right now, the channel is roiling for many firms.”
The report also includes encouraging news. A significant number of channel firms are responding to conflict by reinventing their business.
“They’re looking inside their own organizations to get their own house in order to become more appealing to the customer,” April explained. “They’re improving their own service capabilities, specializing in vertical markets and making the move to a managed services business model, which cements them to a customer.”
April cited three factors that have contributed to the rise in channel conflict, starting with a poor economy, which drove a number of technology vendors to focus more on direct sales to customers at the expense of their channel partners.
Also, new methods for reaching customers with technology services, such as cloud computing, are driving partners to enter industries that are fresh to them. On a related note, there are now new entrants into the VAR market, such as telecom companies that now offer IT services in additional to their traditional voice services.
The most common response from channel firms to lost business is to complain to the vendor. But some firms have taken more punitive actions. About a third attempted to sell a competing vendor’s product to the same customer. Three in 10 dropped the vendor in question as a partner.
Among the biggest sources of friction between technology vendors and their channel partners are deal registration programs, CompTIA noted. When executed properly, these programs help to avoid or reduce the incidence of channel conflict by preserving opportunity rights to a particular deal for the channel partner registering it first into the systems. Vendors benefit from greater visibility and tracking into their indirect sales pipeline.
Indeed, more than eight in 10 channel firms surveyed by CompTIA say the existence of a deal registration program is a critical or important factor into their decision to partner with a vendor.
At the same time, these programs can prove challenging for both parties. Poor communications is an issue, cited by 61 percent of channel partners (including insufficient reporting on approvals and payout status and lack of information on incentives). Inconsistency (27 percent) when rules of engagement and adherence to rules are constantly changing is another barrier, and there are also ease-of-use concerns: 49 percent reported technical challenges when deal registration systems and tools are hard to use.
